Cleveland-Cliffs buys FPT

Ohio-based integrated steelmaker Cleveland-Cliffs Inc. says it has entered into a definitive agreement to acquire Detroit-based Ferrous Processing and Trading Co. (FPT) for approximately $775 million.

Cleveland-Cliffs describes FPT as “among the largest processors and distributors of prime ferrous scrap in the United States, representing approximately 15 percent of the domestic merchant prime scrap market.”

In recent Recycling Today lists, FPT has ranked as the ninth largest overall ferrous scrap processing firm in North America and also the ninth largest nonferrous processing firm that also operates shredding plants. FPT has auto shredding locations in Florida, Michigan, Ohio and Ontario.

FPT currently processes approximately 3 million tons of scrap per year, approximately half of which is prime grade ferrous scrap, according to Cleveland-Cliffs.

FPT operates 22 scrap processing facilities, with approximately 90 percent of revenue originating from its Midwest locations, primarily in Michigan and Ohio. In the trailing 12 months ended Aug. 31, 2021, FPT generated EBITDA (earnings before interest, taxes, depreciation and amortization) of approximately $100 million, the Cleveland-based steel producer and iron ore mining firm says.

“FPT already enjoys an outsized position in automotive and industrial scrap, which is expected to grow as part of Cleveland-Cliffs,” the company adds.

“Cleveland-Cliffs is entering the scrap business as a major player through the acquisition of a large scrap company,” states Lourenco Goncalves, Cleveland-Cliffs’ chair, president and CEO. “Even more importantly, FPT has a very meaningful presence in prime scrap. With all the new flat-rolled EAF [electric arc furnace] capacity coming online in our market over the next four years, prime scrap will only become more and more scarce.”

Goncalves continues, “As the largest supplier of flat-rolled steel in North America, Cleveland-Cliffs is the main source of the steel that generates prime scrap in manufacturing facilities. Furthermore, throughout our entire footprint, Cleveland-Cliffs also consumes a very significant amount of scrap in our EAFs and BOFs [basic oxygen furnaces].”

Adds Goncalves of the strategic aspects of the purchase, “The acquisition of FPT will enhance our ability to buy back prime scrap directly from our clients, cutting the middlemen and improving the margin contribution from scrap for both Cleveland-Cliffs and for the manufacturing and service center clients that will be able to sell scrap directly back to us.”

The Cleveland-Cliffs list of “transaction rationale” aspects also includes that it:

• allows Cliffs to optimize productivity at its existing EAFs and BOFs as the company has no current plans to add additional steelmaking capacity;
• expands portfolio of high-quality ferrous raw materials to include iron ore pellets, direct-reduced iron, and now prime scrap;
• immediately secures substantial access to prime scrap, where demand is expected to grow dramatically with limited to no growth in corresponding supply;
• creates a platform for Cliffs to leverage long-standing flat-rolled automotive and other customer relationships into recycling partnerships to grow prime scrap presence; and
• furthers commitment to environmentally friendly, low-carbon intensity steelmaking with cleaner materials mix.

The acquisition has been approved by the Cleveland-Cliffs board of directors and is expected to close in the fourth quarter of 2021, subject to regulatory approval and closing conditions.