Cleveland-Cliffs Inc.
CLF,
+4.97%

said Monday it is entering the scrap metal business with the acquisition of Ferrous Processing and Trading Company (FPT) in a deal with an enterprise value of about $775 million. The Detroit-based FPT accounts for about 15% of the prime ferrous scrap market in the U.S., making it one of the biggest processors and distributors of the metal. The company processes about three million tons of scrap metal per year, about half of which is prime grade, said Cleveland-Cliffs. The company operates 22 scrap facilities and about 90% of revenue come from its Midwest locations, primarily in Michigan and Ohio. “With all the new flat-rolled EAF capacity coming online in our market over the next four years, prime scrap will only become more and more scarce,” Cleveland-Cliffs CEO Lourenco Goncalves said in a statement. “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.” The deal is expected to close in the fourth quarter. Cleveland-Cliff shares were up 2% premarket and have gained 42% in the year to date, while the S&P 500
SPX,
-0.37%

has gained 17%.

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