Building on Today’s Strong Foundation to Create the Cliffs of Tomorrow
In business, where you have been is as important as where you are going—by building on existing strengths to lay the foundation for future success. Here are some of the highlights of our journey.
In 1847, a group of men from the Cleveland area pooled their money and their minds to create the Cleveland Iron Company. Their objective…to explore for minerals in the remote wilderness of Michigan’s Upper Peninsula, just three years after iron ore was discovered near what is now Negaunee, Michigan, in 1844. The articles of agreement to form this new company were drawn up on November 9, 1847, and the first stock in the new venture was issued on November 27, 1847.
Reborn as Cleveland-Cliffs Inc in the mid-1980s, the company has remained in the forefront of the North American iron ore business since opening its first mine in the Upper Peninsula of Michigan in 1850, achieving longevity by successfully adapting its operations to major changes that drove many competitors out of business.
In the earliest part of its 160-year existence, the greatest problems involved the logistics of moving iron ore from the mines to the consuming steel companies on the lower Great Lakes. Cliffs was in the vanguard, developing railroads, actively supporting the construction of the Sault Locks—which opened passage from Lake Superior—and building a major shipping operation, a business later exited to allow the company to focus on its core iron ore business.
When supplies of high-grade ore became exhausted in the 1950s, enriching leaner ore became a necessity. Cliffs was again in the forefront, developing production of iron ore pellets with 60% to 65% iron content from lower grade 30%-50% natural content ores. Economic to use in blast furnaces, pellets quickly became the steel industry’s preferred feedstock.
Adaptation to new steelmaking technologies shuttered many smaller, independent iron ore companies through the 1960s and ‘70s. Cliffs, having the requisite mining and metallurgy skills, took the lead, putting together consortiums of steel company partners owning about 85% of typical projects, with Cliffs holding the balance. Then, based on take-or-pay contracts signed by its partners, Cliffs obtained full ownership positions, receiving management fees and, in most instances, royalties, and creating a solid stream of low-risk revenues and earnings with built-in inflation adjustments.
By the early 1980s, pellet supply had caught up to demand and nearly all new steel industry capacity was being created by mini-mills using electric furnaces relying on scrap as raw material. Competition from low-cost mini-mills and imports put severe strains on large integrated mills with very high legacy costs in a period of relative economic weakness, resulting in reduced demand for steel, and consequently, periodic reductions in pellet demand. With the strong dollar and global economic downturn experienced in the early part of the 21st Century, steel company bankruptcies became commonplace. Beginning in 2002—at a time when the domestic integrated steel industry was locked in a battle for survival—Cliffs engaged in a dramatic reorganization that would establish it not only as North America’s largest supplier of iron ore, but also as an international merchant mining company well positioned to serve a revitalized and stronger global steel industry. Cliffs focus was two-fold: to acquire and expand capacity domestically and to seek opportunities in international markets.
Through assiduous implementation of its strategic plan, Cliffs decisively seized opportunities by acquiring troubled North American competitors and idled facilities at attractive prices as well as increasing ownership of its managed projects, giving Cliffs the control necessary to react rapidly to changing conditions and make the investments necessary to lower costs—a key to sustainable financial success. The company focused on customers who appeared to have successfully restructured for global competitiveness, and converted its management contracts into long-term sales contracts. The strategy proved to coincide perfectly with the consolidation of the North American steel industry and the explosive international growth of iron ore demand created by a burgeoning Chinese steel industry—validating its vision.
Today, Cliffs operates six iron ore mines located in Michigan, Minnesota, and Eastern Canada accounting for approximately 46% of North American capacity, 28% for its own account. It sells the majority of its pellets to integrated steel companies in the United States and Canada. Cliffs also owns three coal mines in Alabama and West Virginia.
The company also controls an Australian iron ore operation, Portman Limited, serving the Asian iron ore markets with direct-shipping fines and lump ore. Portman represents an integral component of Cliffs’ international growth strategy; its 80.4%-ownership position serves not only to further diversify Cliffs’ existing customer base, but, with Portman’s sales to Chinese and Japanese steel mills, to provide the company with a direct channel to the world’s most rapidly growing steel markets.
Cliffs’ efforts to play an ever-greater role in supplying international steel markets and diversify its product mix continue. Recent growth projects such as Amapá, which provided entry into Latin America, and Sonoma in Australia, which marked Cliffs’ diversification into coking coal, are consistent with Cliffs’ international objective of levering its proprietary expertise in those markets with the greatest growth potential.
Cliffs is comprised of three primary business units: North America, Asia-Pacific, and Latin America. Cliffs Asia-Pacific headquarters are located in Perth, Australia. Cliffs International Mineração Brasil, Ltda. headquarters in Rio de Janeiro provide technical and administrative support for Cliffs’ assets in Latin America. Offices in Duluth, Minnesota, house shared services groups supporting the business units.
While the heart of its operations remains North America, Cliffs continues to consider opportunities for expansion globally that not only enhance existing strengths, but contribute ultimately to the profitability and overall health of the company. In our commitment to serve as a respectful citizen in our communities, we're explore alternative, sustainable methods of powering our business, as in our 70% interest in Renewafuel, a biofuel cube company.
Today’s Cliffs is a company rich in tradition, with a dynamic future. Our journey is only just beginning.
