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Cleveland-Cliffs Jumps on Buying Scrap Distributor By Investing.com

by Mike Robinson

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© Reuters

By Dhirendra Tripathi

Investing.com – Cleveland-Cliffs Inc (NYSE:) stock rose 4.5% on Monday after the company said it will buy Ferrous Processing and Trading Company to gain access to prime scrap and expand its portfolio of high-quality iron-ore pellets and other ferrous raw materials.

Cleveland assigned FPT an enterprise worth of $775 Million on a cash-free and debt-free basis.

FPT is one the biggest processors and distributers of prime-ferrous scrap in the U.S. It accounts for approximately 15% domestic merchant prime market. FPT processes about 3 million tons per annum of scrap. About half is prime quality.

Cleveland-Cliffs’ CEO Lourenco Goncalves said that with all the new flat-rolled capacity coming online in the market over the next 4 years, prime scrap will become more and more scarce.

Cleveland-Cliffs has the distinction of being the biggest supplier of flat rolled metal in North America. This makes it the most important source of steel that produces prime scrap for manufacturing facilities. A significant portion of the scrap is also consumed by the buyer.

The acquisition will enhance the company’s ability to buy back prime scrap directly from its 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 it, according to Goncalves.

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