In March, the Biden-Harris administration awarded $500 million to major steel producer Cleveland-Cliffs to support the production of low-carbon, “green” steel, but the company might have to forgo the funds, according to its CEO. The Department of Energy (DOE) selected Cleveland-Cliffs for the grant to aid in converting one of its coal-powered plants to hydrogen power. However, CEO Lourenco Goncalves told Politico that demand for the more expensive “green” steel is low, and the company still needs to invest over $1 billion of its own funds to complete the project.
“There are only two ways to fix that: One is they change their minds and pay. So far, not very successful. The other way is for me to go back to what I was before and emit more,” Goncalves explained to Politico, highlighting buyers’ reluctance to pay a premium for eco-friendly steel. He added that a decision on whether to proceed would need to be made soon.
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Cleveland-Cliffs was also awarded a separate $75 million DOE grant to replace two natural gas-powered furnaces in Pennsylvania, while the larger $500 million grant is aimed at transitioning its Middletown, Ohio, facility to hydrogen power. Despite the government support, Goncalves expressed concerns about the financial viability of the Middletown project, noting, “I’m still trying to figure out if it even makes sense with the grants because the grant is $500 million, the entire project is $1.6 billion. I still have to pony up $1.1 billion.”
Goncalves also pointed to competition from cheaper producers in India and China, where environmental regulations are less stringent. Buyers, so far, have favored the lower-cost, less eco-friendly steel over Cleveland-Cliffs’ “green” version, which carries an estimated 40% premium, according to Politico.
The company has already received part of the $75 million grant and is still negotiating terms for the $500 million grant with the DOE. If Cleveland-Cliffs walks away from the Middletown grant, it could be a significant setback for the administration’s efforts to green the U.S. industrial sector. Neither the company nor the DOE responded to requests for comment.
