The Biden-Harris administration gave a major steel producer $500 million to go green in March, but the company may have to walk away from the handout, its CEO told Politico.
The Department of Energy (DOE) announced in March that Cleveland-Cliffs was selected for receipt of half a billion dollars to help the company produce “green,” low-carbon steel. However, CEO Lourenco Goncalves told Politico that his company may have to forego the funding because buyers are seemingly not interested in paying more to buy the company’s “green” steel and because Cleveland-Cliffs still has to front more than $1 billion to convert one of its coal-powered facilities to hydrogen-powered.
“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 told Politico, referencing buyers’ unwillingness to pay a premium for more eco-friendly steel. “That’s a decision that I’m going to have to make very soon.”
The DOE has also named Cleveland-Cliffs as the recipient of a different $75 million grant meant to help the company replace two of its natural gas-powered furnaces at its facility in Butler, Pennsylvania, according to Politico. The $500 million grant is intended to cover some of the costs of converting to hydrogen power at a plant in Middletown, Ohio.
However, even with the $500 million infusion from the government, the economics of the Middletown conversion still may not make sense for the company, Goncalves told Politico. Cleveland-Cliffs is one of the top suppliers of steel to the auto industry, which has also faced its own green troubles as automakers lose considerable sums of money on increased electric vehicle (EV) production that the Biden-Harris administration has effectively mandated with stringent regulations.
“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 told the outlet. “I’m not going to do it if the government and the general public are not really supportive of that.”
Goncalves added that he is concerned that his company will lose market share to competitors in India and China, where production is comparatively inexpensive and environmental standards are not as rigorous, according to Politico. To date, purchasers have demonstrated that they would rather buy cheaper, less environmentally-friendly steel than pay a premium for a “green” product.
It is unclear exactly how much more the company’s “green” steel costs buyers, but one estimate from BloombergNEF pegs the premium at about 40%, according to Politico.
The company has already received a portion of the $75 million grant, and it is still negotiating with the DOE over the terms of the $500 million grant for the Middletown facility, Politico reported. If the company ultimately decides to walk away from the Middletown grant, it would be a major setback for the administration’s wider push to make the industrial sector of the U.S. economy more climate-friendly.
Neither Cleveland-Cliffs nor the DOE responded immediately to the Daily Caller News Foundation’s requests for comment.
Featured Image Credit: Alfred T. Palmer
