Dive Brief:
- A Cleveland-Cliffs’ tinplate plant in West Virginia could get new life as a factory that makes grain-oriented electrical steel for electric transformers, CEO Lourenco Goncalves said on an earnings call last week.
- The CEO noted the market opportunity to produce more domestically made transformers, using the Weirton, West Virginia, plant’s existing workforce.
- “We can co-invest, we can just support with the steel. We can do whatever it takes, but we need to increase the throughput and the availability of transformers for the supply chain,” Goncalves said.
Dive Insight:
The steelmaker's new focus on electric transformers could help Cleveland-Cliffs reverse course after idling the West Virginia factory earlier this month.
The site became inactive April 11 after years of underperformance and complications from global trade practices impacting domestic steel tariffs, the company said. Cleveland-Cliffs reported $177 million in costs related to the Weirton plant’s closure, according to a Q1 earnings announcement.
Cleveland-Cliffs seeks to change that narrative and provide critical parts to the country’s electric grid with a revived facility. Approximately 80% of electrical transformers are manufactured abroad, according to the Niskanen Center.
Ongoing supply chain shortages since the pandemic have exacerbated the impact of transformer disruptions in the U.S., leading to long delivery times, high prices and a reliance on foreign manufacturers.
These supply chain woes have created a pent-up demand for transformers in the U.S., according to Cleveland-Cliffs. The company’s next focus is going to be on using its additional capacity in locations such as Butler, Pennsylvania, and Zanesville, Ohio, as well as potentially the idled Weirton plant, to make grain-oriented electrical steel, Goncalves said.
“We expect to see significant investment from our customers in this important piece of infrastructure and we must produce more made-in-USA transformers,” he said.
Other companies have also been trying to address the electric transformer shortage. In February, Siemens Energy announced plans to build a $149.8 million power transformer facility in Charlotte, North Carolina, which will be the company’s first manufacturing facility in the U.S. to build large power transformers.
The Biden administration is also trying to address the lack of domestic production.
In January, the National Electrical Manufacturers Association and other trade groups and steel companies such as Cleveland-Cliffs sent a letter to Senate leaders pushing for the inclusion of $1.2 billion in funding for domestic transformer manufacturing in the Senate Energy and Water Development Appropriations bill. Congress is is currently reviewing the bill and introduced another to bolster the U.S. transformer supply chain.
