Posco's US strategy tilts toward Louisiana mill as Cleveland-Cliffs talks stall

Posco Holdings' two-track strategy for navigating US steel tariffs — equity investment in a domestic producer on one hand, and building its own mill on the other — is showing signs of imbalance. While the Louisiana steel mill project with Hyundai Steel is advancing on schedule, talks with Cleveland-Cliffs over a potential equity stake have struggled to gain momentum.

Cleveland-Cliffs said Wednesday during its second-quarter earnings call that it was in no rush to finalize a deal with Posco.

Celso Goncalves, Cliffs' chief financial officer, said negotiations with Posco were ongoing but that his company faced no deadline. "Valuation and deal structure matter, and if it's not at a level we can accept, we won't rush," he said. He added that "the United States is the best market in the world, and doing business here is never cheap."

The two companies signed an MOU last year and pledged to announce a concrete cooperation plan by the first quarter of this year, but talks have dragged on after Cliffs determined that the terms on offer fell short of its own valuation standards.

Some analysts say the delay reflects a widening gap in expectations: US tariffs have sent domestic steel prices sharply higher, strengthening Cliffs' earnings and its negotiating hand. The United States currently imposes a 50 percent tariff on steel imports under Section 232 of the Trade Expansion Act.

Cliffs expects to post its best annual earnings since 2021. Second-quarter adjusted EBITDA jumped to $286 million, roughly triple the first-quarter figure. The company projects adjusted EBITDA will nearly double to $575 million in the third quarter, with further gains expected in the fourth.

Cliffs CEO Lourenco Goncalves called Section 232 "the most effective industrial policy in a generation" and voiced strong support for the Donald Trump administration's tariff policy. He also doubled down on plans to increase shipments to automakers and expand domestic production.

The standoff pits a Cliffs whose market value has risen on the back of tariffs against a Posco seeking to acquire a stake at a reasonable price — and neither side appears ready to close the gap. A Posco Holdings spokesperson said the company was "discussing investment structures with various possibilities in mind."

Meanwhile, the joint electric arc furnace steel mill project with Hyundai Steel in Louisiana is proceeding as planned. The joint venture HPLS (Hyundai-POSCO Louisiana Steel LLC) is building a facility with annual capacity of 2.7 million tons in the Donaldsonville area of Louisiana at a total investment of $5.8 billion. Hyundai Steel holds a 50 percent stake, Posco 20 percent, Hyundai Motor 15 percent and Kia 15 percent — a structure in which Hyundai Motor Group leads the venture with Posco as the second-largest shareholder.

HPLS plans to hold a ground-breaking ceremony in September to formally begin construction, with commercial production targeted for 2029. The mill will use a process that directly links direct reduced iron production facilities to electric arc furnaces, producing high-value flat steel products such as automotive sheet for supply to Hyundai Motor Group Metaplant America and other automakers' plants in the United States.