Cleveland-Cliffs, recently announced they will be abandoning a $500 million hydrogen-based steel project in Middletown, Ohio—a decision that underscores the complex interplay between innovation, infrastructure, and policy. This article explores the rise and fall of Cleveland-Cliffs’ hydrogen ambitions, the broader implications for green steel production, and the lessons learned from global initiatives like Sweden’s HYBRIT project.
Historical Context of Cleveland-Cliffs: From Iron Ore to Integrated Steelmaking
Cleveland-Cliffs traces its roots to 1847, when it began as an iron ore mining company in Michigan’s Upper Peninsula. Over 175 years, the firm evolved into the largest flat-rolled steel producer in North America, surviving industry consolidation and technological shifts. A pivotal moment came in 2020 when Cleveland-Cliffs acquired AK Steel and ArcelorMittal USA, transforming into a vertically integrated steelmaker with control over raw materials, processing, and distribution. The company’s historical resilience—from pioneering pelletization technologies in the 1950s to navigating the collapse of Great Lakes steel giants—has been marked by strategic adaptability. However, its recent foray into hydrogen-based steelmaking tested this legacy.
The Hydrogen Initiative: A Bold Step Toward Sustainability
In 2023, Cleveland-Cliffs announced a groundbreaking plan to replace Middletown Works’ blast furnace with a hydrogen-ready direct reduced iron (DRI) plant and electric melting furnaces (EMFs). Backed by a $500 million grant from the U.S. Department of Energy (DOE), the project aimed to slash carbon emissions by 50-90% while maintaining annual production of 3 million tons of steel.
Key Components of the Middletown Project:
- Hydrogen Flex-Fuel DRI Plant: Designed to use both natural gas and hydrogen, this facility would have reduced reliance on coking coal—a major CO₂ source in traditional blast furnaces.
- Electric Melting Furnaces: These EMFs would melt DRI pellets using renewable energy, aligning with the Biden administration’s clean energy goals.
- Cost Savings: Projected to lower production costs by $450 million annually through efficiency gains and reduced scrap dependency.
The initiative positioned Cleveland-Cliffs as a leader in green steel, with CEO Lourenco Goncalves touting it as a “transformational step” for U.S. manufacturing. However, the project’s success hinged on a critical enabler: accessible, affordable clean hydrogen.
The Demise of the Middletown Hydrogen Project
On June 4, 2025, Cleveland-Cliffs officially scrapped the Middletown hydrogen initiative, citing the absence of a regional hydrogen hub to supply low-cost H₂. Goncalves noted, “Without hydrogen, the entire thing falls apart”. The collapse reveals systemic challenges in America’s energy transition:
1. Infrastructure Gaps
The DOE’s Hydrogen Hub Program, which aims to establish six regional H₂ networks by 2030, has faced delays in permitting and funding disbursement. Unlike Europe—where HYBRIT leverages Scandinavia’s abundant hydropower—the U.S. lacks a coordinated strategy to link hydrogen producers with industrial users.
2. Policy Misalignment
The project’s reliance on federal grants became a liability amid shifting political priorities. While the Biden administration championed clean hydrogen, the Trump administration’s focus on tariffs and fossil fuels created uncertainty. Goncalves criticized the “lack of assurances” from policymakers, prompting a pivot to retrofitting existing blast furnaces.
3. Economic Realities
Rising tariffs on steel imports (up to 50% under Section 232) forced Cleveland-Cliffs to prioritize short-term profitability. Idling facilities like Weirton’s tinplate mill and Steelton’s rail mill diverted resources from long-term green investments.
Implications for the U.S. Steel Industry
The Middletown setback highlights broader barriers to decarbonizing heavy industry:
- Technology Lock-In: Blast furnaces, which account for 70% of global steel CO₂ emissions, require massive capital investments. Relining Middletown’s furnace (a $200+ million endeavor) extends its life by 20 years, perpetuating coal dependence.
- Scarcity of Clean Hydrogen: U.S. hydrogen production remains 95% fossil-based. Green H₂ costs $4-6/kg—prohibitively high compared to $1.50/kg for gray hydrogen.
- Labor and Competitiveness: The United Steelworkers union supported the hydrogen project as a jobs protector. Its cancellation risks ceding leadership in green steel to European and Asian rivals.
Strategic Pivot: Future Directions for Cleveland-Cliffs
Facing hydrogen headwinds, Cleveland-Cliffs is pursuing alternative pathways:
1. Blast Furnace Modernization
The company will install AI-driven optimization systems at Middletown and East Chicago mills, aiming to boost efficiency by 15-20%. While not a decarbonization solution, this approach aligns with Goncalves’ mantra: “Modernize, don’t demonize”.
2. Grain-Oriented Electrical Steel (GOES)
A $225 million investment in Butler, Pennsylvania, will expand production of GOES—a critical material for power transformers. This DOE-supported project ($75 million grant) capitalizes on grid modernization demands.
3. Advocacy for Protectionism
Goncalves continues lobbying for stricter tariffs, arguing that cheap imports undermine domestic innovation. “You can’t fund the future if you’re losing money today,” he stated at a 2025 AISI conference.
Global Perspectives: Lessons from the HYBRIT Project
Sweden’s HYBRIT initiative, launched by SSAB, LKAB, and Vattenfall, offers a counterpoint. By 2026, HYBRIT aims to deliver fossil-free steel using hydrogen from renewable electricity. Key differences from Cleveland-Cliffs’ approach:
| Factor | HYBRIT (Sweden) | Cleveland-Cliffs (U.S.) |
|---|---|---|
| Hydrogen Source | Hydropower-backed H₂ | No dedicated supply |
| Government Role | Long-term tax incentives | One-time grants |
| Industry Collaboration | Cross-sector partnerships | Limited coordination |
| Timeline | Phased rollout (2030 target) | Abrupt cancellation |
HYBRIT’s success stems from systemic alignment between energy providers, manufacturers, and policymakers—a potential lesson for U.S. stakeholders.
Conclusion: The Road Ahead for Green Steel
Cleveland-Cliffs’ hydrogen reversal underscores a harsh truth: technological potential alone cannot drive the low-carbon transition. Without resilient infrastructure, stable policies, and industry collaboration, even well-funded projects risk failure. As the U.S. grapples with competing priorities—energy security vs. climate action—the steel industry’s path to net-zero remains challenging.
Check out some of our other articles:
- Cleveland-Cliffs Cancels $500 Million Green Steel Project
- Trump Announces New 50% Steel and Aluminum Tariffs
- The US Steel-Nippon Steel Deal: Structure, National Security, and the “Golden Share”
- Nucor Announces CSP Price Cut: Market Analysis, Price History, and What’s Next
- Trump Approves US Steel-Nippon Steel Partnership
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