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Highlights

Cliffs may shut down two unprofitable AK Steel mills

US would become dependent on foreign sources for some critical materials

The US Department of Commerce's Bureau of Industry and Security said in a Nov. 18 report that if AK Steel stops producing grain-oriented electrical steel, or GOES, a key material used in manufacturing transformers, this may be considered as a national security threat to its power grid.

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US-based AK Steel – a subsidiary of Cleveland-Cliffs, the largest flat-rolled steel producer in North America – may stop producing grain-oriented electrical steel due to unprofitability, the Bureau of Industry and Security report noted.

"The threat to national security posed by imports of GOES (among other steel products) was addressed by a Section 232 investigation conducted in 2017, which resulted in the 2018 imposition of 25% tariffs on imports of steel products from most countries. As a result, imports of GOES in 2019 were dramatically lower than in 2018 (down 56%)," the report said.

It noted that while AK Steel was still a leader in the domestic market, its electrical steel operations were not profitable, in part due to years of pressure from lower-cost imports.

The report said that if AK's GOES production were to shut down, the US would be completely dependent on foreign sources for material critical to the manufacture of transformers.

"There is insufficient or no domestic production capability for certain grades and qualities of GOES that are increasingly in demand to meet efficiency standards for distribution transformers as well as general market trends toward more efficient transformers using higher grades of GOES," it said.

"The United States lacks sufficient capacity to produce transformer cores and laminations, which are the key components in transformers. Transformer manufacturers in the United States rely on foreign sources (especially Canada and Mexico) for these critical components to meet over 75% of (non-captive) demand," it said.