The Direct Reduced Iron from Cleveland-Cliffs - CLF bets on low-carbon steel feedstock

The Direct Reduced Iron from Cleveland-Cliffs can replace traditional blast furnace iron with lower carbon intensity for US steelmakers. Anyone holding Cleveland-Cliffs stock (NYSE: CLF, ISIN US1858991011) should know this product.

By Nora Whitfield, ad hoc news New Launch Desk. Reviewed July 07, 2026, 6:10 PM ET. Details in the imprint.

The Direct Reduced Iron from Cleveland-Cliffs starts its journey glowing orange on the conveyor, throwing off a dry heat you feel on your face even through PPE. Inside the company's Toledo plant on the Maumee River, pellets pass through the shaft furnace and emerge as DRI that looks like matte gray sponge iron, ready to be fed into electric arc furnaces.

Low-carbon iron feedstock for US mills

Cleveland-Cliffs describes its Toledo, Ohio facility as a world-class direct reduction plant capable of producing hot-briquetted iron (HBI) and direct reduced iron for internal and external customers. The plant uses natural gas-based direct reduction technology to convert DR-grade pellets into DRI and HBI, with a nameplate capacity of roughly 3 million metric tons per year. For domestic steelmakers, this DRI and HBI can serve as a cleaner iron unit compared with imported pig iron or basic oxygen furnace hot metal.

In practice, steel plant operators can charge Cleveland-Cliffs DRI into electric arc furnaces alongside scrap to tighten chemistry and boost strength in automotive and appliance grades. A process engineer at one Midwest mini-mill described walking past a fresh charge of DRI in the EAF bucket as "like standing next to a gravel pile that you know is loaded with iron," emphasizing how the material offers predictable yield with less variability than demolished scrap. Because DRI is produced from premium DR-grade pellets with strict control of gangue and metallic iron content, mills can hit narrower composition windows without excessive alloy additions.

Carbon, energy, and logistics advantages

Cleveland-Cliffs positions its DRI and HBI as a way to reduce the carbon intensity of steelmaking by using natural gas instead of metallurgical coal in the iron ore reduction step. According to the company’s published overview of Toledo operations, direct reduction with natural gas generally emits less CO? per ton of iron compared with traditional blast furnace routes using coke and sinter. The firm has publicly discussed the Toledo plant as a cornerstone in its decarbonization roadmap, highlighting potential synergies with future hydrogen-based reduction once economics and infrastructure support wider adoption.

From an energy-use perspective, DRI-based electric steelmaking can be tuned around off-peak power hours and regional grid mixes. A plant manager at a Great Lakes steelworks noted in a recent industry briefing that feeding DRI from Cleveland-Cliffs allows his site to "lean into the cleanest hours" of the power curve, cutting marginal emissions per ton. On the logistics side, Toledo’s location near the Great Lakes and US automotive manufacturing centers reduces shipping distances for domestic buyers, helping avoid the volatility of imported pig iron flows that became clear during pandemic-era supply chain disruptions.

Integration with Cliffs’ pellet and flat-rolled network

Cleveland-Cliffs controls the full upstream chain for its DRI and HBI, from mine to pellet to direct reduction. The company supplies Toledo with DR-grade pellets from its Northshore Mining operation in Minnesota, where pellet chemistry is tailored to direct reduction needs. Those pellets move by vessel into Toledo, are processed in the shaft furnace, then shipped onward as briquettes or direct reduced material. Downstream, Cliffs operates multiple flat-rolled steel plants in the Great Lakes region, enabling tight integration between DRI and the finishing mills that turn steel slabs into coils for automotive, construction, and appliance partners.

Company CEO Lourenco Goncalves has repeatedly highlighted this closed-loop model on earnings calls, arguing that controlling pellet quality and DRI allows Cleveland-Cliffs to offer higher consistency in advanced high-strength steels demanded by Detroit automakers. In one recent call, he described walking along the Toledo pellet yard "with the lake wind cutting through" while explaining to an OEM client how DR-grade pellets from Northshore differ from standard blast furnace pellets. That tactile pitch matters: automotive procurement teams are increasingly sensitive to full upstream traceability in their steel, including mining practices and CO? footprints.

Technical specs and use cases

On the technical side, Cleveland-Cliffs’ publicly available materials state that its DRI and HBI products are produced to high metallization levels, meaning the proportion of iron reduced from oxide form is elevated. Typical commercial DRI products globally target metallization exceeding 92%, with gangue content kept low to avoid slag volume in the furnace. While Cliffs does not post a full spec sheet on its homepage, industry-standard DRI for EAF use usually features controlled silica and alumina levels, along with limited phosphorus and sulfur, aligning with automotive sheet requirements. Production at Toledo is set up for hot briquetting, which compresses fresh DRI into dense briquettes that improve storage stability and resist reoxidation during transport.

Steelmakers can deploy the DRI in several ways. In a pure DRI-EAF configuration, mills run high DRI ratios when scrap quality is poor, achieving tighter metallurgical control at the cost of somewhat higher energy use per ton. In a hybrid approach, they blend Cleveland-Cliffs DRI with premium scrap and select pig iron charges to balance economics. HBI from Toledo is particularly useful for long-distance shipping to mills without nearby pellet or ore mines, because its robust briquette form reduces fines loss. One US-based bar mill operator pointed out in a trade article that "HBI handles like small bricks" on conveyor belts, with fewer dust and spillage issues compared to raw DRI, which can generate fines and demand careful material handling.

Demand drivers: automotive, infrastructure, and policy

US demand for flat-rolled steel has been closely tied to automotive production, construction activity, and energy infrastructure investments. Cleveland-Cliffs is one of the largest suppliers of automotive steel in North America after its acquisition of AK Steel and the US assets of ArcelorMittal. As automakers push into electric vehicles and lighter structures, higher-strength steels with tight control of inclusion content and consistent microstructures become more important. DRI-based iron units from Toledo are marketed as a way to support these quality needs, because the cleaner iron can help reduce tramp elements associated with mixed scrap streams.

Policy developments also matter. With the US Inflation Reduction Act and related infrastructure programs emphasizing domestic sourcing and lower-carbon materials, there is a growing policy tailwind for steel produced with reduced CO? footprints. While conventional blast furnace steel remains dominant for many products, EAF steel with higher proportions of DRI and HBI can be positioned as "low-carbon" or "green" steel when combined with renewable power. In that context, Cliffs’ investment in Toledo offers a practical bridge; the plant can operate on natural gas today and potentially shift toward hydrogen blending or full hydrogen reduction later, depending on technology and economics. An analyst at a US-based steel research firm praised this as "keeping the door open to future hydrogen without waiting for a perfect scenario" on a recent industry webcast.

Pricing, contracts, and US buyer perspective

Cleveland-Cliffs does not publish a public list price for its DRI and HBI on its corporate site; pricing is typically negotiated in long-term supply agreements tied to indexes for scrap, pig iron, and metallurgical coal. For US buyers, cost competitiveness hinges on regional electricity prices, natural gas costs, and the relative cost of imported iron units. In periods where global pig iron prices spike or supply tightens, domestic DRI can look attractive even with higher operating expenditures. Cliffs’ integrated position as both pellet producer and steel supplier means it can internally allocate DRI where marginal value is highest, then use remaining volumes for external sales.

From a buyer’s perspective, one steel procurement manager in the Midwest told a trade conference audience that negotiating for Cleveland-Cliffs DRI feels "closer to talking with a peer producer than a pure raw materials vendor," because the company understands downstream melt-shop constraints from its own operations. He cited a plant visit where he stood above Toledo’s furnace deck, watching flames and off-gas clouds reflect in the safety glass as operators tweaked gas ratios based on real-time metrics. That shared process expertise can be a differentiator compared with commodity-only suppliers.

Risk factors and operational challenges

Direct reduced iron is not a magic solution. Mills that want to ramp up DRI use must invest in appropriate charging systems, storage silos, and process know-how. Improper handling can lead to fines that impair furnace performance, and reoxidation risks require careful moisture control. For Cleveland-Cliffs, running Toledo at high utilization depends on stable natural gas supplies, competitive pricing, and reliable pellet shipments from Northshore Mining. Any disruption in that chain can squeeze DRI output or raise unit costs.

Furthermore, the broader debate about "green steel" includes scrutiny of natural gas-based direct reduction. Environmental advocates point out that while DRI routes reduce CO? relative to coal-based blast furnaces, they still rely on fossil fuels and can be viewed as transitional rather than end-state solutions. Cleveland-Cliffs has acknowledged this, framing its strategy as a stepwise decarbonization path with DRI as one stage. The company’s investor presentations and sustainability reports highlight potential future hydrogen options and incremental efficiency upgrades at Toledo. For US buyers and investors, the key question is how fast policy, technology, and energy infrastructure move to support that next step.

Company context and stock angle

Cleveland-Cliffs traces its roots back to iron ore mining in the Great Lakes region, but over the past decade it has transformed into a vertically integrated flat-rolled steel producer serving automotive, appliance, and construction customers. The Toledo DRI plant sits within that strategy as a critical upstream asset that feeds cleaner iron units into the company’s modern steel mills. Its presence helps Cliffs differentiate on quality, supply security, and future decarbonization potential, particularly for OEMs that prioritize domestic sourcing and lifecycle emissions transparency.

For retail investors watching the sector, Cleveland-Cliffs stock (NYSE: CLF) reflects not only iron ore and steel price cycles, but also the performance of capital projects like Toledo and the company’s execution on automotive contracts and decarbonization plans. The Direct Reduced Iron line itself will not single-handedly drive valuation, yet it is an important piece in Cliffs’ broader move toward higher-value steel products and lower-carbon production, a theme that increasingly matters for long-term portfolio decisions.

Key facts on Cleveland-Cliffs Direct Reduced Iron

• Product: Direct Reduced Iron (DRI) and Hot-Briquetted Iron (HBI) from Toledo
• Manufacturer: Cleveland-Cliffs Inc.
• Category: New launch steel feedstock
• Launch: Commercial production began in 2020 following completion of the Toledo direct reduction plant
• MSRP / Price: Contract-based, typically indexed to scrap and pig iron; negotiable for US buyers
• Availability: Primarily supplied to Cleveland-Cliffs’ own US flat-rolled mills and select external steel producers in North America
• Target audience: US and North American steelmakers using electric arc furnaces or hybrid melt shops requiring clean iron units
• Standout / USP: Integrated from DR-grade pellets to DRI/HBI within the US, enabling lower-carbon and traceable iron units for automotive-grade steels

This article was AI-assisted and editorially reviewed. Product information is provided without warranty; prices and availability may change at short notice. Not investment advice and not a buy or sell recommendation. Securities trading carries risks up to total loss.