Cleveland-Cliffs walks back plans for flagship U.S. hydrogen steel project.

Cleveland-Cliffs, the largest producer of flat-rolled steel in North America, has signaled that it is pulling away from its original plan to build a hydrogen-ready green steel facility at its Middletown Works plant in Ohio, touted as an up-and-coming landmark in U.S. industrial decarbonization.

The project, supported by a $500 million federal grant, aimed to replace coal-fired blast furnaces with direct reduced iron (DRI) technology and electric furnaces capable of running on green hydrogen.

On a first-quarter earnings call with investors, Cleveland-Cliffs CEO Lourenco Goncalves said the company was negotiating with the Department of Energy to "explore changes to the scope to better align with the administration's energy priorities."

Goncalves now says the company will fall back on more "economical" fossil fuels, aligning with what he describes as the likely direction of future U.S. energy policy under a second Trump administration – a change that marks a significant reversal for a project that was previously seen as a model for modernizing heavy industry while reducing emissions.

Cleveland-Cliffs is committed to environmentally responsible and integrated All-American production processes, ranging from the extraction of iron ore to steelmaking, rolling, coating, finishing, stamping, and tooling steel products.

As the largest iron ore pellet producer in North America, the company boasts an annual capacity of 28 million long tons, tailored for its own facilities and produced under what its website describes as "perhaps the most stringent environmental regulatory framework in the world."

Missing infrastructure and policy uncertainty

Middletown Historical Society

The Middletown Historical Society's photo of metal workers in 1925, representing a Midwestern steel town now hoping to leverage a rich history and infrastructure into green steel.

One of the central challenges facing the Middletown project is the lack of nearby green hydrogen production, which makes sourcing fuel within the project timeline unfeasible.

Goncalves acknowledged to reporters at an event hosted by the lobby group American Iron and Steel Institute that "without hydrogen, the entire thing falls apart," and current infrastructure and fuel prices make hydrogen-based steel financially untenable.

This problem is being exacerbated by political moves to repeal the 45V tax credit under the Inflation Reduction Act, which was designed to incentivize clean hydrogen production. Without that credit, the cost of green hydrogen remains too high to compete with natural gas or coal, driving up steel prices and undermining the economics of clean steelmaking in the U.S.

"Before all this uncertainty, this project was going to be, potentially, the first green-steel plant in the U.S.," said Hilary Lewis, the steel director at the climate research group Industrious Labs, in an interview with Canary Media. "With all this uncertainty, and particularly with this potential pivot toward fossil fuels, the future of clean iron and steelmaking in the U.S. is much less clear, and that puts our competitiveness at risk."

Economic stakes are high

The decision to scale back the project will likely have ripple effects that extend beyond its climate impact, as the future green steel facility was expected to stimulate $373 million in local economic activity and create over 2,000 jobs in Middletown, according to analysis by the Center for Climate and Energy Solutions think tank.

By reverting to the option of relining an existing blast furnace to avoid the higher upfront costs of building a new facility, the company may be forgoing longer-term opportunities for innovation, job creation, and regional investment – an outcome that some climate groups and policy analysts interpret as a setback in the shift toward lower-emission steelmaking.

"Middletown is sort of the quintessential Midwest steel- and paper-making town that is looking for a way to leverage that history and infrastructure and know-how to chart a path forward," said Brad Townsend, the Ohio-based vice president of policy and outreach at the Center for Climate and Energy Solutions. "This project would have done exactly that."

While Cleveland-Cliffs scales back, international competitors are surging ahead, as Europe's leading green steel project, Sweden's Stegra plant (formerly H2 Green Steel), has made significant progress thanks to Sweden's majority of hydroelectric, wind, and nuclear power.

In contrast, the U.S. has continued to lag in the development of infrastructure and coherent policy to support large-scale green hydrogen projects, putting potential American green steel manufacturers at a financial disadvantage.

Left unaddressed, analysts warn that without clear federal support and investment, the U.S. may cede leadership in decarbonized steel production, which could have implications not just for climate goals but for industrial competitiveness and national security in a carbon-constrained global economy.