The shares of Cleveland-Cliffs jumped 4.5 % on Monday after the firm announced plans to purchase Ferrous Processing and Trading Company in order to obtain access to premium scrap and extend its portfolio of high-quality iron-ore pellets and other ferrous raw materials.

FPT has a cash-free, debt-free enterprise value of about $775 million, according to Cleveland.

FPT is one of the country's leading processors and distributors of prime ferrous scrap, accounting for roughly 15% of the domestic merchant prime scrap market. It processes about 3 million tonnes of scrap each year, about half of which is prime grade.

With all of the new flat-rolled capacity coming online in the market over the next four years, Cleveland-Cliffs CEO Lourenco Goncalves believes prime scrap will become increasingly scarce.Cleveland-Cliffs to Fully Redeem 5.75% Senior Notes due 2025 | Business Wire

Cleveland-Cliffs is the primary source of steel that generates prime scrap in manufacturing plants as the largest supplier of flat-rolled steel in North America. In addition, the customer consumes a substantial amount of scrap.

According to Goncalves, the acquisition will improve Cleveland-Cliffs' ability to buy prime scrap directly from its clients, cutting out the middlemen and increasing scrap margin contribution for both Cleveland-Cliffs and the manufacturing and service center clients who will be able to sell scrap directly to it.