Can technology breathe new life into the Midwest's old iron?

Dec 7, 2011

The industrial Midwest might not be the industrial Midwest if it weren’t for the iron-rich regions of northern Minnesota and Michigan. These iron ranges have long supplied domestic steelmakers, depleting the highest quality ore along the way. Now, a plant in Minnesota is testing a process to dramatically upgrade the low-grade ore that remains.

To understand why this matters, keep in mind how steelmaking has changed.  The old recipe for steel calls for iron ore, coke and a blast furnace.  But now, more than half of American steel is made in electric arc furnaces, which use electricity to melt scrap steel into new steel.

You can find those ingredients in your own kitchen or garage.

“Anything from bicycles to barbeque pits, refrigerators, washing machines,” says David Guz, listing the kinds of scrap metal his customers bring in.

Guz runs a scrap yard called H &H Metals in Inkster, Michigan.  There’s a mountain of metal out back.  Dan Letinski parks beneath it and starts tossing out junk.

“There’s a sink, there’s shock absorbers, there’s engine blocks, there’s crank shafts,” he says.  “I have an automotive shop and this is a lot of scrap that we just have no use for anymore.”

The US produces lots of scrap.  It’s actually one of the country’s big exports.

But scrap contains impurities.  So to make high quality steel, electric furnace steelmakers often add clean iron to the mix.  That’s meant relying on imported pig iron from countries like Brazil.

American companies like Steel Dynamics don’t like that.  So way up in the woods of Minnesota, they’re trying something new.  It’s called Mesabi Nugget.

“We’re the only facility in the world that does what we do, so we’re pioneers of sorts,” says plant manager Jeff Hansen.

This plant cost more than $300 million  and took years of development with Kobe Steel of Japan.  All to produce a tiny nugget of iron.

“It’s very dense, it’s very heavy,” Hansen says.  “If you were to look at it you’d say it very closely resembles a Junior Mint.”

A Junior Mint that’s 96 percent iron.  Remember, this started as low-grade ore.  That ore is usually upgraded into pellets that are about 65 percent iron.  The pellets work in traditional mills but don’t serve the growing electric market.

Nuggets do.  They’re pure enough and metallic enough to mix with scrap.

Jeff Hansen’s face glows orange as he peers into the plant’s vast furnace.  He says it’s the largest of its kind in the world.

“We bring the temperatures up to 2400, 2500, upwards of 2800 degrees Fahrenheit,” he says.  “As you look inside the furnace, you’re gonna see the pellets giving off volatiles and actually giving off some fire.”

Pellets float by almost like lava, on their way to becoming pure metallic iron.  Mesabi Nugget produced about 200,000 tons of nuggets over its first two years.  The goal is 500,000 tons a year.

Still, nuggets are already helping change the rules of the game.  Steel Dynamics has stopped importing pig iron for use in its electric furnaces, because of the nuggets made in Minnesota as well as other domestic efforts.  It acquired its own scrap company as well.

John Anton is a steel analyst with IHS Global Insight.  He says Steel Dynamics isn’t the only company that wants to supply its own raw materials and buffer itself from the market.

“Raw material costs – and iron ore and scrap are key here – used to be very steady,” he says.  “In the past seven or eight years they have become incredibly volatile.  They’re one of the most volatile things in the entire commodities, more volatile than oil.”

Now the major iron ore producer Cliffs Natural Resources is considering opening a nugget plant in Michigan’s Upper Peninsula.  That idea is still in the feasibility study phase.

Michael Locker is president of the business consulting firm Locker Associates.  He says the new nugget technology means the Minnesota Iron Range can now supply the growing part of the steel industry.

“It will mean employment.  It will mean the mines are gonna work again.  It will mean transportation and it’ll strengthen the steel industry of the United States,” he says.

There’s a ways to go before the Mesabi Nugget plant is pronounced a success.  If it is, the hope is it could attract more electric furnace steelmakers to the region.