U.S. Steel’s Fairfield Works near Birmingham, Alabama as it appeared in 1972. Known for the billowing smoke of its classic blast furnaces, the Fairfield Works will soon be home to an industry-changing electric arc furnace. (PHOTO: Dystopos, Flickr CC)
Times are good in the iron and steel industry. Here in Northern Minnesota, the mines on the Mesabi Iron Range now operate at full capacity. Prices for both iron ore and finished steel run high.
Moments like these build the mining industry. They allow companies to strike while the iron is hot. Pun intended. Good times make it possible for producers to survive inevitable economic downturns and invest for changes in the industry.
That last part is critical for Northern Minnesota’s mining industry. Hoarding profits won’t help the communities of the Mesabi. After all, we aren’t the ones who end up with the cash. The value of iron ore to the people of the Range comes from employment, support industry and production tax revenue, all of which depend upon good times like these.
But the churn of success also creates pressure on steel and commodities companies. On one hand, they must invest in new technology and adaptation to industry trends in order to maintain long term strength. On the other, they need to satisfy stockholders who want profits, dividends and value right now.
As I wrote last fall, U.S. Steel is one of the companies caught in this balancing act. Stockholders at the time weren’t necessarily happy with the company’s decision to invest in upgrades to old plants. Or perhaps the better word would be “uncertain.”
After all, according to conventional wisdom, U.S. Steel runs big, smoke-belching blast furnaces, rolling out quantities of steel for a hungry nation.
But now the country is on a weird new diet. It still needs steel, but in smaller batches, made to different specifications and within much more complex supply chains.
And so steel companies running smaller, more efficient and less labor-intensive electric arc furnaces have risen while U.S. Steel slid from its former glory atop America’s corporate mountain.
That’s why some recent news roughly equates to grandpa buying a pair of magenta skinny jeans.
In February, U.S. Steel announced it was restarting construction of an electric arc furnace in Alabama. It had flirted with the technology in 2015, only to be undone by the steel downturn that year. According to local reporting in Fairfield, Alabama, restarting the project was part of negotiations with the United Steelworkers last year.
Later in February, U.S. Steel and other major steelmakers announced more price increases. Insiders liked that, with one firm moving U.S. Steel into the “buy” column. More euphoria for miners and vendors here on the Iron Range?
Ah, but another new electric arc furnace, this one by the nation’s largest user of traditional blast furnaces, also shows the imperative facing the Mesabi Range mining industry to modernize itself.
You can feed electric arc furnaces with recycled material, scrap iron, or pure iron concentrate. Whatever’s cheapest and whatever you need to make the particular kind of steel your customers want. You still need iron mines, but probably not as many. Further, the ore must be processed differently. That means new (and very expensive) iron ore processing plants.
That’s why you hear so much about hot-briquetted iron (HBI) plants like the ones Cleveland-Cliffs is building in Ohio. Cliffs has floated building another in Minnesota. It’s also planning to reopen the Empire Mine in Michigan.
And that’s why the delays in the iron ore project at the former Butler Taconite plant near Nashwauk sting so badly. It’s true, Essar failed in its promises to finish a taconite plant. But much earlier promises of building an electric arc furnace in Northern Minnesota slipped out the back door years prior.
The Mesabi Range still mostly produces varieties of traditional taconite pellets. At some point, companies like U.S. Steel, ArcelorMittal, and Cleveland-Cliffs either invest in changing this, or we ride taconite and blast furnaces to a not-so-distant conclusion. There’s plenty of iron here. But there’s plenty of iron around the world. This equation won’t favor us forever.
Critical investment in industry typically only happens during good times. This year looks pretty good, and some predict that might last into 2020. But many others see warning signs of the next recession in our economy.
If the Mesabi Range leaves this boom period without new iron mining technology our region will feel the recession far more deeply than the rest of the country.
The most frustrating aspect is that we regular folks don’t control the machinations of industry. We can only hold companies to this goal as our elected officials negotiate tax policy, environmental regulations and mineral leases. A good relationship requires long term commitment from both parties.
Of course, we also require new energy and thinking at the local level. If you want to live in a mining camp, do nothing. If you want to live in a region that will last generations, work locally to build a more resilient economy — in mining, and in everything else.
Aaron J. Brown is an author and college instructor from northern Minnesota’s Iron Range. He writes the blog MinnesotaBrown.com and hosts the Great Northern Radio Show on Northern Community Radio. This piece first appeared in the Sunday, March 3, 2019 edition of the Hibbing Daily Tribune.
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