Cliffs to unveil ‘Mustang’ pellet project at UTac

Taconite pellets

Taconite pellets

On Thursday, Cliffs Natural Resources breaks ground on its “mustang” pellet project at United Taconite in Eveleth. The $64 million investment coincides with the imminent shuttering of the Empire Mine in Michigan, and resulting demand for specialized iron ore pellets by Cliffs’ customer ArcelorMittal.

The revival of United Taconite (still called by its old name, “EvTac,” by your average Iron Ranger) ends a year-and-a-half shutdown caused by the downturn in the global steel market and oversupply in North America. Although U.S. Steel’s Keewatin Taconite remains idled, Cliffs’ mines at Eveleth and Northshore are now running again. Other Range mines at Hibbing, Virginia and Mt. Iron managed to continue running despite the difficult market conditions of the past two years.

Most experts cite the fact that U.S. tariffs on subsidized (aka, “dumped”) Chinese steel appear to be working as the reason for the regional mining stabilization. Many of the underlying problems with global oversupply remain, however, something we talked about last week. We can safely look at the next year as a welcome reprieve from a dire 2015-16 downturn, but not something likely to become a “boom.”

Direct-reduced iron pellets

Direct-reduced iron pellets

So, what the heck is a “mustang” pellet?

Well, the name is mostly marketing. There are many different ways to use iron ore to make steel. Each method requires iron ore of different specifications. Electric arc furnaces use nearly pure iron. Older-style blast furnaces use taconite pellets, which are about 65 percent iron, mixed with limestone to aid the steelmaking process and small amounts of bentonite to bond the pellet together. The iron content of taconite pellets are finely tuned by modern mines to fit customer specifications. “Mustang” pellets are highly refined, designed to make a particular kind of steel later in the production chain.

New steel mills depend entirely on electric arc furnaces. Once blast furnaces have run their course traditional taconite won’t matter much, “mustang pellet” or not. That’s why Cliffs and other companies are also exploring direct-reduced iron, the kind that feeds electric arc furnaces, as part of their future strategy. Such a move, however, would be extremely expensive, and the iron-and-steel guys I talk to seem to think that only a few mines will make the leap.

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