KEEWATIN, MINN. – U.S. Steel is preparing to produce a taconite pellet that could help save the Iron Range's mining industry — and the thousands of jobs that rely on it — from obsolescence.
For more than 100 years, Minnesota mines have fed iron ore to the sprawling Great Lakes mills of U.S. Steel and other big corporations. There, red-hot blast furnaces transform ore, coal and limestone into pig iron and eventually steel.
But this process is slowly dying, replaced by cheaper and more energy-efficient plants that use electricity and scrap metal. And concerns over climate change may deliver a final blow to traditional steelmaking; blast furnaces emit far more carbon dioxide than electric furnaces.
U.S. Steel is investing $150 million at its Keewatin plant to produce a higher-grade iron ore pellet that would serve electric furnaces, also known as "mini mills." As mini mills make higher quality steel, they require high-quality iron to supplement scrap metal. That's where the new pellets come in.
"The greatest advancement in the state-of-the-art iron ore processing technology is what is happening right now on the Iron Range," said Kevin Kangas, director of the Natural Resources Research Institute in Coleraine, which is part of University of Minnesota Duluth. "This is a great step forward for the Minnesota iron ore industry."
Cleveland-Cliffs, the largest player on the Iron Range, is already making the new higher-grade iron ore pellets.
Whether U.S. Steel and Cleveland-Cliffs — long tied to blast furnace steelmaking — prosper in this new field is crucial to the Iron Range. The region's mines have long been captive to their steel mill owners.
"We are kind of on pins and needles on the Iron Range as the steel industry is turning to [electric furnaces]," said John Arbogast, District 11 staff representative for the United Steelworkers of America, which represents workers at all but one of the state's six taconite operations.
"Are we going to be part of the long-term future of the steel industry? It makes me nervous," he said.
Mining key to Iron Range economy
Though much diminished from its heyday, Minnesota's taconite industry is still the bedrock of the Iron Range's economy.
Jobs once numbering in the five digits are down to around 4,000 nowadays, but that figure has held relatively steady for 20 years. Mining jobs are among the best-paying blue-collar jobs in the state, and the industry underlies the Iron Range's tax base.
"Mining is still the straw that stirs the drink," said Keewatin Mayor Mike LaBine, who was a miner until he was laid off in the early 1980s and became an electrician.
Not far from Keewatin's city hall sits Keetac, one of several sprawling taconite facilities built between the mid-1950s to the mid-1970s. It is the smaller of two mining and processing operations on the Iron Range owned by Pittsburgh-based U.S. Steel.
Taconite, which is about 30% iron, is blasted from Keetac's mine and fed in chunks into massive grinders. The rock is pulverized to powder, its iron culled by magnets and molded with clay into marble-sized pellets that are about 66% iron.
In August, U.S. Steel started construction on the expansion that will take that process one step further.
Keetac, which employs about 400 workers, will continue to produce the traditional pellets. But when Keetac's new wing begins operating in 2024, it also will produce the new pellets with 68% to 69% iron and considerably less silica than a traditional pellet — in other words, a product tailored for use by electric furnaces.
"This is probably one of the most exciting things that has happened on the Iron Range in 50 years," said Mike Bakk, operational readiness director at U.S. Steel's Minnesota iron ore operations.
Electric furnaces gain foothold
Electric furnaces started gaining traction in the 1980s, particularly in the United States with its abundance of scrap metal. At first, they produced low-grade steel products like rebar for reinforced concrete. But as technology improved, mini mills have increasingly encroached on premium steel markets.
In 2021, 71% of U.S steel production came from electric furnaces, up from 47% in 2001, according to data from Carnegie Mellon University's Center for Iron and Steelmaking Research in Pittsburgh. Traditional steelmaking correspondingly lost market share, and the number of U.S. blast furnaces dwindled from 60 in 1990 to 21 in 2021.
Mini mills use electrodes to melt scrap steel, along with smaller amounts of pig iron and "direct-reduced iron" (DRI). The latter two metals are important in making higher quality steel.
The new "direct-reduced" iron pellets from U.S. Steel and Cleveland-based Cleveland-Cliffs are fashioned for use in DRI furnaces, which churn out a product that's around 95% metallic iron.
There are three DRI plants in this country, and one — in Toledo, Ohio — is owned by Cleveland-Cliffs. The company uses DRI in both its electric furnaces and its blast furnaces.
U.S. Steel plans to sell direct-reduced pellets to DRI manufacturers, but it also seems likely to build its own DRI plant. "It's not a matter of if, it's when and where when it comes to DRI," Kevin Lewis, U.S. Steel's investor relations vice president, said in a recent conference call with stock analysts.
In an interview, Lewis said U.S. Steel has "not gotten into a lot of site considerations for a DRI plant."
The Iron Range, of course, would covet a DRI plant; Cleveland-Cliffs invested $1 billion in its DRI operation, which opened in 2020.
To make the pellets for its DRI plant, Cleveland-Cliffs in 2019 invested $100 million into its North Shore taconite operation in Silver Bay. However, Cliffs' Silver Bay plant — and the Babbitt mine that supplies it — have been idled since spring.
Cliffs bought the U.S. operations of steelmaker ArcelorMittal in 2020, and it is now making direct-reduced pellets at a former Arcelor mine near Virginia. Cliffs has blamed the temporary shutdown on a royalty dispute with the Babbitt mine's mineral rights owner.
"You can't judge the market for DR pellets based on what Cliffs is doing because they are making their own internal business decisions," said Steve Mekkes, a senior minerals engineer at the Minnesota Department of Natural Resources.
Electric arc furnaces will continue gaining ground since they pose a lesser threat to climate change. Unlike blast furnaces, they don't rely heavily on coal.
"Most blast furnaces will shut down because of their very high CO2 intensity," said Chris Pistorius, co-head of Carnegie Mellon's Center for Iron and Steelmaking Research.
According to consultancy Wood Mackenzie, a typical blast furnace emits two tons of carbon for each ton of steel produced. A mini mill using 100 % scrap emits a quarter of that amount.
Mixed predictions for Iron Range operations
How changes shaping the steel industry play out in Minnesota — and at traditional steel mills across the country — "depends on how Cliffs and U.S. Steel adapt," Pistorius said.
Both could sell a significant amount of the direct-reduced iron pellets as merchants instead of using all pellets only in their own facilities, effectively opening markets for the Iron Range. Indeed, U.S. Steel said it intends to do so.
"Cliffs and U.S. Steel do have incentives to be merchants if they can get a good price," Pistorius said. Direct-reduced pellets sell at a premium to traditional taconite pellets.
Cliffs has four operations with electric furnaces and five blast furnace locations. U.S. Steel, once the king of integrated steel making, is currently making a big push into electric furnaces.
The company bought Big River Steel in Arkansas for $1.5 billion and plans to invest another $3 billion to expand that electric furnace operation.
But not long after U.S. Steel completed buying non-union Big River in 2021, the company canceled plans to invest $1 billion in its traditional steelworks in Pennsylvania's Mon Valley. That's not a good sign for its future or the Iron Range's.
Also in 2021, U.S. Steel closed blast furnaces near Detroit, cutting iron ore demand and a plethora of jobs. And earlier this year, the company said it would sell its blast furnace in Granite City, Ill., but close the rest of its steelmaking operation there, shedding nearly 1,000 jobs.
Those lost jobs aren't being completely replaced by growth in the mini mill business, which requires fewer workers.
It's a trend eating at the Steelworkers ranks. "That's the problem with technology, we lose a lot of jobs," said the union's Arbogast.