Mesabi Nugget
Makes History

From 2000–2008, world steel production increased by 57 percent because of tremendous economic growth in the developing world, especially China. Although the present economic downturn has caused a drop in steel output, growth will resume and the long-term trend is strongly upward. Most new steel capacity in China has been the blast furnace/BOF (basic oxygen furnace) process route, but elsewhere, the electric arc furnace (EAF) route dominates. Global EAF production grew by 46 percent during the 2000–2008 period because of the EAF's lower capital cost, flexibility, technological innovations, variable cost structure, environmental benefits, and the availability of reasonably priced electricity and scrap. In the United States, the shift from the blast furnace/BOF to the EAF has been striking (see figure). In 1980, only 28 percent of steel was made in EAFs, but by 2008, that share had increased to 58 percent. The blast furnace faces some serious constraints, including the need for high quality coking coal, environmental issues with sinter plants and coke ovens, high capital cost, and a high fixed cost structure.

One issue impacting further EAF growth is the availability and quality of scrap. Since they are in an early stage of economic development, emerging market countries generally do not generate a large amount of scrap and must import it. In the industrialized countries, there is a sufficient volume of scrap produced for EAF production, but much of it has a copper content too high for premium long and flat products. These two issues result in an increasing need for reduced iron products such as DRI, HBI and pig iron to feed to the EAF. Minnesota in the United States is well suited to supply this need because of the large volume of iron ore reserves that can be easily upgraded for feeding to an iron-making furnace.

ITmk3 at Home on the Range

The iron range of Minnesota, located in the northeastern part of the state, produces 75 percent of the iron ore mined in the United States, about 40 million tons annually. Mining of high grade natural ore began in the area in around 1890. By the 1950s, the high grade ore was largely depleted and mining of taconite ore began. Taconite is a low-grade magnetite of 20–30 percent iron content, but it can be beneficiated fairly easily. Minnesota reserves of taconite are in the billions of tons. The Mesabi Range, mostly within Itasca and St. Louis Counties, contains the largest ore reserves. Although the iron range accounts for most U.S. iron ore production, there are currently no iron or steelmaking facilities located there.

The ITmk3 phenomenon was discovered in 1996 and from then until 2000 Kobe Steel performed laboratory and pilot plant research and development of the process. During the late 1990s, Kobe began to approach steel companies and others about commercialization of the technology. Since the process can use magnetite, the State of Minnesota and others became intrigued by the idea of installing an ITmk3 Plant to make use of the large taconite reserves on the range. In 2001, a decision was made to install a 25,000 ton per year (tpy) pilot demonstration plant (PDP) at Cleveland-Cliffs' (now Cliffs Natural Resources) Northshore Mine in Silver Bay, Minnesota. The partners in the venture were the State of Minnesota Iron Range Resources, Kobe Steel, Cleveland-Cliffs, Steel Dynamics, and Ferrometrics. Cliffs is the largest U.S. iron ore mining company, Steel Dynamics is a major U.S. mini-mill operator, and Ferrometrics is a consulting firm.

Based on the success of the PDP, the partners began planning for a commercial-scale facility. In November 20, 2007, Steel Dynamics (SDI) and Kobe Steel signed the agreements to proceed with a 500,000 tpy plant to be built near Hoyt Lakes, Minnesota, on the site of the old LTV Mining facility. The plant will be known as Mesabi Nugget in recognition of its location on the Mesabi Iron Range. For initial operations, ore will be purchased from Cliffs' Northshore Mine and other sources. A mining operation is being developed and permitted to supply iron ore concentrate for the ITmk3 plant in the future. Coal will be purchased from U.S. suppliers.

Strategic Benefits

Mesabi Nugget provides numerous strategic benefits for SDI. SDI is one of the leading U.S. EAF steelmakers and it operates five EAF mini-mills producing structural steel, rebar, SBQ products, and flat-rolled products, with total capacity of 6.5 million tpy of finished products. This requires the use of over 7 million tpy of feedstock, a combination of scrap, market pig iron, and high-value liquid pig iron provided from the company's Iron Dynamics operation in Butler, Indiana. In 2008, Iron Dynamics supplied 176,000 tons of SDI's pig iron requirements and the remaining 174,000 tons were purchased on the open market. The open market pig iron is purchased from Brazil, Russia, and Ukraine, putting SDI at risk when the market is tight or prices are high. In 2008, the price of pig iron reached over 1,000 U.S. dollars per ton. SDI's objective is to control the supply of more of its charge materials and one step was to purchase OmniSource, one of the largest processors and distributors of scrap and secondary metals in North America. Mesabi Nugget is another step and will provide SDI's mini-mills a domestic source of high grade pig iron. In addition, the plant's future use of ore from an old mining site will add value and avoid the need to import ore. This strategy of controlling raw materials sourcing is growing among leading American mini-mills. Kobe's Iron Unit Group works closely with Midrex Technologies to supply MIDREX Direct Reduction Plants and FASTMET Plants worldwide. MIDREX Plants produced 40 million tons of DRI in 2008, representing nearly 60 percent of the world total. In addition, KSL has supplied or contracted five FASTMET Plants in Japan with a total feed capacity of 0.8 million tpy. The ITmk3 Technology evolved from FASTMET, and Kobe and Midrex see the potential of the ITmk3 Process and are actively pursuing projects worldwide. The Mesabi Nugget ITmk3 Project will provide an environmentally responsible facility on the Minnesota Iron Range. The plant will make history as the first to convert taconite to a value added reduced iron product on the range and the world's first commercial scale ITmk3 Plant. The nuggets will provide Steel Dynamics a valuable source of high quality electric arc furnace feedstock. The project promises strategic benefits for SDI as a means to control a portion of its raw material supply.