Cliffs Natural Resources Inc. is on track and on budget to deliver its customized Mustang iron ore pellets to steelmaker ArcelorMittal USA LLC in the second quarter of 2017, the companys top executive told AMM.
Cleveland-based Cliffs invested $65 million to upgrade its United Taconite mine in Minnesota, with AMM touring the site and related facilities in August, upon groundbreaking of the Mustang project.
Construction of Mustang-related facilities will probably finish in the first quarter of 2017, with delivery of the specialized iron pellets on a commercial basis to Chicago-based ArcelorMittal slated for the second quarter of 2017, Cliffs chairman, president and chief executive officer Lourenco Goncalves told AMM in a Nov. 3 telephone interview.
That (schedule) was more or less the intention from the get-go, Goncalves said, who led the groundbreaking in person at the 5.4-million-gross-tons-per-year mine in August. So we are on schedule and we are on budget as well. It is progressing extremely well.
The Mustang pellet, tailored to replace the Viceroy pellet formerly shipped out of Cliffs Empire mine in Michigan, was developed with ArcelorMittal, Goncalves noted.
The Mustang pellet, like the Viceroy pellet, is destined to be melted and used in ArcelorMittals blast furnace No. 7 at its Indiana Harbor steelmaking complex, Goncalves said.
The Empire mine came to the end of its natural life in 2016, after serving ArcelorMittal and Cliffs for decades. The Empire mine has been operating since 1963, according to Cliffs 2015 annual report.
The two pellets are broadly similar but also importantly different in key specifics, Goncalves told AMM, noting that the nature of iron ore pellets depends on items as geographically specific as terrain.
They are different, (pellets) because they come from different iron bodies, Goncalves told AMM, noting that the Mustang pellet comes from the well-known Mesabi iron range in Minnesota, the area responsible for a bulk of U.S. iron ore production, vs. Viceroys origin in Michigans Marquette iron range.
Still, Goncalves believes the Mustang pellet will be more efficient for ArcelorMittal vs. the Viceroy pellet. After all, as noted, Cliffs developed the Mustang pellet in cooperation with ArcelorMittal, he continued.
We basically developed the Mustang pellet together with ArcelorMittal, he said. We incorporated into the Mustang pellet, some specific details that ArcelorMittal feels like that would make for the better, at the Indiana Harbor No.7 blast furnace, he continued.
Thats in line with a longtime tradition and business strategy at Cliffs. The top U.S. iron ore miner tends to customize iron ore pellets and products for specific client steelmakers, even at the level of the individual furnace used by the steel producers.
That ensures process optimization at a specific blast furnace, where details like the size of the blast furnace can come into play. A bigger blast furnace will need a pellet that can resist compression better than a blast furnace that is much smaller, for example, Goncalves said.
Cliffs is always willing to work with the client to produce a customized pellet that will optimize the operation of that blast furnace, Goncalves said.
That customization of iron ore for a particular customer is one of Cliffs most important selling points, because it showcases Cliffs impressive technical capability, he said.
There is no such thing as pure iron ore simply going into a blast furnace, Goncalves explained. How the iron ore is carried into the furnace, and in what form, is crucial.
In other parts of the world, steelmakers use iron ore sinters and sinter fines, which are highly polluting and now very rare or entirely phased out in the U.S., he said.
Instead, U.S. steelmakers use iron ore pellets. But even within pellets, there are acid pellets, flux pellets, and super flux pellets, besides direct reduced (DR) grade pellets, Goncalves added.
So its not that each pellet is equal (and identical) to another one. And even within each category (of pellets), we customize to the level of the blast furnace, he said.
Another example of Cliffs customization of pellets involves its sales of DR grade pellets to Nucor Corp.s direct reduced iron (DRI) plant in Trinidad and Tobago, Goncalves said at an Aug. 11 press conference at the site of the Mustang project.
We are employing the same approach (of customized and tailored pellets for each specific furnace), as we produce DR-grade pellets, Goncalves told reporters.
Nucor had asked Cliffs and other iron ore suppliers if they could produce a DR grade pellet with a bigger diameter, he explained, and many iron ore miners turned down Nucors request.
For us, it wasnt even a consideration (to reject Nucors needs), he continued. (We thought): Thats the size they want, so thats the size we are going to produce. That was the first step.
Today, the pellet we produce for the DRI facility for Nucor in Trinidad and Tobago is absolutely perfect for their module, and thats not our assessment. Thats their assessment, Goncalves said.
Cliffs does not feed DR pellets to Nucors DRI plant in Louisiana, the companys only U.S. DRI module, but that it is not necessarily because Charlotte, N.C.-based Nucor doesnt want Cliffs DR pellets for that facility, Goncalves said.
Instead, theres a quirky logistical restraint, related to the outdated and decades-old restrictive so-called Jones Act governing seafaring vessels, that makes it more expensive and cumbersome to deliver DR pellets to Louisiana from the U.S. Great Lakes, Goncalves said.
Believe it or not, its cheaper and easier to move pellets to Trinidad . . . from the Great Lakes, than to Louisiana, which is still in the United States, he said. Logistically, it makes more sense to deliver to Trinidad than Louisiana.
Instead, Nucor imports DR pellets from countries as varied as Canada, Sweden and Brazil, Nucor has said in the past. A Nucor spokeswoman didnt respond to a request for comment for this article.
Nucors Trinidad DRI plant has been operating at high-utilization rates lately, and is on track to produce 1.6 million tonnes of cold DRI in 2016, a record for the plants 10 years of production.
Presently, Cliffs supplies DR grade pellet for Nucor out of its Northshore mine, which is sited in Babbitt, Minn., according to Goncalves.
There are no present plans to produce DR-grade pellets out of its United Taconite (UTAC) facility, but never say never, Goncalves said, noting that from a technical perspective, given the ores specifications, the ore at UTAC could be utilized to make DR pellet well down the line.
The ore there can be utilized, but we have no plans at this point, Goncalves said. We prefer to continue to produce DR grade pellets out of Northshore. We are doing very well out of Northshore. . . . Again, we have the logistics in place, out of Northshore, to take the pellets to Trinidad in a way, that makes sense for both of us, for Cliffs and for Nucor. . . . So were happy with that.
Northshores rated capacity is 6 million tons per year, inclusive of concentrates capacity, according to a Cliffs fact-sheet on the companys website.
The Mustang project did not alone prompt the August restart of Cliffs formerly idled UTAC mine, as the overall mine restart was more prompted by improving market conditions, Goncalves explained.
Nonetheless, the $65 million invested in Mustang-related upgrades, which covers extra loading facilities, rail facilities, a new slurry tank, and storage space, among other items, does contribute positively and significantly to the UTAC mine, he added.
Broadly speaking, the development of the Mustang pellet itself was part of evolving market conditions, as it involved Cliffs evolving to meet a clients needs, made more urgent and relevant by the fact that the Empire mine began to reach the end of its life.
But what led to the restart of UTAC was improvement of the (iron ore and steel) market, Goncalves continued. We did not restart UTAC just to do Mustang. Mustang will only be a portion of our production at UTACwe wont produce only Mustang there.
About 40 percent of UTACs production will be geared to Mustang, while about 60 percent will be geared to its standard pellet output, Cliffs has said in the past. The late August restart of the UTAC mine brought back dozens of workers to work, although as many as 300 had seen their positions shifted as a result of the natural death of the Empire mine, which also occurred in August.
Overall, the Mustang pellet will allow faster melting and will cut energy consumption for ArcelorMittal, Goncalves said, declining to go further into technical specifications, because these are proprietary to ArcelorMittal.
In general terms, flux pellets are superior to non-flux pellets because they carry the slag together with the iron ore into the blast furnace, instead of furnace operators needing to load slag in separately.
In a blast furnace, you basically load three things: iron ore, through a pellet, or through sinter, coking coal, and flux (or slag). So when the pellet carries the flux, you are carrying, already, the slag together with the iron ore, Goncalves explained.
Its a good question, but one for steelmakers rather than a question for Cliffs, why all blast furnaces do not use flux pellets, he remarked.
One client (steelmaker) prefers it one way, other clients prefer it the other way, partly due to diverse blast furnace technical setups and specifications, he said. Some people like SUVs (sport utility vehicles), some people like smart cars. I like Porsches.
As for the overall progress of the Mustang build-out and upgrades, Goncalves is happy and believes the project has exceeded initial expectations, going smoothly.
We made a lot of progress in a couple of months, he told AMM, referring to initial groundbreaking in August to progress to date in early November.
Others at the groundbreaking ceremony for the Mustang upgrades were similarly optimistic, focusing on how Cliffs managed to restart the mine and bring back workers to Minnesotas famous iron range, a region where several generations of families often work in the mining industry, handing down industry lore and experience.
Attendees at the ceremony included local union workers, representatives from the offices of state and federal lawmakers, and Minnesota Gov. Mark Dayton, all of whom applauded Cliffs dexterity in getting the mine back up and running.
Our future looks a lot brighter than it did a year ago, United Steelworkers union Local 6860 president Brian Zarn said at the August news conference. Almost all of the workers in Zarns union, who were adversely impacted by UTACs idling, will return to work, Zarn said.
Zarn thanked state, local and federal lawmakers in the Minnesota Congressional and political delegation for drawing prompt attention to the plight of Minnesota iron workers, including via a Dec. 2015 visit from then-President Barack Obamas chief of staff Denis McDonough.
Our politicians got on the ball, before you could say Jiminy Crickets, Zarn told reporters. Theyve been helpful to us throughout this whole (layoff) ordeal.
13 percent of U.S. gross national product (GDP) passes through the Sioux Narrows, and through the nearby Lake Superior, Great Lakes, and St. Lawrence Seaway, all near Minnesota, according to Rep. Rick Nolan, (D., Minn.), who received enthusiastic applause from the attendees, at the event.
Nolan cited a Department of Homeland Security study, and said the economic importance of the region, including production from Minnesotas iron range, explains the significant and protective military presence along these waterways.
As a steel and iron ore crisis mounted its peak, partly due to unfairly traded imports, the only realistic means of help would have to come from the very White House itself and the U.S. executive branch, not from stalled legislation or the media bluster of press conferences, Rep. Nolan said then.
The only way this thing is going to get fixed is the way it got fixed in the early 2000s, Nolan said, who is considered a champion for U.S. domestic steelmakers and the domestic iron ore industry. And thats by getting the White House involved in this case.
And the person who chartered that course for us and gave us the advice that we needed to know, was Lourenco Goncalves, because he had seen it and been through it before, Nolan said.