CHICAGO AK Steel Corp. is looking to ramp up in-house iron ore pellet production as it scales back plans to boost coal mining because of low prices.
Construction of the Magnetation LLC iron ore pellet plant in Reynolds, Ind., should be completed by the late third quarter or early fourth quarter, with the facility expected to be in full production by 2015, AK Steel chairman, president and chief executive officer James L. Wainscott said during a conference call with analysts April 22.
After a very long, cold winter, spring has arrived in the Midwest and, with it, Magnetations pellet plant is literally springing to life, Wainscott said.
Magnetation is a joint venture between the West Chester, Ohio-based steelmaker and Grand Rapids, Minn.-based iron ore concentrate producer Magnetation Inc.
Magnetation was expected to invest between $300 million and $350 million in the Reynolds iron ore pellet plant (amm.com, Nov. 27, 2012). The project is essentially on budget and ahead of schedule, Wainscott said.
The facility is expected to produce about 3 million tons annually, or roughly half of AK Steels iron ore requirements, Wainscott said. The company will continue to buy an additional 3 million tons of iron ore pellets from third parties, he said.
The start up of the pellet plant is a real game-changer, Wainscott said, noting the company could have used the additional capacity this year. Magnetation will create a natural hedge against iron ore price volatility and give AK Steel geographic diversity in terms of where it sources the raw material, he said.
In the meantime AK Steel faces a very tight iron ore supply chain as Great Lakes shippers struggle to catch up after an unusually long and cold winter in North America, Wainscott said. The company continues to monitor and manage its iron ore supplies closely, he said.
But while AK Steel is looking to boost its iron ore production capabilities, it is holding off on plans to open new mines at Somerset County, Pa.-based AK Coal Resources Inc., given the steep fall in merchant coal prices, Wainscott said.
We will continue to proceed with permitting activities, but the timing of opening additional mines will depend entirely on future market conditions, he said. When it makes more sense to mine more of our own coal in the future, we look forward to doing just that.
AK Coal is expected to provide about 500,000 tons to AK Steel annually, company executives said, noting that the company has consumed less coke and coal this year because of an unplanned outage at its Ashland (Ky.) works.