Confronted by well-heeled mini-mill competitors on one side and aluminum producers on the other, the GM of ArcelorMittal Indiana Harbor is counting on integrated technology to not only hold on to steel’s share of the automotive market but add to it.
As it turns out, you can teach an old mill new tricks, advanced high-strength tricks, to be more precise.
If you find that hard to believe, simply head south from the gleaming skyscrapers of Chicago and over the Skyway to East Chicago, the Windy Citys grittier neighbor. Situated in northwest Indiana, the top steelmaking region in the United States. East Chicago is also home to ArcelorMittals Indiana Harbor (IH) steelmaking complex.
Built more than a century ago, the mill sports a current annual steelmaking capacity of 6.4 million tons. Its No. 7 blast furnace which began production in September 1980 and new by U.S. blast furnace standards is the largest in North America.
At the helm of the mill, which juts out into Lake Michigan, is vice president and general manager Wendell Carter, the son of a career Navy man. Carter worked for 20 years in the mills blast furnace division before assuming his current position. And his military heritage shows.
Here I am an industrial general, Carter said in a bullhorn voice that came through loud and clear over the din of equipment on a recent mill tour. I have troops, 4,200 people, who I am responsible for. And I have equipment that (ArcelorMittal) has given me stewardship of.
A lot of my mindset is Know the rules, follow the rules, execute the recipe, he said. Ive never been in the military. And we dont have boot camp. But if you work at the blast furnace, youll learn to beat the mule out of a child.
The same approach or philosophy might be applied to a mini-mill aiming to horn in on ArcelorMittals hold on the market for advanced high-strength automotive steels (AHSSs).
In the beginning, there was ore
Hot metal with a high iron content and few impurities is the first ingredient in the recipe for stronger, lighter steel. And you cant get it from a mini-mill, not easily anyway.
It starts with rocks taconite from Minnesotas Mesabi iron range to be more specific not scrap. Mix it with coking coal and limestone, ideally in a 300-foot-tall blast furnace, then set said furnace to about 4,000 degree Fahrenheit to melt the rocks.
Once the rocks are melted, wait for the iron they contain to sink to the bottom and the impurities to rise to the top. Then skim the slag off, tap the furnace and let the iron flow into a torpedo car. Next, transfer the iron to a ladle and then pour that hot metal into a basic oxygen furnace primed with a bit of scrap. Alloy as necessary, and youre ready to roll slabs on Indiana Harbors 80-inch-wide hot-strip mill (HSM).
The slabs enter the mill measuring several inches thick, about 30-feet long and traveling approximately 2 miles per hour. When they exit the HSM, the slabs measure mere fractions of an inch thick, more than 300- feet long and moving as fast as 36 miles per hour as theyre spooled into coils that will take three days to reach a temperature cool enough to touch.
Pain in the scrap
When it comes to producing AHSS for the automotive market, Carter describes most mini-mills as two or three generations behind Indiana Harbor. An EAF (electric-arc furnace) would have to start with a very, very clean metallic and they would also have to spend a lot more time refining it in the LMF (ladle metallurgy furnace) or through degassing, which results in a more expensive process, he added.
Contrary to popular belief, mini-mills arent always the lowest-cost steel producers. Thats because ferrous scrap is not as plentiful now as it was in the 20th century.
Case in point: American Metal Markets hot-rolled coil index stood at $29.80 per hundredweight ($596 per ton) on November 7, up 24.2 percent from $24 per cwt ($480 per ton) a year earlier. Metal Bulletins 62% Fe Iron Ore Index, meanwhile, clocked in at $62.66 per tonne, down 8.3 percent from $68.30 per tonne a year earlier.
Its fair to assume then that profit margins for integrated mills are wider than they were a year ago because prices for finished steel are up and their hot metal cost which is based primarily on ore prices is down.
Just the opposite is true for mini-mills. The consumer buying price for Chicago No. 1 scrap was $325 per gross ton when this article was filed, up 38.3 percent from $235 per gross ton a year earlier. That means mini-mills costs (not including a recent price spike in the graphite electrodes they use to melt scrap in their EAFs) are up more than selling prices for their finished goods. The net result: margin compression.
After 100 years, scrap is no longer a full-blown surplus commodity, Carter pointed out. And so you see these mini-mills and others investing in metallics. Thats probably the next big frontier . . . he allowed. But the integrateds already have that infrastructure.
Much of Indiana Harbors ore, for example, comes from ArcelorMittals Minorca operation in Virginia, Minn. Minorca produces approximately 2.8 million tons of fluxed blast furnace pellets annually from the 18 million tons or ore and rock it mines yearly. Minorcas pellet plant was commissioned in 1977.
In many cases, mini-mills dont yet have ready access to virgin iron units. They need purer iron feedstock not only to move into high-value markets like AHSS that are dominated by the integrateds but also to reduce their reliance on supplies of pig iron and other metallics from politically high-risk countries like Russia and Venezuela. The result could be billions of dollars spent on scrap alternatives such as direct-reduced iron (DRI) and hot-briquetted iron (HBI).
Big River Steel LLC, the mini-mill that some see as being the most aggressive at targeting territory currently held by integrated mills , began rolling hot band only a year ago. To many, Big Rivers mill in Osceola, Ark., and Indiana Harbor define the two poles of the steelmaking world in the United States.
Great Lakes mills like Indiana Harbor are the North Pole of American steel. They are vertically integrated and operated by unionized workers.
Mini-mills like Big River situated across the Mississippi River from Memphis in the second largest steelmaking region of the United Statesare the South Pole. They feed off a diet of ferrous scrap and are run by non-union staff.
Mini-mills are prone to revel in the general perception of the sector as insurgents. Its important to note, however, that the billionaire Koch brothers count among Big Rivers backers. And although the company markets itself as a Rebel steelmaker, it has deep ties to the establishment. That linkage means Big River could afford to not only install new hardware, such as a Ruhrstahl-Heraeus (RH) degasser, but also cutting-edge artificial intelligence (AI) and cloud computing software.
Big Rivers RH and AI doesnt mean a whole lot to Carter. Big River Steels business model is to make inroads into automotive. Thats what theyre saying, he said. Theyre pretty fresh on startup. So, well see what they do.
Where Big River wants to be is where ArcelorMittal already is. I have been told through the company which I believe that you will not find a major vehicle platform without ArcelorMittal steel, Carter noted.
The A word
Indiana Harbor, it should be noted, is fighting a war on multiple fronts. On one side are the mini-mills. On the other is a certain nonferrous metal that has long lurked in automotive closures trunks, hoods and doors but has ambitions to extend its reach.
That metal has already captured no less a prize than the best-selling passenger vehicle in the United States, Dearborn, Mich.-based Ford Motor Co.s F-series pickup trucks, which switched to an aluminum-intensive body in 2015.
ArcelorMittal steel is still on the F-150, however. So dont refer to the F-series as all-aluminum if Carter is in earshot. If you do, hell point out that the trucks underbody where strength is critical remains steel. About 750 pounds of our steel reside in the F-150, he said.
Carter noted that steel gets as good as it gives. Case in point: German automaker Audi A8, which is returning to the steel fold after many years on the aluminum side. Why did Audi make that choice? he asked rhetorically. I dont know. But Im thankful that they did.
And, even if steel weighs a little more, it looks a lot better, he contends. Its curvier. Easier to form. Look at the (aluminum) closure on the F-150, Carter suggests. It has a dog bone in the tailgate. I think its ugly. Ford had no choice but to put it there to get the strength that would come naturally to a steel tailgate, he added.
Aluminum should also note that Steel is no longer content to cede closure applications to the light metal. Steelmakers plan to displace aluminum even from strongholds such as hood applications. In many cases, we can compete directly with closures thanks to research and development efforts, Carter said.
Pay to play
One thing researchers and mill operators implementing the technology coming out of their labs were quick to realize is it doesnt make sense to price a product by the ton when you are aiming to slash weight.
If all you need is sink-in-the-water steel, then any number of industry price indices might fit your needs, Carter allowed. But when you are dealing with manufacturers who want an engineered solution, they will pay a premium, he said. That premium can be based on performance such as hitting weight saving or fuel economy targets.
Just because integrated facilities can produce third-generation AHSS doesnt mean its easy on their rolling mills. AHSS has to be stronger than existing steels as well as lightweight, which means being thin. Meeting tha criteria translates into more time on the rolling mill because more force and energy are required to achieve the right molecular structure and correct thickness.
To that end, ArcelorMittal has invested $30 million, for example, into a continuous annealing line as it approaches making AHSS with strengths of up to 2,100 Megapascals (Mpa). The company has also upgraded its rolls and hydraulics to handle tougher steel. But at some point, you will reach the technical limitation of the facility and the asset, Carter acknowledged.
The question then, at least as this reporter sees it, is who is going to build the next integrated mill in the U.S. and where?