Cliffs says Northshore ready to produce new-age taconite 04.25.13

By: John Myers, Duluth News Tribune

News Tribune file photo

Top officials of Cliffs Natural Resources said today they have successfully completed a two-week, full-scale production of a new kind of taconite pellet that can be used to make directly reduced iron and steel.

The tests, conducted at Northshore Mining in Silver Bay, produced 30,000 tons of DR-grade, low-silica pellets that can eventually be made into steel in electric-arc “mini-mill” furnaces.

Traditional taconite pellets historically have only been used in larger blast furnaces.

Cliffs officials say the DR-ready experiment continues to go well and potentially opens new markets for Cliffs’ Minnesota taconite iron ore. But they stopped short of saying they had any agreement from a steelmaker to buy the pellets.

“We’re out talking to a lot of different mills within our area of influence” near the Great Lakes, said Cliffs CEO Joseph Carrabba during the company’s first-quarter financial announcement. Carrabba also said they could potentially send DR-grade pellets to mini-mills by rail.

The company said last year it was experimenting at both Northshore and United Taconite in Eveleth to test DR-grade pellets. It now appears they are leaning toward Northshore, saying they were more easily able to convert one or more of that plant’s traditional taconite furnaces, idled last year when the company lost a major U.S. customer, into new DRI-grade production lines.

“Northshore right now has a competitive edge” over United, Carrabba said, adding that North Shore would have slightly lower transportation costs with its own Lake Superior port.

Meanwhile, the company also said it plans to sell more U.S. taconite iron ore this year than previously announced. Cliffs officials said they now expect to sell 21 million tons in 2013 from their U.S. operations, up from 20 million tons estimated earlier this year, but said the extra tonnage will come from stock reserves and not increased production.

Carrabba also spent considerable time during the conference call defending the company’s position to withstand future competition from new taconite iron ore producers such as Essar Steel and Magnetation in Minnesota and the proposed Gogebic Taconite in Wisconsin.

“We’re well aware of the potential competition we face later in this decade,” Carrabba said, adding that Cliffs has decades of experience in producing low-cost pellets as well as huge reserves at its Minnesota and Michigan operations.

Carrabba said the U.S. steel industry appears to be stable if not growing, noting increasing consumer spending and lower unemployment. But he added that the U.S. government should take action to limit unfair trade steel imports that are increasingly coming into the U.S., especially from Europe.

Cleveland-based Cliffs owns and operates Northshore Mining in Silver Bay and Babbitt as well as United Taconite in Eveleth and Forbes, and also is part-owner and manager of Hibbing Taconite. The company also owns and operates the Empire/Tilden taconite operations in Michigan’s Upper Peninsula and multiple iron ore mines in Canada and Australia, as well as coal mines and other ventures.

The company said its earnings were down in the first quarter of 2013 compared to the same time in 2012. The company said it expected strong markets in China, noting China’s annualized crude steel production achieved record levels in the first quarter of the year, while steel production in the U.S. has remained stable.

The company’s consolidated revenue was $1.1 billion in the first quarter, down $72 million or 6 percent from the first quarter in 2012.

Cliffs said first-quarter 2013 U.S. iron ore pellet sales volume was 3.1 million tons, compared with 3.4 million tons in the first quarter of 2012.

The company said the decrease was primarily driven by the bankruptcy of one of its steelmaking customers in May 2012. Cliffs also indicated first-quarter U.S. iron ore sales volume is historically lower compared with other periods due to seasonal shipping constraints on the Great Lakes.

The price-per-ton for Cliffs’ first-quarter sales was $119.82, up 2 percent from $117.40 in 2012. Production cost was $60.17 per ton, down 2 percent from $61.14 in the previous year’s first quarter.