These notes come from the Q&A section that immediately followed Jeff Hanson’s talk. This section was not recorded as part of the zoom. The notes have been lightly edited.
Maggie S
This transition will be good for the climate and good for the Minnesota economy. It will require, a transition period of retiring blast furnaces and changing to the vertical shaft DRI furnace. Even though it’s good for the economy, do you see that as being a disruptive process at the company level and then at the workforce level? Or do you see that as being fairly smooth? If it is disruptive, what are your thoughts on that? What sort of incentives and supports would we need?
Jeff H
Thanks for the question. First off I’m not an economist but I think it’s going to be fairly disruptive. It’s a big change because we don’t traditionally do any of the next steps after pelletizing. That means a lot more being done here, needing a lot more people working. Those in the taconite mining and pellet making industry are basically going to be keeping the same jobs, but we do need new people for new jobs. But it’s good, in a lot of ways. One thing we know about the challenge of climate change, if we keep doing what we’re doing we are doomed. We’ve got to do some disruptive things to change this. I keep thinking of that 9% of greenhouse gas from the steel industry. The steel industry is ranked as number two contributor to greenhouse gases after transportation. And they said for a long time, oh, it’s a hard industry to green up, well there is a way to green it up.
Michael O
Green Iron & Steel Conference is the link for the summary of the conference “MN Iron Ore and the Green Economy” held March 16, 2022. Can you comment on why electric arc furnaces did not get started in Minnesota? Why did we miss that opportunity? Also how much infrastructure needs to be developed to incorporate hydrogen into the process?
Jeff H
On the first question “Why did electric arc furnaces not get started here?” Electric arc furnaces need conductive feedstock. They were started and developed as a way to recycle steel. But we don’t produce steel here nor do we have as many scrap cars as Detroit. What we produce here mostly, up to now, are taconite pellets. They don’t conduct electricity and cannot be fed into an electric arc furnace. So why would anybody put an electric arc furnace in Minnesota when we don’t have the feedstock? The president of Cleveland Cliffs delayed the opening of the Northshore Mine in Babbitt and kept Silver Bay idled because they are getting more and more recycled steel to put into their furnaces and they have enough DRI grade pellets from the Minorca Mine in Virginia. They don’t need the pellets from Babbitt and Silver Bay. We don’t have the scrap steel here or the DRI grade pellets so we don’t have the electric arc furnaces.
On the second question “How much Infrastructure needs to be developed to use hydrogen?” The Midrex system dominates 70% of DRI furnaces right now. They have an older system that uses coal which we won’t discuss. Their natural gas system is designed to fairly easily incorporate hydrogen. They can incorporate a small percentage of hydrogen in the existing plants like the one that they have in Cleveland Cliffs in Toledo where our pellets go to. With small modifications in that plant they can do 100% hydrogen. Those plants are not cheap and they’re rather sophisticated. It would require having plants of that nature here. That’s pretty big infrastructure building. That’s a bigger step than doing electric arc furnaces which have a much smaller footprint. A DRI vertical shaft furnace is a big investment and we don’t have any around here at this time. But if we are going to produce DR grade pellets I would expect that is under consideration at a couple of different mining and steel companies. US Steel and Cleveland Cliffs definitely, and there will be others.
Bill N
One comment on the transition from blast furnaces. Many of the blast furnaces are quite old. At some point they are going to need major renovations and new refractory linings etc that cost billions of dollars. They are already expensive and inefficient and if we ever have a carbon tax they are dead. If you are a steel company, do you want to invest in old technology that may go away? If blast furnaces go away then taconite is dead.
Jeff H
For full disclosure, that was Bill Newman my partner at Clearwater Biologic. Our advisors come from the taconite industry. Jim Swearingen is an ex general manager at Minntac, he knows this business. He has said for years that when you need to replace the thick expensive refractory lining of a blast furnace they will just shut it down instead. It’s more efficient and less expensive to use an electric arc furnace. Our industry was built on blast furnaces originally, but that technology is now old. So, Bill’s point is that when it comes to that time to refurbish and reline a blast furnace generally it has been shut down. Last year there were two blast furnaces that were shut down. If you read the strategy of Cleveland Cliffs you can see that they bought a whole bunch of different steel making facilities and they are now bigger in steel making than US Steel. They have a mix of blast furnaces and electric arc furnaces, but their investment is now all going to electric arc furnaces. The transition is happening.
Hudson K
I like your presentation. I agree with you strongly about everything you said. But Mr. Lourenco Goncalves, the president of Cleveland Cliffs, he’s a bit of a piece of work right? He’s not an environmentalist and he doesn’t care about that at all. He admits he just wants to make money. US Steel’s Keetac burns coal now. And you know there are dirty versions of every technology including making hydrogen. Neither grey hydrogen nor blue hydrogen are environmentally clean. It would be much cheaper to get that dirty hydrogen from Alberta than it would be to make green hydrogen here. I read about Keetac upgrading to make a particular type of iron. But I didn’t see any details that gave me optimism that they were actually going to do green hydrogen which would be the right thing. So I invite you to tell me where your optimism comes from.
Jeff H
I agree, Goncalves of Cleveland cliffs, is not a staunch environmentalist. He is worried about making money and he says that very clearly. They are not inherently going to be doing the right thing for the environment. Their priority is making money. So where’s my optimism coming from since the Keetak plant burns a lot of coal? They didn’t talk about changing that. They talked about making DR grade pellets to feed into a DRI system somewhere else. Where’s the optimism index? They didn’t talk about cleaning up that operation at all.
I have one very strong conviction, mining and steel companies are there for financial reward. If you think otherwise you are fooling yourself. That’s why I say environmentally there are two things going on. One, we have to hold their feet to the fire and see that they do the right thing. Historically, mining steel companies have not done exactly the best thing environmentally. And second, why am I more optimistic now? Because the economics are in favor of them doing it better. If they don’t make the transition to DRI, they will die. It’s not a good economic scenario for them to base their future on taconite pellets. The blast furnaces are going out, so the taconite pellets are going out too. They are going to have to make the change. And if you want to do it in the economic way, you work towards basing it on hydrogen. It is more energy efficient, it is more economical, and it’s in their best interest. The Inflation Reduction Act with the money that is going into green energy and infrastructure is a big deal. And it’s a real big deal to make hydrogen more economically feasible than fossil fuels. It has already started to happen. We are in that transition now. How fast are we going to go? We don’t know yet but it is a reason to be optimistic. And I think that understanding this whole myriad of factors coming together is significant here in northeastern Minnesota.
I think we need to understand and promote it as “Hey Mr. Mining Companies and Steel Companies, nice to see you going in the right direction. I applaud that, but let’s see you do it faster and cleaner than you might do if you drag your feet.” Lourenco Goncalves is bombastic, strong industry leader. But he’s turned Cleveland cliffs into a much bigger and better company. Before he came in, the only thing they produced were taconite pellets. Now they’re the largest steel producer in the US, and they’re getting larger. US Steel have been dragging their feet. But they’re also being forced into going forward. Now we understand what’s going on, we can hold their feet to the fire and say “Hey, this is what we need for climate, for climate change, for our country, for the world and for Minnesota.” We have got to move forward, it’s not an option to not change.
Barb J
How inevitable do you see this development for Minnesota? Is the financial setup and the existence of the iron here enough? Or do we have to have the politicians or the state put in extra incentives?
Jeff H
The simple honest answer is I don’t know, that’s a big question. I think we need the politicians, they set the rules on a lot of stuff. And if you go back and say, why weren’t we doing this in Minnesota before, why didn’t we do value added things on our iron that we mined in Minnesota before? Well, did we want blast furnaces in Minnesota? I didn’t, they are big polluters. How many cement kilns do we have in Minnesota? That’s really easy. The answer is zero. They are in Iowa, Wisconsin, and South Dakota, but not in Minnesota. Because cement kilns are the second most polluting greenhouse gas emitters right after blast furnaces, and we didn’t want them in Minnesota. So cement kilns have never been permitted in Minnesota. The taconite industry really got started up here because we changed our tax codes for it. Hematite had a different incentive – a requirement to produce on their leases. So yes, we do need politicians. And I think for me, the important point on this is that I care about the environment. I moved here because of the environment and mining. I know that to do the things we need to do for the environment and for climate change we need steel and iron. A lot of the people that live up here want to stay here and they need jobs.
Barb J
Before you close you should tell people about Almanac North on Duluth Public TV 8pm this Friday.
Jeff H
Yesterday, I got invited to participate in a special edition of almanac North on WDSE, to be aired at 8pm Friday. The topic will be “The Future of Iron and Steel and What it Means to Minnesota”. So it’s related to the topic presented here. It will be hosted by Aaron Brown. I was invited because of the other big issue on mining in Minnesota which is “What do you do about the sulfur and sulfate?” Can we have a more economical version than reverse osmosis so we can tell the mining companies “Yes you can do something about sulfate pollution”. Watch on Friday.
Barb J
We should thank Jeff for talking and zooming with us. This talk has been hosted by Bill Tefft in the Ely Field Naturalists’ Resource Center. Thank you Jeff and Bill and thank you all for coming.
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