Indiana may win out in a battle over where to locate a new manufacturing plant -- in Minnesota, where the raw materials are, or in Indiana, where the environmental requirements are less stringent.
What is the product to be manufactured? Iron nuggets. The process is described in this story from the Duluth News Tribune:
Mesabi Nugget is a pilot-demonstration plant at Northshore Mining Co. in Silver Bay.This from an AP story in the Miami Herald of 3/3/04 [emphasis added]:The plant, which uses a proprietary process developed by Kobe Steel of Japan, is designed to turn taconite concentrate into iron nuggets. The nuggets are 96 percent iron and worth about six times more than the $35 per ton that taconite pellets fetch.
An upturn in the global price of pig iron, from $100 per ton two years ago to $300 per ton today, also holds tremendous opportunity for the plant, Mesabi Nugget President Larry Lehtinen told a [Minnesota] House committee on taxes Thursday [Feb. 26th].
Iron nuggets are a value-added product made from taconite concentrate. It's the first new product made from Iron Range ore since the taconite pellet replaced natural red iron ore decades ago.So how does Indiana come into the picture? This AP story, published March 17 in the Miami Herald, and titled "Minnesota Lawmakers Concerned about Indiana Plans to Build Iron Nugget Plant," explains:While taconite pellets generally sell for about $35 per ton, iron nuggets are now selling for $300 a ton, up from about $100 per ton when the pilot-demonstration plant began operation, Lehtinen said.
The success of the plant has prompted Mesabi Nugget officials to begin conceptual engineering for a 1.5-million-ton-per-year, commercial-size nugget plant at Northshore Mining.
Unlike taconite pellets, which are fed into blast furnaces by integrated steelmakers, iron nuggets can be fed into electric arc furnaces at minimills. Nuggets also can be used in iron making at foundries.
High worldwide demand for iron units and a shortage of high-quality scrap has helped boost the price for high-iron products, including the nuggets. "The demand is incredible," Lehtinen said. "We wish we could start construction right now."
Using technology successfully tested at Mesabi Nugget in Silver Bay, Steel Dynamics Inc., a minimill in Butler, Ind., may build the $100 million, 500,000-ton-per-year iron nugget plant. Its board of directors is expected to review the plan in about a month, said Larry Lehtinen, Mesabi Nugget president. * * *See also this story from BusinessNorth.com [thanks to Ed Feigenbaum of Indiana Legislative Insight for the link and for the heads-up] that is headlined "Mesabi Nugget's first plant likely in Indiana, not North Shore: Tougher environmental permitting process here could take two years." A quote:Next month, permits to operate the plants will be sought from officials in both states. It's expected an Indiana plant could be up and running by late 2005 or 2006. In Minnesota, it could take that long to meet regulatory requirements.
To build the proposed $240 million iron nugget plant in Silver Bay, Lehtinen said Mesabi Nugget must complete an environmental impact statement, which Indiana doesn't require.
And there's another issue. Northshore uses natural gas as a fuel source to heat taconite pellets, which serve as feed stock to make iron nuggets. But the rising cost of natural gas has some taconite producers considering coal-gasification to provide a supplemental fuel. To use that technology at Northshore Mining, Minnesota Pollution Control Agency approval is required. * * *
"The delay in Minnesota comes because Minnesota requires an EIS and Indiana does not. That's not something we can change," she said.
With economies booming in countries such as China, and integrated steelmakers facing a shortage of coke for their blast furnaces, demand for iron nuggets is high, Lehtinen said. Potential partners in a commercial iron nugget project can't wait for Minnesota to issue permits. * * *
A 500,000-ton-per-year Indiana plant would consume about 1 million tons of taconite concentrate per year. That concentrate could come from Northshore Mining Co. It would be shipped via railroad through Biwabik, Proctor and Chicago to Butler, Ind. With a $15 million investment in processing and mining equipment at Northshore, the production of additional concentrate for an Indiana nugget plant would create about 50 new jobs.
Steel Dynamics Inc. of Fort Wayne, IN, a mini-mill operator and one of four investors in the Mesabi Nugget project, is considering spending $100 million to build a new steel plant in nearby Butler, IN, that would utilize the taconite-derived iron nuggets.The difference is the environmental impact statement (EIS) requirement. Indiana's requirements, found at IC 13-12-4, apply only in the case of state action (IC 13-12-4-5) and are not required for the issuance of a license or permit (IC 13-12-4-8). Most often what we hear about in Indiana is the federal NEPA statement, which is required in highway projects, etc. I haven't checked the other "rust-belt" states, but offhand I do know that the State of New York is another state with its own NEPA requirements.The nuggets are being tested as a much less expensive substitute for the pig iron and steel scrap used by the growing mini-mill sector that’s captured more than half of the domestic U.S. steel market.
Because Indiana’s environmental regulations are weaker than Minnesota’s, a nugget-using steel facility can be erected more quickly there. But Lehtinen said the market for nuggets — assuming the production process passes its third and final test run this spring at Northshore Mining — is big enough to ensure that production plants envisioned for Minnesota will materialize.
“We’re just putting the finishing touches on the Minnesota Environmental Assessment Worksheet, and it should be ready for submission by the end of April,” Lehtinen said. “We’re committed to the permitting for two production units up here (in Silver Bay). It will take 24 months to get through that. So you’re talking about waiting two years for something that will be around for 50 years.”
[Update 3/23/04] This story this morning in the Washington Post, headlined "Trapped by Rising Steel Prices: Manufacturers Find They Can't Recover Raw Materials Cost," adds more information on why, as stated in an earlier quote, "a shortage of high-quality scrap has helped boost the price for high-iron products, including the nuggets," and how this impacts our other manufacturers. The Post story today says that "increasingly expensive scrap metal" is resulting in "a surcharge [to be] tacked on by mills that produce the steel." And small manufacturing companies, "[a]lready beset by cheap foreign competition and spiraling health care costs, ... find themselves largely unable to pass on this new expense in a marketplace that demands lower and lower prices for consumer goods." More:
Steel users report prices for flat-rolled and other popular types of steel have more than doubled in the past year, but the average American has yet to see that cost tacked on to the prices of products such as automobiles, lawn tractors or bicycles. Many large makers of consumer goods are forcing the smaller companies that supply them with components to eat that increased cost as a price of doing business. * * *Posted by Marcia Oddi at March 22, 2004 06:01 PMMany experts blame the hike in steel costs on China, which has sharply increased its use of raw materials as it begins industrializing its economy. In particular, China is absorbing the world's output of scrap metal, an important source of steel. U.S. companies are selling more of their scrap to China, making it harder to get the material domestically and nearly tripling the cost of scrap to about $300 per ton from an average of $110 per ton in 2002, according to Morgan Stanley steel analyst Wayne Atwell.
The run-up in scrap hits at an especially bad time for domestic steel consumers. Other factors were already pushing prices up, such as rising energy costs and a shortage in the supply of coke, a coal product used to fuel furnaces that produce steel. To make matters worse, the industry had been expecting steel prices to fall or at least stabilize after President Bush lifted tariffs on imported steel in December.