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Changing Gears: Iron Ore Recaptured

To understand why this matters, you have to keep in mind how steel making has changed.

The old recipe for steel calls for iron ore, coke and a blast furnace. But now, more than half of American steel is made in electric arc furnaces, which melt scrap steel into new steel. And you can find those ingredients in your own garage.

GUZ: Anything from bicycles to barbeque pits, refrigerators, washing machines…

David Guz runs a scrap yard called H &H Metals in Inkster, Michigan. There's a mountain of metal out back. Customer Dan Letinski parks beneath it and starts tossing out junk.

LETINKSI: There's a sink, there's shock absorbers, there's engine blocks, there's crank shafts. I have an automotive shop and this is a lot of scrap that we just have no use for anymore.

The US produces lots of scrap - it's actually one of the country's biggest exports.

{crash of metal dump}

But scrap contains impurities. So to make high quality steel, electric furnace steelmakers add clean iron to the mix. That's meant relying on imported pig iron from countries like Brazil. And American companies like Steel Dynamics don't like that. So way up in the woods of Minnesota, they're trying something new.

HANSEN: My name is Jeff Hansen, we're at the Mesabi Nugget facility. We're the only facility in the world that does what we do, so we're pioneers of sorts.

This plant cost more than 300 million dollars and years of development. All to produce a tiny nugget of iron.

HANSEN: It's very dense, it's very heavy. If you were to look at it you'd say it very closely resembles a junior mint.

A junior mint that's 96 percent iron. Remember this started as low grade ore; it's usually upgraded into pellets that are about 65 percent iron. Those work in traditional mills but don't serve the growing electric market. Nuggets do. They're pure enough and metallic enough to mix with scrap.

Plant manager Jeff Hansen leads me to a vast furnace, he says it's the largest of its kind in the world. Our faces glow orange as we peer in.

HANSEN: We bring the temperatures up to 2400, 2500, upwards of 2800 degrees Fahrenheit. As you look inside the furnace, you're gonna see the pellets giving off volatiles and actually giving off some fire…

Pellets float by almost like lava, transforming into pure metallic iron. Mesabi Nugget produced about 200,000 tons of nuggets over these first two years. The goal is 500,000 tons a year. Still, nuggets are already changing the rules of the game. Steel Dynamics has stopped importing pig iron for use in its electric furnaces. John Anton is a steel analyst with IHS Global Insight. He says the company wants to become its own source of raw materials … to buffer itself from the market.

ANTON: Raw material costs - and iron ore and scrap are key here - used to be very steady. In the past seven or eight years they have become incredibly volatile. They're one of the most volatile things in the entire commodities - more volatile than oil.

Now the major iron ore supplier Cliffs Natural Resources is considering opening a nugget plant in Michigan's Upper Peninsula. Analyst Michael Locker says this new nugget technology means the iron ranges of the Midwest could now supply the growing part of the steel industry.

LOCKER: It will mean employment, it will mean the mines are gonna work again, it will mean transportation, and it'll strengthen the steel industry of the United States.

There's a ways to go before the Mesabi Nugget plant in Minnesota is pronounced a success. If it is, analysts say it could attract more electric furnace steelmakers to the region. For Changing Gears, I'm Kate Davidson.

Rick Jackson is a senior host and producer at Ideastream Public Media. He hosts the "Sound of Ideas" on WKSU and "NewsDepth" on WVIZ.