LONDON, Nov. 6, 2019 /PRNewswire/ -- In a recent three-part series, available to CRU subscribers, we focused on the US iron ore market in order to explain the changes the industry is going through and outline our view of long-term sustainability of US iron ore supply.
The USA is blessed with a wealth of natural resources, including oil, gas, gold, copper, timber and coal. In addition, the country has large iron ore deposits that have supported its steel industry for more than a century. Today, the USA is the world's fourth largest steel producing country, but what stands out is its high share of EAF production. In 2019, CRU estimates that 68% of the country's carbon crude steel output will be produced in the EAF route, compared with 27% for the world as a whole. The country's integrated steel production, which makes up the remaining 32% of total output, is heavily reliant on domestic iron ore supplies. US iron ore producers sell almost all their volumes to steelmakers around the Great Lakes, including Canadian steel mills, thereby making the country a marginal exporter of iron ore to the seaborne market.
Supply concentrated around the Great Lakes
Most US iron ore production takes place in the Mesabi Range, located west of Lake Superior in northeastern Minnesota. At present, there are six operational mines producing ~40 Mt/y from this deposit, which stretches 180 km from Grand Rapids to Babbitt. Another important region with large reserves is the Marquette Range, located in northwestern Michigan. However, production in the Marquette Range is only ~8 Mt/y as Cliffs' Tilden mine is currently the only asset in operation.
Like almost all iron ore in the world, US iron ore comes from a sedimentary rock type called a Banded Iron Formation (BIF). BIFs are comprised of interbedded layers of silica and the iron-bearing minerals hematite and magnetite.
The iron ore deposits found in the USA have not been subjected to the same geological processes of weathering and enrichment that created large 'direct shipping ore' resources in Australia, northern Brazil, South Africa and India. As a result, the US deposits are characteristically low in iron content, hard, fine grained and high in silica, giving rise to a rock type known as taconite. This ore type requires extensive grinding to separate the iron from the silica and other impurities. The fine particle size of the resulting iron ore concentrate is better suited to pelletising than sintering, which is why almost all US iron ore is pelletised. In fact, the physical properties of the local taconite deposits actually led Cleveland Cliffs to pioneer the iron ore pelletising process in the 1950s. The low grade of taconite and requirement for grinding and pelletising raises mining Site Costs, but the high-grade pellets that are produced are a very efficient and productive feed for the blast furnace (BF). Therefore, they attract a high premium in the market.
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