SILVER BAY, MINN. – The maze of overhead conveyors on the banks of Lake Superior made jaws drop as millions of freshly-minted iron pellets jiggled, shuffled and dropped through the air, landing in an imposing mountain of iron at Northshore Mining's plant and shipyard.

The new "low-silica, direct-reduced-grade" iron pellet product is the only one of its kind in the country thanks to $100 million in factory upgrades.

The investment not only gave the Silver Bay pelletizing plant a second iron product, but it is also helping nudge Minnesota's Iron Range one step closer to more modern steelmaking technologies.

"What a new day in Northern Minnesota this is. … We are building for the next generation," said a beaming Lourenco Goncalves, CEO of Northshore Mining's parent firm Cleveland-Cliffs, at a ribbon-cutting last week.

The arrival of the new technology is a big step forward on the Iron Range of northeast Minnesota, where just five years ago a sharp industry downturn left plants idle and 2,000 workers out of jobs. Now most of the plants have ramped back up, and some are investing to position themselves for the future.

Unlike Minnesota's traditional taconite iron, which can be turned into steel using only bulky, costly blast furnaces, Northshore's new pellet will feed more advanced steelmaking plants known as "direct reduced iron" (DRI) or "hot briquette iron" (HBI) plants. HBI plants turn pellets into "low-silica" iron bricks that then get converted into steel by the mini-mills or electric arc furnaces (EAFs) that have become the most common method of steelmaking.

The ability to feed an HBI plant is a first for Minnesota, where Northshore Mining is one of six iron ore processing firms funneling $3 billion into the state economy.

"It's revolutionary," said Kelsey Johnson, president of the Iron Mining Association of Minnesota. "We are seeing more and more blast furnaces closing up. They are big. They are bulky. They require a lot of money and overhead to keep them up and running. And so this new pellet brings us to a new and different and growing market that we have not historically been in."

Goncalves told crowds last week that he already has new HBI customers lined up in Canada and Trinidad. But the bulk of the new Silver Bay pellets will head to Toledo, Ohio, where Cleveland-Cliffs is building a hot-briquetted iron plant of its own.

That factory opens next year.

Cliffs' investments were necessary, Goncalves said, because blast furnace use has dwindled. It's now used by only 32% of steelmakers. Tapping into EAF markets will keep Northshore relevant and protect Minnesota jobs, he said.

"If we did not do anything, we would be OK for maybe the next 25 years. But your kids and grandkids would be out of luck," Goncalves told the crowd. "But with this investment we will have this going for more than 100 years."

The Silver Bay plant produces 5.6 million tons of iron pellets a year. Going forward, some will continue to be traditional taconite pellets headed for blast furnace customers like ArcelorMittal, the world's largest steel producer. The rest will be DR-grade pellets headed to Toledo or sold to new customers.

Northshore Mining began testing the DR-grade iron concept in 2013. It has since installed miles of new wiring and chutes; car-sized magnets that pluck iron fragments from crushed ore; and two 370,000-gallon slurry-separation tanks the size of houses.

The new equipment includes filters that remove sand and alumina impurities from iron ore as well as soaring stretches of "separating" conveyor belts.

"I think this is fantastic," said former U.S. Rep. Rick Nolan while looking around. "This is an Iron Rangers' dream."

"It's just awesome," said Chris Johnson, president of United Steelworkers Local 2705.

Industry recovery

Minnesota's traditional taconite industry is thriving now but periodically battles boom and bust cycles.

A savage downturn in 2014 and 2015 smacked the industry hard. Six Minnesota taconite plants were idled. Bankruptcies swelled and 2,000 Iron Rangers lost jobs.

Iron ore prices recovered only after the Obama administration slapped 522% anti-dumping tariffs on Chinese steel imports in 2016.

One by one, Northshore Mining and Keetac in Keewatin; Minntac in Mountain Iron; United Taconite in Forbes and Eveleth and other idled taconite producers recalled workers and restarted production. Three iron firms never recovered. Magnetation went bankrupt. Mesabi Nugget and Mining Resources remain idled.

With the industry in a stronger position, the next step for Minnesota's taconite industry was to tap into the growing electric arc furnace marketplace.

"The blast furnace is not going to disappear overnight. But the electric arc furnaces continue to gain advantage over the blast furnace," said Brian Hiti, a retired mining expert and former deputy commissioner of the Iron Range Resources and Rehabilitation Board (IRRRB).

College of St. Scholastica Economics Professor Tony Barrett said standard taconite will be around for at least another generation. But he said the new pellets open a wider market that will benefit Minnesota.

"Anything that widens our market will be better for the industry up here," Barrett said. "The whole dream of [direct reduced iron] will increase the value added up here."

New investments

Northshore Mining's upgrade is one of several new investments in northeastern Minnesota's iron country.

Two years ago Cleveland-Cliffs, which also owns United Taconite and co-owns Hibbing Taconite, built a $75 million superflux pellet plant in Forbes, so customers could more easily remove impurities from iron. In December 2017, Cliffs snatched up nearly 3,800 acres of mining land near the old Butler Taconite Mine in Nashwauk — with the hopes of one day mining iron ore there.

Taconite firms in the state have also moved highways to expand their Minnesota iron mines. Just weeks ago U.S. Steel's Minntac in Mountain Iron unveiled a new $20 million mining shovel. It towers like an office building and can scoop busloads of iron ore in a single dig.

Last year, U.S. Steel announced its Keewatin Taconite plant would produce iron pellets for a blast furnace it had shut but reopened in Granite City, Ill. That should protect an estimated 400 jobs in Keewatin, local officials said.

There are also ongoing but tentative efforts to revive the controversial and bankrupted $1.9 billion Essar Steel Minnesota mining project in Nashwauk — now called Mesabi Metallics. Key construction deadlines and financing goals have yet to finalize.

While Mesabi Metallics holds permits for the site, Cliffs wants to build a second hot-briquette plant there in addition to the one being built in Toledo. Goncalves said last week that Cliffs remains hopeful that the Minnesota Department of Natural Resources (DNR) will grant Cliffs mining permits for Nashwauk.

Pete Clevenstine, a 40-year mining pro who is assistant director of minerals at the DNR, said this is a "telling year" for Minnesota.

"This is a really good time in the industry. I feel very optimistic," Clevenstine said. "What I am seeing with United Taconite [and its new superflux plant] in Forbes and with Northshore in Silver Bay [is] very positive." 612-673-7725