This classification covers establishments primarily engaged in mining, beneficiating, or otherwise preparing iron ores and manganiferous ores valued chiefly for their iron content. This industry includes production of sinter and other agglomerates except those associated with blast furnace operations. Blast furnaces primarily engaged in producing pig iron from iron ore are classified in SIC 3312: Steel Works, Blast Furnaces (Including Coke Ovens), and Rolling Mills.
212210 (Iron Ore Mining)
Virtually all of the iron ore mined in the world is used in steel making. In the United States, the largest producers are concentrated in a few states that account for the country's national output of usable iron ore. According to the U.S. Geological Survey, mines in Minnesota, Michigan, and three other states shipped about $1.21 billion worth of usable iron ore in 2001, down from the $1.56 billion shipped in 2000.
The U.S. iron ore industry is dependent on the domestic steel industry, most notably the large integrated steelworks along the Great Lakes. These integrated manufacturers use blast furnaces to turn iron ore, coke, and limestone into pig iron and then into steel.
High labor and fuel costs, declining ore grades, and the inland location of the country's mines make it difficult for the United States to compete in the world iron ore market. U.S. iron ore producers are meeting these demands by making higher-quality fluxed iron ore pellets that can meet the tight chemical and physical specifications that are needed to make higher quality steels.
U.S. iron ore production decreased in the late 1990s in response to the Asian financial crisis that began in 1997, when Thailand devalued its currency and set off a chain reaction of devaluations in the region. Foreign producers, unable to find buyers for their steel products in their depressed regions, supplied low-cost exports to the United States, thereby decreasing the need for domestic iron ore. The situation did not improve during the first years of the 2000s. U.S. mine production of iron ore dropped 26.8 percent to 46.2 million metric tons in 2001, down from 63.1 million metric tons in 2000.
The United States maintained a close relationship with Canada in regard to iron ore trade. Over the course of the 1990s, the United States was a net importer to meet demands for iron ore. Since 1990 about 54 percent of U.S. imports have come from Canada, while 99 percent of U.S. exports went there. The reasons for the tight relationship included ownership and proximity. In 1998 Canadian steel mills owned part of three of the nine iron ore producers that accounted for 99.5 percent of the U.S. ore produced. Likewise, one U.S. iron ore company and one U.S. steel maker had partial ownership of one of three iron ore producers in Canada. Also, the proximity of the countries and the location of the Great Lakes, which were used for transportation, meant lower shipping costs for each country.
The high-grade direct shipping ore of Michigan and Minnesota has all been mined in the United States. Lower-grade taconite, which requires the more expensive processes of beneficiation and pelletizing, makes up the bulk of U.S. mining today. Many of the pelletizing and taconite mining facilities are in the interior of the country, forcing higher transportation rail costs to ship to the Mid-Atlantic and Alabama steelworks. Since these mines are far away from saltwater harbors, imported iron ore from Canada, Brazil, and Venezuela makes up a large portion of iron ore consumed on the East Coast.
For the inland steel-making region, those same high rail costs that keep U.S. iron ore from being competitive for use at coastal steelworks also act to keep foreign ores from being used in their region. The St. Lawrence Seaway is an inexpensive transportation route to the Great Lakes, but it can also become a bottleneck for iron ore carriers trying to supply the steelworks in this region. Some oceangoing iron ore carriers cannot enter the Great Lakes because of the short gate-to-gate river locks.
Similarly, U.S. iron ore bound for foreign shores on 1,000-foot ships cannot leave the locks. Ore often has to be off-loaded onto smaller gulf vessels or transferred to railcars at Philadelphia or Baltimore. Sometimes, to reach the many steelworks in the Pennsylvania and Ohio River Valley, iron ore is barged up the Mississippi River through the port of New Orleans.
A handful of states account for the country's national output of usable iron ore. Minnesota and Michigan are by far the largest providers of iron ore in the country. In 2001 Minnesota produced 33.8 million metric tons of ore, out of the 46.2 million metric tons in total U.S. production, while Michigan produced 12.8 million metric tons. Operations from other states accounted for less than 1 million metric ton.
Making up 5 percent of Earth's crust, iron is the fourth most abundant rock-forming element. Iron ore is the primary source of iron for the world's iron and steel industries and is the cheapest and most widely used metal.
The first known use of iron ore from the United States was when several barrels of ore were shipped from Virginia and Maryland to England for testing in 1608. The ore was found to be of good quality, and an attempt was made to build an ironworks near Falling Creek, Virginia. An Indian raid in 1622 ended that early undertaking.
In 1645 Massachusetts became the first regular production site for iron ore in the colonies with the building of the Hammersmith ironworks just north of Boston. Other furnaces built in Rhode Island, New Jersey, and Connecticut soon followed. During the next 100 years, iron making spread southward and westward, with many new mines opening to meet the surging demand. By the beginning of the Revolutionary War, iron ore was mined and smelted in 12 of the 13 colonies. Pennsylvania became the center of iron making.
By the 1840s the northeastern furnaces began to close because of a scarcity of charcoal and ore, but smelting in Tennessee, Missouri, Alabama, and Texas easily met the demand. In 1844 the discovery of the reserves contained in the Marquette Range in Michigan supplied new hard ores. Before the completion of the Sault Ste. Marie shipping canal in 1855, development of the industry in this region was slow, but with this new transportation route came further development of the Lake Superior region. By 1885 the Gogebic and Menominee Ranges of Michigan and Wisconsin began producing more than two million metric tons of ore, more than 20 times the volume produced in 1860. Smaller mines in New York, Tennessee, and the Mid-Atlantic states could not compete with the high grades and low water transportation costs of ore coming out of this region. Production from the Vermilion Range in the 1880s and the discovery of the Mesabi ores in the 1890s helped to close most of the Eastern mines in the United States by the turn of the century. Birmingham, Alabama, became a major iron ore center at this time.
Iron ore properties in the Lake Superior district were bought by steel companies, and small mines were consolidated into larger ones by the mergers of large mining companies. The structure of the iron ore industry today is a direct result of the consolidations that took place between 1893 and 1905.
In the 1950s hundreds of U.S. mines closed because of greater imports, the rising costs of underground mining in America, and depleted ores of higher grades. By 1981 some 15 mines accounted for 90 percent of America's iron ore production. Only five years later, increasing steel imports and two severe recessions reduced the number of iron ore mines from 15 to 10. The numbers were slightly up in 1991, when iron ore was produced by 20 companies operating 24 mines (23 open, 1 underground), 16 concentration plants, and 10 pelletizing plants. But by 1998 iron ore was being produced by only 12 complexes with 12 mines (11 open pit, 1 underground), 10 concentration plants, and 10 pelletizing plants. In 1998, 5 companies operating 9 mines produced 99.5 percent of the ore.
Electric arc furnace steel-making in the United States, which accounted for 43 percent of total steel making in 1993 and does not use iron ore, is the technology most often used by minimills, the chief competition of integrated outfits. Minimills substitute metal and iron scrap for iron ore to melt in their furnaces and made great inroads into integrated steel's market share in the 1980s. The minimills, however, during the 1990s, were faced with 50 percent increases in scrap prices, and as a result they were forced to vertically integrate, sometimes taking on the cost structures of their larger integrated competitors. But minimills remained strong competitors. Their share of the steel market, which stood at 15 percent in 1970, increased to more than 43 percent by 1997.
In the late 1990s, imports of low-priced steel plagued U.S. producers, especially following the Asian financial crisis that began in 1997. While the market picked up early in 1998, which had been looking like a good year with domestic iron ore production and consumption rates into the third quarter exceeding those of 1997, the rates dropped off at year-end because of record imports of lowpriced steel. As a result, two of the seven iron ore producers in Minnesota's Mesabi iron range reduced production. Though U.S. steel consumption remained strong that year, a majority of that consumption was met by steel imports. The strength of the U.S. dollar against foreign currencies made imports cheaper. The Asian financial crisis also made imports more enticing. As Asian economies weakened, steel consumption in that region declined, and the area's producers looked to the U.S. market to sell their products. Throughout 1998 the United States imported vast amounts of inexpensive semifinished steel. These falling world export prices also hurt domestic steel producers.
The U.S. steel industry accounts for 98 percent of iron ore consumption in the United States. Following a relatively strong performance during the 1990s, the iron ore industry stumbled in the early 2000s. In 2001 domestic iron ore mine production dropped from 2000's 63.1 million metric tons to 46.2 million metric tons, or 26.8 percent, of the 1,060 million metric tons produced worldwide. This amount represents the largest decline since 1982. Reported year-to-date total production in October 2002 of 42 million metric tons was slightly ahead of the previous year's October year-to-date total of 39.9 million metric tons.
The reported U.S. consumption of iron ore was 67 million metric tons, down significantly from 76.5 million metric tons consumed in 2000. The consumption of iron ore is directly related to the number of blast furnaces in use. Between 1992 and 2001, the number of active blast furnaces decreased every year but one, falling from 43 in operation in 1992 to 33 in use in 2001.
During 2001 some 13 companies produced iron ore, with 9 companies in Michigan and Minnesota accounting for 99 percent of production. Between 1990 and 2001, domestic suppliers provided 70 percent of U.S. demand. In 2001 domestic production supplied 60 percent of domestic U.S. demand. LTV Steel Mining Company in Minnesota was permanently closed, and Empire Mine in Michigan made a permanent reduction in production. The effect caused an approximately 15 percent decrease in production capabilities or 10 million metric tons per year. No longer able to compete with low-priced imports, Pea Ridge Iron Ore Company in Missouri, the only active underground iron ore mine in the United States and one of the few in the world, also closed.
Consolidation of mining operations that began in 2000 continued in the following years. In 2001 approximately 50 countries produced iron ore, but the 7 largest producers provided more than 80 percent of the product, with no other country producing more than 5 percent.
Following the economic decline in the United States in early 2001, experts began predicting an upturn for 2002. However, the terrorist attacks of September 11, 2001, stymied all expectations for a quick recovery. At the end of that year, the iron ore industry had taken a major hit. Bankruptcy loomed for several companies, and others stopped production for weeks at a time. During 2002 the iron ore industry was still operating with a net loss of income, as expenses exceeded revenues.
By early 2003 industry leaders were once again looking hopefully to the future, as companies cut costs by employee reductions and scaling back unprofitable business segments. Analysts have also given a nod to an impending improvement in the steel industry that directly affects sales of iron ore. To return to profitability and compete with the increasing competitive international market, iron ore companies will continue to look for ways to cut costs and increase efficiency.
In 2001 leading companies included Cleveland-Cliffs, with $387.6 million in sales, and Oglebay Norton, with $404.2 million, both based in Cleveland, Ohio. Other leaders included Rouge Steel, based in Eveleth, Minnesota, with $923.5 million in sales; and Northshore Mining, of Silver Bay, Minnesota, with $387.6 million.
In 1996 most iron ore mine workers were union members of the United Steelworkers of America. For decades, up until 1983, union contracts often included generous increases in wages and benefits. But the 1982 recession, subsequent large layoffs, and the need to reduce operating costs brought about new working relationships between the unions and company management. Reductions in real wages, more flexible work rules, and management/labor cooperation were more the norm in the late 1990s.
Mines also began offering incentive bonus plans. In 1997 some 55 metal mines had incentive bonus plans, and in the 1990s, the number of mines offering bonuses rose 37 percent. Bonuses were awarded generally for productivity, safety, profit, attendance, commodity price, and/or meeting sales goals. According to a 1998 study by Western Mine Engineering, the most common bonuses were fixed bonuses awarded for having a specific period accident-free, according to a report in American Metal Market.
Total employment in 2001 was 7,920, down from 11,103 in 1997 and reaching close to the low of approximately 7,000 total employment in the late 1980s. The industry's peak had occurred in 1953 with a total workforce of 40,100. Average hourly wages were $20.81 in 2001, according to the U.S. Department of Labor's Bureau of Statistics.
In 2001 world iron ore production was at 1,060 million metric tons, slightly down from the 1,080 million metric tons produced in 2000, which was a new record for world production. World iron ore production was expected to increase to 1,240 million metric tons by 2006, according to Sydney, Australia-based AME Mineral Economics.
China was the world's largest producer of iron ore with an estimated output of 220 million metric tons in 2001, but China's iron ore is a low-grade product, so the metal content from the ore is substantially lower than other producers. Brazil and Australia rank first and second in production of usable ore, mining 210 million metric tons and 181 million metric tons respectively in 2001.
India also experienced dramatically increased output during the 1990s. In 2001 India produced 79.2 million metric tons, up 10 million metric tons in just four years. Russia and the Ukraine both produced more than the United States in 2001, reporting 86.6 million metric tons and 54.7 million metric tons respectively. The United States ranks seventh in the global production of iron ore.
The United States produced 4 percent of the world's iron ore in 2001, continuing a steady downward trend from its 11.9 percent world market share in 1970. Imports for consumption in 2001 decreased to an estimated 10.7 million metric tons from 1994's level of 17.5, reflecting the lack of demand. Imports of iron ore had reached their peak of 48.8 million metric tons in 1974. Exports for 2001 stood at an estimated 5.6 million metric tons, down from the previous four-year average of 6.1 million metric tons.
World resources were estimated to exceed 800 billion tons of crude ore containing more than 230 billion tons of iron, with U.S. resources estimated at about 110 billion tons of ore containing 27 billion tons of iron. U.S. resources, however, were mainly low-grade taconite-type ores that required beneficiation and agglomeration for commercial use.
Technological advances during the 1990s affected the structure of the iron ore industry in the United States. Many of the integrated steelworks began using fluxed pellets, which were created by adding fluxstone, limestone, and/or dolomite to the iron ore during the balling stage. A more reducible type of iron ore pellet was thus created. In 1990 U.S. production of fluxed pellets made up 39 percent of total iron ore pellet production. In many cases, integrated steelworks were trying to meet the growing fluxed pellet demand.
In the late 1990s, stricter environmental regulations restricting coke oven gas emissions closed some older integrated facilities. But ultimately the closures forced the development of new technologies for those firms providing alternatives to scrap. With the closures, companies became concerned about the availability of low-reside scrap and invested in alternative iron-making technologies. Direct-reduced iron (DRI) is an alternative to scrap. During the 1990s DRI production grew rapidly. Then, responding to the same market conditions as the whole iron ore industry, DRI production dropped dramatically during 2001. Production is expected to return to its growth pattern, when the steel industry regains strength.
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