Turning away from blast furnaces still leaves problems for steel industry

It’s hard to say what was more surprising: that blast furnaces may no longer be needed for steel production or that Nucor has hippies.

Tim Worstall, a fellow at the Adam Smith Institute in London, says as much in a recent article in Forbes magazine. Sort of.

Writing about the bleak future of steel mills in England, Worstall posits that “the real underlying cause is that these are integrated steel plants, they include a blast furnace. And on this subject the hippies have won, as they should have done.”

He later rightly identifies America’s Nucor as the steelmaker behind the trend away from iron-making blast furnaces with its large-scale expansion of electric arc furnace (EAF) steel production, which effectively skips the iron-smelting phase and instead recycles scrap steel into new steel. Recycling. Hippies. Get it?

Worstall points out that Nucor and others have advanced EAF steelmaking to match integrated mill quality in many applications.

But alas, not all.

“It's much too soon to write the obituary for the blast furnace/basic oxygen furnace steel production route,” said Ron Ashburn, executive director of the Association for Iron and Steel Technology. “While EAFs have 65% of the market in the United States, the opposite ratio holds true for the balance of global steel manufacturing.”

Like Worstall, Ashburn highlights the role Western World environmental regulations have had in speeding the decline of BF/BOF steel (which includes coke production), particularly in Europe.

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Worstall describes BFs as “an old technology, one that no one is going to build again in the rich countries, and the extant versions are going to gradually close over the years. Quite simply because we’ve got better at recycling the steel out of which our civilization is already built.”

But Ashburn notes that the best steel is made from BF iron. “Value-added steel grades are still dominated by the BF route, although the EAF route is indeed more nimble when dealing with fluctuating market cycles,” he said. “It's a healthy competition that has led to crossover technologies shared between them.”

Nucor has made quality advances by producing direct-reduced iron (DRI) to “sweeten” its scrap-recycling EAFs with virgin iron units. It also purchases pig iron on the open market to upgrade its steel output, which is run through a vacuum degasser to make the most demanding grades.

While the BF is indeed an old technology — some take it back to the first century AD in China — it is still the most economical way to make iron due to economies of scale. The largest modern blast furnaces can produce 9,000 tons or more of iron per day. And this virgin iron is the best starting stock for large-volume steel production.

Blast furnace/BOF steel production is sort of like making a cake from scratch. The quality tends to be better.

“The death of blast furnaces has been overstated,” said steel analyst Charles Bradford of Bradford Research Inc. He agreed that EAF steel still comes up short on some critical applications and said DRI may not be the answer for large scale high-quality steel production. For one thing, it catches fire when wet, making transportation problematic.

Bradford also raised an existential issue: “Ultimately, if you don’t have steel made conventionally, you don’t have scrap.”

I wonder if any hippies’ minds were blown by that observation?