Monday, December 26, 2011

About that mini-mill in South Carolina

Last Tuesday, I embedded a video clip that shows a mini-mill in Georgetown South Carolina cranking out giant spools of wire as an example of Producer achievement. Well it is certainly that but like everything that touches the steel industry, there is a lot of interesting complexity to this story.

Steel is insanely difficult to make.  It is derived from iron which itself is difficult to make because it requires such high temperatures to extract from ore.  Steel is produced when tiny amounts of impurities are introduced into pure (wrought) iron. Add .5% to 1.5% carbon to iron and the result is steel.  Pure iron is soft while iron containing too much carbon is brittle.  Getting that recipe right happened so rarely that for much of history, the little steel that was produced wound up in the manufacture of swords.

By the 19th century, folks were beginning to figure out how to make quality steel in large batches.  The mass-production of steel changed everything.  This once extremely precious metal that was used to arm the nobility now could be used to make rails and ships and building structures.  Tough-guy politicians like Stalin took to calling themselves "men of steel."  Leaders who preached egalitarianism like Mao Zedong promised a steel mill for every village (a suggestion so technologically insane it helped discredit Marxism forever).  USA tycoons who grabbed control of the steel-making machinery like Andrew Carnegie became some of the richest men in history.  Countries that mass-produced steel tended to win wars—at least until they met each other in battle.

By the 1960s, so many men of steel in so many countries had gotten into steel production, the profit margins of the older plants began to collapse—especially when competing with steel from countries where development strategies made profits unnecessary.  In places like USA, new plants with lower cost structures became necessary and the mini-mill, which only needed recycled steel for its raw material, became a preferred strategy.

While making steel from ore is extremely difficult and energy-intensive, recycling waste steel is a LOT easier.  Basically, all you do is melt the scrap, rake off the impurities, and reform the molten steel into something new.  While this process rarely produces the high-quality steel needed for automobiles or surgical instruments, there are thousands of applications where this recycled steel works just fine.  This is especially true in the construction industry where millions of tons of steel are used every year to reinforce poured concrete.  And given the fact that abandoned automobiles have become a blight on the landscape, the raw material for mini-mills seems almost limitless.

In 1969, a German steelmaker and engineer named Willy Korf (pg 157) opened one of those low-cost mini-mills in Georgetown South Carolina.  It used electric arc furnaces built by Danieli of Italy and rolling machinery from Sund Birsta of Sweden.  While the plant worked just fine, the financial storms battering the steel industry in USA raged on.  Korf overextended himself so the Georgetown facility always had debt problems.  In 1984, the government of Kuwait purchased an ownership position and in 1995, it was purchased by none other than Bain Capital—the vulture firm associated with Mitt Romney.  It is now owned by ArcelorMittal, the giant steelmaker headquartered in Luxembourg.  They shut the place down in 2009 but have reopened it as of Jan 2011.  (This is a demonstration of another of a mini-mill's advantages—blast furnaces that make steel from ore can never be shut down and restarted.)

There's a lot of history embedded in that mini-mill and it's only 42 years old.  The Producer story is especially interesting—Danieli has been in the steel business since 1927 while the Swedes have been making steel since Gustavus Vasa and seriously since the 19th century.  Korf was a genius.  On the other hand, the Predators have been making things extremely difficult for anyone who makes things since the late 1970s so the fact that Georgetown is even open is something of a miracle.


  1. I believe blast furnaces can be shut down, but they generally require a lot of expensive relining before being reused. That is what made the threat of strikes in the post-war steel industry such a powerful weapon. The costs which would be incurred if the blast furnaces were shut down were significant compared to going along with union demands

  2. I would never argue steel mill technology with a guy from Ohio so I'll bet you are right. I would imagine a relining job would essentially produce a new blast furnace on the inside—but what a hassle! But the point remains—an electric arc furnace can be restarted by flipping a few switches (I oversimplify.)

    I know there are steel mills that have never been shut down—that Stalin-era mill at Magnitogorsk is a prime example. I always thought that meant that in an economy where they don't have to care if there are markets for the output, the reality of blast furnaces meant they had to run 365/24/7.

  3. Yeah, the electric-arc furnaces are tremendously flexible, and are great since they recycle scrap steel, as you emphasized. I don't know what the timeframe was between relinings, but I do remember AK Steel took their blast furnace off-line a few years ago to do relining.

  4. Thanks for your input. Here in Minnesota we mine a bunch of iron ore but never had any real steel mills. We do have a mini-mill called North Star Steel and it is owned by Cargill—the folks who make most of their money trading agricultural commodities—so knowledge of steelmaking is not widespread.

  5. There is this project which may come to fruition:

    Sounds like it's been a dream for years, but high commodity prices could make it a reality.