SILVER BAY, Minn. — As company officials and politicians prepared to cut the ribbon on $100 million in upgrades at the Northshore Mining processing facility in Silver Bay, Mayor Scott Johnson said the reinvestments have brightened the outlooks of many residents of his town.

“In mining towns, we’re always waiting for the other shoe to drop. There’s inevitable shutdowns. In our experience, we have had actually plant closing and bankruptcy,” Johnson said, referring to the 1986 closure of Reserve Mining Co., the company that built and operated the Silver Bay plant for three decades. “This is the first time we’re actually optimistic.”

With the upgrades, the Cleveland-Cliffs plant can now produce the kind of pellets the steel mills of the future will rely on.

Northshore is set to process up to 3.5 million tons of direct-reduced iron, or DR-grade, pellets per year, most of which will feed its soon-to-be-completed hot briquetted iron, or HBI, plant in Toledo, Ohio. After that, the HBI produced by Cliffs can be mixed with scrap metal in an electric arc furnace to make steel.

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Electric arc furnaces are becoming the new normal, while the blast-furnace steel mills that the Minnesota taconite industry has traditionally supplied are aging.

Just recently, Northshore Mining was idled for several months in 2015 and 2016 when iron ore prices fell due to a glut of cheap Chinese steel, but Johnson said he’s hopeful the changes will ensure a more stable future.

Cliffs CEO Lourenco Goncalves certainly thinks so, noting that electric arc furnaces now account for 68% of crude steel production in the U.S. while blast furnaces produce the remaining 32% of crude U.S. steel.

“We could do it for the next 10, 20, 25 years, but our kids, your kids, your grandkids, would not be OK,” Goncalves told the crowd at the ribbon-cutting ceremony. “With this, they would not be able to be here because this industry would be gone. These DR-grade pellets will ensure that here in Northern Minnesota, we will have this thing going for at least 100 years.”

The future of steelmaking

In the 1950s, Reserve Mining Co. opened North America’s first taconite processing plant along the shores of Lake Superior in Silver Bay, marking a turning point for the industry.

By the end of World War II, the high-grade iron ore found throughout northeastern Minnesota’s Iron Range was mostly depleted, but low-grade iron ores like taconite, which are laced with other minerals, remained abundant.

To actually use the iron found in taconite for steelmaking, it needed to be separated from the other minerals. A process was developed to crush the rock, separate the iron from waste rock with magnets and roll the iron into pellets for shipment to steel mills where blast furnaces and basic oxygen furnaces turned the iron into marketable steel.

While Reserve was the first to use that process, Minnesota’s other mining companies followed suit, a move many say saved the Iron Range’s mining industry.

Since June, that same plant, now owned and operated by Cliffs, has been stockpiling the DR-grade pellets since June when it finished the upgrades ahead of schedule.

While the production of the DR-grade pellets is similar to blast furnace pellets, the $100 million in upgrades account for new concentrators, scavenger building and conveyor systems, among other additions, that allow Cliffs to hit the right formula for DR-grade pellets.

Because electric arc furnaces melt down scrap metal, it must be supplemented with a more pure form of found in hot-briquetted iron.

But Northshore can still continue to make blast furnace pellets on separate furnaces simultaneously to its DR-grade pellets.

“The industry evolved, and now it’s not just blast furnaces and not just blast-furnace-grade pellets to feed blast furnaces,” Goncalves said. He said of electric arc furnaces, “That’s the future.”

A future for Silver Bay

As Reserve built its facility, Silver Bay formed around it and officially became a city in 1954, just two years before the first pellets were shipped out of Reserve.

In the 65 years since, Silver Bay has ridden the highs when iron ore prices are up and employment is steady and the lows when prices drop, forcing layoffs.

At Tuesday’s ceremony, former 8th Congressional District Rep. Rick Nolan contrasted those highs and lows.

“I've been here in the dark hours, and to face hundreds of men and women who’ve been laid off and lost their jobs, and to face them and understand how profoundly difficult that was for them at that moment, at that time in their lives and then to stand there and promise to be able to try to do something to fix it and get it right so that people could get back to work again and take care of their family and their obligations,” Nolan said. “And with that in mind, I can’t tell you how exciting it is to be here at a time when we’re celebrating great progress.”

During times the plant has been shut down, the city can’t survive on tourism alone, Mayor Johnson said, and Cliffs’ reinvestment in the plant is an added incentive for Silver Bay’s residents to stay.

“You don’t hear the talk anymore about ‘What am I going to do if?’” Johnson said. “They’re planning for having their lives here.”