The Odd Couple Of Steel

Nucor Chairman F. Kenneth Iverson has missed some bets in his time. In the early 1980s, for example, he spent some $5 million manufacturing steel railroad ties. "They lasted forever, but nobody wanted to buy them," he laughs. But small setbacks such as this are dwarfed by Iverson's winning record on big gambles, especially his triumphant 1989 move to enter the flat-rolled steel business with $350 million in unproven technology.

Now, Iverson is rolling the dice on a far more ambitious venture. By teaming up with longtime rival U.S. Steel Group, a unit of USX Corp., Iverson is hoping to come up with a brand-new way to turn iron ore into steel. The discovery of a direct steelmaking process could revolutionize the steel industry: It could permit integrated companies such as U.S. Steel to boost capacity without also adding dirty, costly coke ovens and blast furnaces, which reduce iron ore to a metallic iron alloy that's then made into steel. At the same time, it would free Nucor Corp. and other minimills from relying on the topsy-turvy market for scrap, their raw material. "This could be a cheaper and highly efficient type of steel manufacturing," says J. Clarence Morrison, metals analyst at Prudential Securities Inc.

CLEAN PROCESS. The Nucor-U.S. Steel joint venture, announced in mid-October, hinges on a new raw material for steel--iron carbide. This compound, researchers say, has double potential. Containing iron and carbon, it's a source of metal as well as a fuel, the equivalent of both the iron pellets and the coking coal that are smelted in a blast furnace. What's more, researchers hope to cash in on a chemical reaction--the heat-producing conversion of carbon monoxide into carbon dioxide--to superheat liquid iron, refining it into steel.

The upshot, says Nucor President John D. Correnti, could be an energy-efficient method for making steel. He estimates it would save Nucor $50 per ton, or 20%. U.S. Steel President Thomas Usher adds that the direct steelmaking, confined within closed furnaces, would be a much cleaner process than today's technology. This could eventually spell relief for steel companies, which are struggling to meet the standards of the 1990 Clean Air Act.

Before cashing in on direct steelmaking, however, the partners must clear a couple of tall hurdles. First, Nucor must perfect the technology to create iron carbide, a process that's just beginning on the island of Trinidad. Tougher yet, the partners must devise a direct steelmaking system. By doing so, they hope to leapfrog ahead of Japanese and German researchers, who are pioneering technology to smelt coal and iron pellets into liquid iron. Early this year, a consortium of U.S. companies led by the American Iron & Steel Institute and the U.S. Energy Dept. abandoned a $60 million direct steelmaking project. Although the technology worked--smelting iron and coal, and then refining it into steel--it took too long and produced inconsistent grades of steel.

DUAL CHAMBERS. Nucor, U.S. Steel, and a third junior partner, industrial gas company Praxair Inc., are betting that iron carbide can make the difference. They will test the process for the next four months to a year, says Nucor's Correnti, then decide whether to build a $30 million to $40 million demonstration plant next to a Nucor mill in Arkansas. Correnti says that plant would produce 50 tons of steel per hour, as much as a midsize minimill.

The demonstration plant would likely feature a furnace with two closed chambers, one to dissolve the iron carbide into liquid iron, and a second to refine it into steel. In the first stage of the planned process, iron carbide would be mixed with a small quantity of hot liquid steel. The heat would ignite the carbon in the iron carbide, warming the enclosed chamber enough to reduce the metal to a molten iron alloy--just like the metal that pours out of a blast furnace.

In a separate compartment, the process would kick in with its second shot of energy, resulting from the conversion of carbon monoxide into carbon dioxide. While this reaction occurs in many steelmaking processes, it's rarely harnessed to fuel the steelmaking. But Gordon H. Geiger, an inventor working for U.S. Steel on the project, has described a steelmaking technology in an enclosed chamber, where the heat, instead of escaping, would fuel the entire process. "If such a furnace can be designed," Geiger said in a speech last year, "no other energy source is needed to take iron charged at 500C to liquid steel."

For the direct-steel project, the Trinidad plant should perform some of the work traditionally handled by a blast furnace. In an integrated steel mill, the oxygen from iron oxide pellets is burned off in the roaring blast furnace. In Trinidad, tiny grains of iron ore known as fines will be placed in a 1,100F fluid bed and treated with methane and hydrogen obtained from Trinidad's plentiful natural gas. The hydrogen from the gas should combine with the ore's oxygen, creating drinkable water--a by-product that Nucor will sell. Meanwhile, the carbon will latch on to the metal, producing iron carbide.

UP THE MISSISSIPPI. To be sure, plenty of doubts surround Nucor's iron carbide plant. Iverson was in such a hurry to produce a substitute for scrap steel that he went ahead two years ago with the $80 million Trinidad plant without building a demonstration plant first. With the Nucor plant working at a scale 50 times larger than test models, no one knows if the yields of iron carbide will be high enough to justify the cost. "It's a big lab experiment," Iverson jokes.

He should know by next month if the plant will meet projections of 330,000 tons per year. If it does, Iverson will quadruple the Trinidad works. The plan is to send shiploads of iron carbide to New Orleans, where it will proceed on barges up the Mississippi.

Waiting at Nucor's Hickman (Ark.) plant will be a team of scientists and engineers from U.S. Steel. It came as a shock to many in the industry that the tight-buttoned steel giant would cast its lot with Nucor's wild bunch. U.S. Steel executives routinely pooh-pooh the quality of Nucor's steel, while Iverson and company paint U.S. Steel as a rigid hierarchy dominated by the United Steelworkers of America. Iverson joked two years ago that if he entered a joint venture with a company like U.S. Steel, "our directors would shoot me."

But when the steelmaker came knocking in search of a direct partner, Iverson and Correnti listened. In some ways, it's a perfect match. U.S. Steel has an advanced research and development department and Geiger's iron-carbide technology. Nucor has the iron carbide--assuming the Trinidad plant works--and experience in commercializing new technologies. "It's a good fit," says Correnti. Now, all these partners have to do is refine a good idea into hard reality.

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