Canadian Iron Ore: 1950 to 1986

The Iron Ore Company of Canada (IOC) began shipping from its new mine at Schefferville in 1954. It was the first of the mines in the Labrador Trough, which would reshape the Canadian iron ore industry. Over the next four years, new mine openings in Ontario, Quebec and British Columbia supplemented the boost given by the Schefferville mine to bring Canadian iron ore production to over 20 million tons. A five-month strike in the United States, in 1959, pushed iron ore prices to a peak and stimulated Canadian mines to produce 22 million tons. During the Second World War, it had become apparent that the United States’ reserves of high- grade ore would be seriously depleted during the 1950s. Indeed, production of direct-shipping ore peaked in 1953 and declined sharply in 1958, from supplying half the United States iron ore production to accounting for only 5% by 1973. To maintain a domestic source of ore, the United States iron and steel industry developed the vast taconite deposits of Minnesota and Michigan at great capital cost.

The hard, fine-grained taconites graded about 34% iron. They needed to be ground to minus 325 mesh to liberate the iron-bearing mineral (magnetite) and beneficiated, using gravity, flotation and magnetic techniques, to produce a concentrate grading about 64% iron. This premium grade was becoming the world standard for commercial ores. Finally, because of the fine grain size, the concentrate had to be pelletized to make it usable. The industry turned to techniques pioneered at the Moose Mountain property, in the Sudbury area, from 1908 to 1914. This mine exploited Archaean iron-formation that required grinding, magnetic concentrating and briquetting to meet the quality demanded at the blast furnaces. Pilot work for the whole North American industry and the first iron ore pellets were completed at the Hilton Mine near Bristol, Quebec, in 1958. The companies incurred large capital costs to construct the new mines, mills and pellet plants. Because of extensive processing, their operating costs were higher as well.

The iron ore pellets had more consistent analyses and better performance in the blast furnaces than the direct shipping ores. Two waves of price increases coincided with the debt servicing costs and increased operating costs associated with the switch from direct shipping to taconite pellets. Nevertheless, taconite’s share of United States iron ore production grew from 5% in the mid-50s, to 66% in the mid-70s.

In 1959, Moose Mountain was reopened, but it and the other nine operating mines in the rest of Canada were overshadowed by the production from Schefferville which provided over 60% of the nation’s iron ore production. Between 1961 and 1965, Quebec Cartier Mining Company (QCM) began shipping from Lac Jeannine, Quebec, IOC began shipping from its Carol Lake Mine near Labrador City, Labrador, in addition to Schefferville, and Wabush Mines began producing form the Scully Mine which was adjacent to the new IOC site. These new mines were based on ore requiring concentrating and much of the product had to be pelletized.

Over the next 10 years, one mine opened in British Columbia and two in Ontario, and QCM’s new mine at Mt. Wright, Quebec, was developed to eventually challenge IOC’s Carol Lake operation as the largest iron ore mine in North America. In 1979, Canadian mines produced a record 59 million tons of iron ore, the all-time high.

After the Second World War, the steel companies integrated backward into iron ore mining to ensure supplies of iron ore at a reasonable price for the long term. This process reached its peak of sophistication with development of the large mines in the Labrador Trough. With the exception of QCM, wholly-owned by the United States Steel Corporation, the operations, namely IOC, Wabush and later the mines taken over the Sidbec-Normines Inc., were all owned by partnerships. These partnerships were dominated by American and Canadian steel interests who had pooled the investment necessary to mount the large mining projects. These same companies, however, were rivals in the steel industry and set up price and product allotment agreements within the iron ore partnerships to ensure that no partner was able to gain advantage or take control of the mines. Also, these agreements were originally expected to protect the partnership from the exorbitant price increases for iron ore that were forecasted for the 1980s. In fact, they effectively established floor prices, based on the costs of production, which held the North American iron ore price well above the price for ore traded internationally.

By the late 1970s, a significant amount of Canadian ore was being sold on the world market at competitive prices,unfettered by the artificial pricing agreements among the mine owners. The major mines in the United States, however, were still locked into the North American market. For the first time a significant price differential between the Canadian and American mines appeared and widened as the Labrador Trough mines came to depend more and more on the offshore market.

For most of the last hundred years, Canadian and American iron ore prices have tracked each other closely. Taken at the point of departure from the mine or the property prior to 1970, and excepting the major strike year 1959, the price per iron unit stayed within a range of 7 to 15 (1971 constant $). Only recently, coinciding with the intensive development of the taconite ores in the United States, has it risen above 20 * Although the price also rose at this time on the international market, competition quickly pushed the price back to the “normal” range.

From an Energy, Mines and Re-1/8sources report on Canadian Iron Ore Industry Statistics 1987 by B. W. Boyd and A. Cadieux.