Half a loaf? Getting maximum value from the Ring of Fire

August 9, 2014 - When I was a youngster, we had a neighbour who kept a jar of coins. When kids would visit, he’d offer the jar and say, “take as many as you like.. If you grabbed too many, your bulging fist wouldn’t make it through the neck of the jar. Lesson learned.
As the development of the Ring of Fire moves ahead, those involved will need to make complicated decisions on how much of the Ring’s wealth to keep in Ontario and how much to let go.
At this point, there are many scenarios of where the North’s chromite might end up. It’s certain that the raw ore will be reduced to concentrate at the mine sites, but after that, it’s a guess. When Cliffs Natural Resources was grabbing the headlines, the plan was to have the concentrate shipped to Sudbury to be turned into ferro chrome at a new smelter they would build in Capreol.
Right now, it’s debatable whether the Ring’s chromite will ever see an Ontario smelter due to provincial electrical costs. Quebec and Manitoba sell their power to industries for less than three cents per kilowatt hour (kwh), while Ontario’s rates are based on a spot market that is often double that.
Other than government intervention, there is nothing that would stop a company from shipping the chromite directly to another province or to another country. At the very least, Northerners want the chromite smelted into ferro chrome in the North.
The pinnacle of value-added chromite would be the production of stainless steel from that ferro chrome, an industry that does not yet exist in Canada. There’s only one country in the world that has all four resources to make stainless steel by combining cheap electricity, iron, chromite and nickel: Canada. Thanks to the Ring of Fire, the chromite, iron and nickel can all be found in Northern Ontario. But the cheap power is in its neighbouring provinces.
Businesses can’t be expected to pay higher rates if the hydro is cheaper nearby, unless there are significant other factors to offset that cost. The introduction of subsidized hydro rates for industries in the North would be one approach to compete with Quebec and Manitoba, albeit on the backs of all Ontarians.

KWG Resources, one of the key players in the Ring of Fire, is actively trying to develop a smelting process that would use natural gas. If they were successful in making gas smelting cheaper than electrical smelting in Ontario, the playing field would be leveled because gas costs are competitive in Ontario. The North would then have all the resources it needs to make ferro chrome right at home. Should KWG find that alternative to smelting, a very different Northern Ontario industrial landscape would be possible. In the meantime, the future of the Ring of Fire and its chromite is based on the reality of what is.
Whatever energy is used when smelting iron, nickel or chromite into their end products, tremendous heat is required. When making stainless steel, all of those ingredients have to be re-melted, using even more energy. The secret to making stainless steel efficiently is to have the smelting processes combined and to recycle the heat. In this way, the metals can be kept in a hot state as they are being turned into stainless steel.
This energy-saving process is already being used in Finland, one of the world’s largest producers of stainless steel. The inefficiencies for Finland come from having to ship some of their raw materials great distances. Finland’s electricity costs are also higher than those anywhere in Canada. They pay 7.5 cents per kwh (2013), which is more than twice the cost per kwh in Quebec and Manitoba.
Would the Finnish model, combined with the proximity of resources, allow Ontario to compete on the world stage of stainless steel production? Even if the answer to that were yes, business investors would always want maximum return, which would still make a Quebec or Manitoba operation more profitable.
The Ring of Fire chromite will hopefully be smelted into ferro chrome in Canada and (very hopefully) into Canadian-made stainless steel as well. However, it may have to be done in partnership with one of Ontario’s provincial neighbours.
From my childhood experience with my neighbour, I know that I would not have gotten my hand out of that jar had I not let some of those coins go. The alternative would have been to break the jar. The status quo of electricity costs for Northern Ontario industries may need to be broken too. Matching Quebec and Manitoba prices might be the only solution to keeping the full benefits of the Ring of Fire in the North’s grasp.

Authored by Rick Millette, Senior Executive Director for the Ring of Fire at Northern Policy Institute. Originally published in the Chronicle Journal, August 9, 2014.