Buying Midrex and its natural-gas direct-reduction process (1983)

On holding a technology you never use

Kobe Steel has never once used the process it bought in 1983 in its own mills. Midrex’s method of reducing iron ore with natural gas makes feedstock for electric furnaces; there was no demand for it in a country running on blast furnaces, and its siting was limited to places with natural gas. That the company could buy it anyway was because the machinery and engineering division, which had built Qatar Steel’s mill itself, looked at the process as a seller rather than a user. It was a different arena, chosen by a company that could not match Nippon Steel or NKK on blast-furnace scale.

The forty years in between were not smooth. ITmk3 saw its first commercial plant start up in 2010, yet through 2011 it ran intermittently because of coal-conveyor trouble and never reached its rated 500,000 tonnes a year. Per-unit scale fell short of a blast furnace, and president Sato Hiroshi himself listed “whether a market exists” as an open question. Midrex was only regarded as the front-runner once decarbonisation arrived; to say the 1983 acquisition foresaw this would be hindsight. That the company held on to a technology with no visible use for forty years is itself what this decision achieved.