Saturday, October 21, 2006

Move over Hank Rearden...

Steelmaking has been around for over a century and a half. Good thing that there is still innovation going on in the industry. From a September 18, 2006 Forbes article,
Hismelt has invented a new way of making iron that is supposed to cut production costs by 20%, reduce pollustion and convert billions of tons of currently uneconomic iron ore into a valuable commodity.
If you think that "old" industry doesn't innovate, think again. Everything that has a use can be improved and even old industries like steel, oil and chemicals have innovation occuring in them every day.

This new process for pig iron (the raw carbonized iron that goes into steel) termed "direct smelting" saves money by
  • using crude inputs (coal instead of coke, including high sulfur coal)
  • allowing use of crude ores (high phosphorus ore)
  • using an efficient high temperature furnace
  • allowing efficient economics at smaller scale plants
The project drew investors with particular interests in seeing the process become reality, and is on it's way to becoming operational at full scale. Investors are drawn by the desire to see part of the 20% cost savings go into profits. This is how innovation is driven, by investors who can create value in the form of profits from technological improvements. And you get the ultimate benefit in cheaper goods.