ECONOMIES OF SCALE IN THE NORTH AMERICAN IRON ORE MINING INDUSTRY

Past observers of the iron ore industry have asserted that significant economies of scale exist in the mining of iron ore which is enriched into taconite pellets. Quasi, long‐run average costs (LAC) of production are measured and used to estimate optimum scale of plant. Indeed the LAC appears u‐shaped and the minimum efficient scale of plant produces approximately 13 percent of 1987 North American output. However, because of the existing joint vertical integration and the conflicting ownership claims of the mines by the steel users, rationalization of capacity is not likely to occur.