A new furnace concept is described in which it is possible to produce either iron or steel directly from fine iron ores, concentrates, or wastes. The heat for the endothermic reduction reactions and for the melting of the metal and slag phases is supplied by a plasma device. The plasma is formed by injecting arc stabilizing gases or materials into a carbon arc. The material to be processed is passed both through a preheater and a column or flash reactor before entering the plasma zone prior to the completion of the reduction reactions and fusion of the metal and slag in the hearth zone. Reduction mechanisms in all of the furnace zones are investigated and temperature profiles are reported. The behavior of carbon, silicon, manganese, titanium, sulphur and phosphorus in the reactor is described.