Making iron was a two-stage process: Iron ore would first be melted with charcoal in a blast furnace, to separate the iron oxide from waste rock, and to remove the oxygen from the iron oxide. Blast furnaces have been used since the 11th century, although of course sophistication and size increased over the centuries.
The cast iron produced in a blast furnace still had a carbon content of around 4%, which made the cast “pig” iron too brittle to work further. The job of a blacksmith in the iron work’s hammer mill was not to produce finished items, but to reduce the carbon content in a combination of re-melting and mechanical working of the iron.
The pig iron was remelted on an open charcoal hearth. To increase the heat, air was blown into the hearth by a pair of leather bellows powered by a waterwheel (to provide an even flow of air, one bellows was blowing while the other bellows was being filled with air). The oxygen in the air reacted with the carbon in the molten iron and formed carbon monoxide, which then burned with more oxygen to form CO2.
Low-carbon iron has a higher melting point than the original pig iron, so as the carbon content was reduced, it started to solidify into doughy clumps of hot iron. These clumps were lifted to the top of the hearth and remelted to reduce the carbon content further. Clumps of solidifying iron were taken to a large hammer, also waterpowered, where they were hammered into sheets of iron, which were cut apart into suitable sizes, reheated on the hearth and hammered into iron bars which were the final product of the hammer mill. The hammering not only shaped the iron but also solidified it and altered the metallurgic structure of it.
In a manufacturing mill, these bars would later be reheated and reshaped into tools, nails etc.
The hammer mill was usually operated by a team of three: The master blacksmith (“mästersmed”), an assistant blacksmith (“mästersven”), and a helper (“smeddräng”) who was often learning the trade. The master blacksmith was fully trained in all aspects of operating the hearth and the hammer, and could oversee one or more hammers in a larger mill. The assistant blacksmith was capable of operating the hearth and hammer when the master was not around, and the helper would do whatever he was ordered: feeding the hearth with charcoal etc. The master blacksmith was an independent contractor who hired his own assistants and helpers, and also provided room and board for them.
What I have described above is the so-called “German” method, prevalent in Swedish mills from the 15th century until the late 19th century. The “waloon” method, imported from Belgium, differed mainly in that two separate hearths were used for the initial melting of the pig iron and the subsequent reheating.