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Even if we consider a kind of preindustrial metal work, that does not mean no waste. Quite the opposite modern industrial processes are more efficient and by that less waste productive. But that is only true if they work with the same ore and other material as did our forefathers. The production of charcoal for example is much more effective and less harmful for the environment now a day then it has been when as a kind of workman ship.
I think that most of the metal used by the Hobbits or by the men of Bree was produced by the Dwarves and traded. Neither the Shire nor Bree-land looks much as if there was iron ore dug out of the ground. But a blacksmith heating up iron to work it in the desired form does by fare not produce as much waste and pollution as does a ironworker by producing iron from ore. A blacksmith doesn't even need coal, a good wood fire might do.
Any way the slag-hills you see in areas of heavy steel industry are normally not really slag produced by steel or iron mills. They are most often the by product of coal mines. That means they are stone that surrounded the coal and was brought up because the industrial mining has a minimum height of the layer it takes out. In addition the industrial mining goes straight while the natural coal layer does not.
The slag produced by iron and steel mills is normally useful. Part of it can be used in the production of cement, a part was even used as mineral fertiliser (today we know that isn't a good idea), and the rest is used in building streets. Thus it really makes sense that Tolkien named the dwarves as the most skilled iron and steel producer and as the most skilled street builders in Middle-Earth.
Respectfully
Findegil
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