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Minnesota’s Iron Ore Industry Bounces Back

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(credit: Jupiter Images)

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DULUTH, Minn. (AP) – Minnesota’s iron ore industry has bounced back to full speed thanks to global steel demand, less than two years after bottoming out.

It’s one of the fastest turnarounds in a century of mining in Minnesota, the Duluth News Tribune reported Sunday. Iron Range taconite experts and workers say the taconite industry is poised to hit full capacity, and expansion plans are in the works.

“Everyone is going at full capacity-plus right now and we’ve got new projects down the line,” said Craig Pagel, executive director of the Iron Mining Association of Minnesota. “It’s having a ripple effect on our whole region’s economy.”

An industry known for booms and busts suddenly seems to have shortened the period between bust and boom, the newspaper reported.

“Everyone’s back to work now. You can have all the overtime you want. . And they’re trying to hire new people,” said Jack Thronson, an electrician at Keetac in Keewatin and president of Steelworkers Local 2660. “It was pretty bad in 2009; we were down for most of a year. But things have changed so fast. The steel demand is supposed to be good for a while now.”

In 2008, the industry produced 39 million tons of taconite, one of the best years of the decade. But the global economic meltdown that started in late 2008 caused one of the fastest downturns ever.

Production in 2009 dropped to the lowest level since 1963, just 17 million tons. For a few weeks in 2009, all six of the state’s taconite plants were completely shut down, and nearly all their workers were laid off. The slump rivaled the early 1980s when the industry lost half its workers, half its production and some 20,000 residents moved out of St. Louis County to find new homes and jobs elsewhere.

Industry experts say 2011 production will hit at least 40 million tons, a mark not seen since LTV Steel permanently shut down in 2000.

New products and new markets are also changing the nature of the industry in Minnesota, which has long been based on refining lower-grade raw taconite into higher-grade iron ore pellets suitable for blast furnaces.

Mesabi Nugget is making high-purity iron nuggets that can be used in electric mini-mills, a new market for Minnesota ore. And ore concentrate pulled from what used to be waste by upstart producer Magnetation in Nashwauk is heading to Mexico. And China is hungry for taconite pellets. Cliffs Natural Resources Inc. has said it will ship 1 million tons of Michigan and Minnesota taconite pellets there this year.

Overseas steel mills are now willing to pay enough for Minnesota ore that it more than covers the shipping costs. Pellets from Minnesota now compete with raw ore from Brazil and Australia. Magnetation is shipping its concentrate to a Mexican steel mill by train, displacing raw ore from Brazil.

“It now matters more for Minnesota taconite whether India’s growth rate is 8 percent or 12 percent than what sales are for the U.S. auto industry,” said Drew Digby, regional analyst for the Minnesota Department of Employment and Economic Development.

Peter Kakela, an expert on the global iron ore industry at Michigan State University, said companies are selling taconite at four times what it cost to produce, a return on investment unheard of in the past when profits of a few dollars per ton were common.

“For years — decades, even — the price hovered in that $30 to $35-per-ton range. . And now someone is paying $200. They’ve never seen anything like this before,” Kakela said. “There’s your incentive for all the expansions people are talking about. That’s why everything is running at full capacity.”

Kakela said the good times appear to be here for a while, thanks to unrelenting demand for steel in Asia.

“I don’t see any downturn in global demand right now anywhere on the horizon,” he said. “And northern Minnesota is poised to supply that demand because it’s really become the cradle of innovation for iron ore worldwide.”

Not only have the mines recalled all the 3,600 Steelworkers who were laid off in 2009, they’ve added about 100 jobs. With the increasing pace of retirements by aging Steelworkers, 1,000 of today’s workers are new to the taconite business.

Still, direct employment in the taconite industry has dropped from more than 15,000 at its peak to about 3,700 now.
Digby said that while mining is still big and now growing, its role as a regional employer is shrinking as health care, education and other service industries grow faster.

(© Copyright 2011 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

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