New types of processed taconite. Plant expansions. Even the possibility of a steel mill right by a mine. There has been so much news on the Iron Range recently that it’s hard to keep track. One thing’s certain: Minnesota’s iron ore industry is bullish. Though it's not clear if it should be.
First, let’s catch up on some of the action:
- Essar Steel Minnesota launched a $1.7 billion construction project on a new taconite mining and processing operation at the former Butler mining site near Nashwauk. It will be Minnesota’s first new iron-ore mining and taconite plant operation in 30 years; taconite processing is expected to begin in May. Essar signed a deal with steelmaker ArcelorMittal USA, which will take 3.5 million tons of iron pellets per year for the next decade. Essar also has plans to produce slab steel at the site by 2015. If that happens (and that will depend on market demand), it would be Minnesota’s first mining-to-steelmaking facility ever.
- On February 13, Cliffs Natural Resources, the Cleveland-based Fortune 500 mining firm that has a stake in three Iron Range mines, announced that it plans to develop a new kind of taconite pellet that could be used to make the direct-reduced iron for use in electric arc steel furnaces.
- On March 1, Grand Rapids–based Magnetation, which extracts ore from old tailings (waste product from iron mines), announced plans to expand production of iron ore concentrate at three of its plants. Annual production at Magnetation’s Keewatin and Coleraine plants would increase by 500,000 tons. A processing plant near Chisholm that Magnetation operates jointly with Indiana-based steelmaker Steel Dynamics started production in September.
That’s not all. Craig Pagel, president of the Duluth-based Iron Mining Association of Minnesota, noted in early March that there are two more projects afoot on the Range. Even during the recession, Pagel says, mining companies pursued additional permits “knowing that the need for iron ore in the United States will continue to grow.”
Meanwhile, Wisconsin is interested in pumping iron. In early March, the Wisconsin Assembly approved a plan that would make it easier to establish a $1.5 billion open-pit taconite mine in the northwestern part of the state, much to the chagrin of environmental groups. The state has had no mining of any kind since 1997.
Not that Minnesota needs to fret about its neighbor’s production. Minnesota mines produce at least three-quarters of the taconite in the United States, with at least a century’s worth of ore still left to mine. Overall iron ore production in Minnesota hit 39.7 million tons, up 1.8 percent from 2011, according to data from the state Department of Revenue.
Nearly all of the state’s ore is used by U.S. mills (some of which own their own mines), with a little sent to Canada and Mexico. Therefore, much depends on whether American steelmakers can sell their product. That’s where the picture grows murkier. Lisa Reisman, Chicago-based managing editor for MetalMiner, a metal industries publication, says that demand for U.S. steel has been coming “in fits and starts.” While some customers, particularly the automotive industry and oil and gas pipelines, have been strong for a few years and are likely to stay that way, Reisman notes a lack of “good, solid, consistent strength across the board, like there was in 2007, when the industry as a whole was booming.”
As of mid-March, Reisman says, U.S. steelmakers were operating at 74.5 percent capacity. That’s much better than the 39 percent capacity during the depths of the recession, but short of 85 percent, which is considered full capacity. All told, she expects production to be a little lower than in 2012. “We actually have too much supply in the U.S.”
But longer term, prospects seem brighter for what has long been a volatile industry. Global market research company IbisWorld predicts that the U.S. steel and finished iron products industry will grow an average of 3.5 percent per year from 2013 through 2018. Agiimaa Kruchkin, a Los Angeles–based industry analyst for IbisWorld who keeps tabs on the U.S. steel and iron ore industries, believes that private nonresidential construction will see increases in four out of the next five years. That, along with the energy and automotive industries, is expected to drive demand in the next five years.
As for the Range, the Department of Revenue predicts slightly lower production in 2013 than last year. That’s based largely on news that Cliffs Natural Resources cut back production at its Babbitt mine and its Silver Bay taconite processing plant in January, laying off 84 of 671 workers, in part due to a loss of a key steel mill customer. Pagel considers that “a small downturn.”
Iron mining always has been an up-and-down industry. The industry is placing its chips on the black numbers of an improving U.S. economy and an ever-growing market for American steel. Looking beyond 2013, it looks like a solid bet.
Gene Rebeck is TCB’s northern Minnesota correspondent.