The Twin Ports Have Open Capacity
For a man who oversees the Duluth-Superior port, Vanta Coda II seems remarkably relaxed. Minnesotans know the Iron Range is hurting, and that reality translated into an economic hit in 2015 for the port. A 16 percent drop in the number of ships was slightly more than the 13 percent drop in total tonnage through the port: 32.9 million tons in 2015 versus 37.6 million the year before.
But Coda, executive director of the Duluth Seaway Port Authority, expresses optimism about the next couple of years. That’s partly because shipments of Range taconite could improve in 2016, at least slightly. A bigger reason is that the port—a unified entity that combines both the Duluth and Superior operations—ships more than taconite. The port’s general commodities terminal in the harbor had what Coda characterizes as a “great year.”
Grain remains a stable market, Coda notes, and shipments of coal have been steady despite the national decline in demand. Low-sulfur Powder River Basin coal “is still an attractive choice for those needing coal” in the United States and elsewhere, he says.
As for iron shipments, the Range got some good news this spring, after a year when around 2,000 mineworkers were laid off. Cleveland-based Cliffs Natural Resources, whose facilities account for about half of the taconite produced on the Iron Range, said in late April it would reopen its Northshore mine and pellet production facilities during the second quarter, after idling them in December.
Cliffs Natural Resources CEO Lourenco Goncalves also said that it would restart operations at United Taconite in Eveleth later this year. “The steel market in the United States has started to show consistent signs of a real recovery, with a direct positive impact on our steel clients’ order books and, consequently, a totally expected improvement in our clients’ appetite for the pellets we supply them,” Goncalves said in a late April statement.
He also has expressed a desire to build a direct-reduced iron (DRI) plant in Minnesota. DRI pellets are used in electric arc furnace steel mills, which now supply nearly two-thirds of U.S.-made steel. Those mills can’t use traditional taconite pellets, which were developed for old-school blast furnaces. Most DRI pellets come from outside the United States.
With some pellet plants scheduled to return to production, taconite shipments should improve in the next couple of years. However, it’s not likely that the port will be shipping as many tons of pellets as it did at its highest point in the past decade. As Minnesota economist Toby Madden warned at a March Regional Economic Indicators Forum in Duluth, the Range shouldn’t expect mining to be a growth industry. That’s because the U.S. is clinging to an ever-shrinking part of the world’s steel production. For the Duluth-Superior port, that reality will require other sources of shipping revenue. And those exist.
What had been fueling much of the port’s heavy-lift traffic in the past few years was the transport of equipment used in oil and gas projects, primarily in North Dakota and Canada. “There were a lot of projects they were already midway through, so they couldn’t just stop them,” Coda says. He certainly expects a slowdown in exploration equipment in 2016, and perhaps the following two years after that.
Wind projects, by contrast, offer a sunnier forecast. Tax credits for sun and wind energy were renewed in the fall for another five years. Last year, he notes, “was the first year that renewables set market pricing in the United States.” While 2016 might be a slower year, “what we’re starting to hear and feel is that in ’17, everyone’s going to have their plans that they’ve been holding onto completed and will be ready to go.” Coda adds that the Port Authority’s Clure Public Terminal in Duluth handles more than half of the components for midwestern wind energy projects carried on the Great Lakes St. Lawrence Seaway.
Coda also points to the growing number of vehicles using the port for logistics purposes. Last year, Lake Superior Warehousing Co. (LSW), the independent entity that clears and loads ships at the Duluth-Superior Port, handled 25,000 truckloads and 4,000 railcars in addition to ship traffic. Those vehicles represented a surge of about 40 percent in total freight tons over 2014. Over the past 10 years, the port has grown about 300 percent in the number of trucks coming in and out of the port terminal, Coda says.
Coda argues that more shippers and logistics operations will see the value in using Duluth as a link in their supply chains. His argument: With transportation pathways around the Twin Cities becoming more congested, transport firms can use Duluth as a hub instead. The port area connects with four major railroads that connect with both U.S. coasts and into Canada. Plus, it’s located right off of Interstate 35, which is easy for trucks to enter and exit.
One area where logistics companies could operate are the C and D docks. After the work on those docks is completed this fall, they will provide 25 acres of “lay-down” area for project cargo, including a heavy-lift dock. Coda sees this infrastructure as providing opportunities for logistics firms that handle agriculture-based commodities, timber and other heavyweight goods. They could operate their own facilities there. There also are other properties on Rice’s Point that could be remediated and made ready for industrial and business development.
The vision, Coda notes, is to build upon the idea that there’s “open capacity within the Great Lakes.” That translates into increased international transportation of more goods to and from Canada and Europe. Those goods likely will be similar to what Duluth-Superior handles now. It serves many key industries: forestry, pulp and paper, mining, manufacturing, steelmaking, construction, wind energy, power generation, and oil and gas extraction.
“We’re a natural resources port,” Coda says. “We’re going to continue to be who we are.” Depending on how the energy and commodities markets perform, that might be all it needs to be.
Gene Rebeck is a Duluth-based freelance journalist who writes monthly for Twin Cities Business.