Minntac to slow production, 700 layoffs expected: Rapid downfall of domestic steel, iron ore industries hits Iron Range hard. Mar 31, 2015
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MOUNTAIN IRON, Minn. -- The string of bad economic news on the Iron Range compounded Tuesday when U.S. Steel announced that it will dramatically slow production at its Minntac taconite facility in Mountain Iron starting June 1.
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Local union officials said the move will put 700 Steelworkers off the job, nearly half of the 1,500 people who work at Minnesota's largest taconite mine and processing plant.
The Pittsburgh-based steel giant said the move was forced by an oversupply of iron ore due to continued low demand for its American-made steel -- a problem made critical in recent weeks by the ongoing flood of foreign steel made with cheap foreign iron ore.
"Global influences in the market, including a high level of imports, unfairly traded products and reduced steel prices, continue to have an impact," the company said in a brief statement Tuesday.
State Rep. Jason Metsa, DFL-Virginia, said he's been told that three of the plant's five production lines will be shut down in an effort to reduce a backlog of 3.2 million tons of taconite. Union officials said they had not yet been told which employees will be laid off.
The move comes less than three weeks weeks after U.S. Steel said it would shut down production at its Keetac facility in Keewatin starting in May, putting 412 steelworkers off the job. The Minnesota cuts join a series of layoffs -- now estimated at more than 4,000 workers -- at U.S. Steel facilities across the country.
In addition to Minntac and Keetac, Magnetation earlier this year announced it will idle its Plant 1 in Keewatin because of decreased demand and the continued depressed price for iron ore globally.
"The problem is, even with Keetac shutting down, domestic iron ore is still piling up on the ground because there's still too many companies in the U.S. buying foreign steel that's being dumped in the U.S. illegally," Metsa said. "We have companies in the U.S. buying steel. But they aren't buying steel that's made with Minnesota iron ore."
Metsa and others on Tuesday expressed frustration over the lack of progress at slowing the flood of foreign steel.
Minnesota lawmakers in Washington met with White House officials last week and secured a promise that the Obama administration would help solve the steel trade problem, But it's not clear how, or when, those efforts might advance. Minnesota lawmakers want the U.S. government to take faster action against steel that's dumped below cost on U.S. shores in violation of international trade laws.
"Right now there's just no way to enforce it, and it's killing us on the Iron Range," Metsa said.
Jon Malek, president of United Steelworkers Local 1938 that represents Minntac workers, said his office has been in contact with the governor's office on unemployment benefits and accessing MNsure for workers who may lose insurance coverage. In a notice to union members, Malek said Local 1938 has "not been given any details on who is getting laid off, manning levels in each department, or if they will keep stripping in the mine."
"The magnitude of this first round of layoffs came as quite a blow and the logistics of this will be quite a lot to deal with," Malek added.
The Minntac slowdown "is not only devastating to the laid-off employees and their families, but also to the economic well-being of the entire region," said U.S. Sen Al Franken, D-Minn., in a statement. "It's another sign that we must continue our fight to level the playing field for our steel and taconite producers by ending the unfair dumping of foreign steel that is pushing down ore prices, cutting demand for American steel, and taking jobs away from Minnesota."
State officials already are working to make sure that U.S. Steel employees who are laid off will have access to full state unemployment benefits, which could amount to more than $650 per week for workers at the top pay scales, Metsa said. The state unemployment insurance fund is fully stocked, he noted, but no one knows how long the layoffs will last.
Metsa said it's unclear if other Minnesota taconite operations might also be affected by the downturn. But he said the U.S. Steel layoffs on the Range will almost certainly have a ripple effect on the local economy, with mining industry suppliers, retail stores and service industry jobs also threatened, especially if the layoffs linger.
"There's always light at the end of the tunnel. But first you have to walk through the tunnel," Metsa said. "I fear that we are getting ready for a long, dark walk."
Minnesota's Iron Range has seen the boom and bust cycles of iron ore mining for more than a century. But the latest downturn seems to have happened fast and caught some by surprise. As recently as September, Minntac officials were moving ahead with a major expansion, increasing the size of the mine and promising 120 new jobs after securing state permits for the expansion.
"U.S. Steel's layoffs at Minntac and Keetac will cause economic hardships and emotional distress for thousands of hard-working Minnesotans and their families. Now is a time for everyone to come together and support one another," Gov. Mark Dayton said in a statement. "The Range has endured these industry downtowns before and each time has come back even stronger. My administration stands ready to do everything possible to help do so again."
The layoff situation is the worst on the Iron Range since 2009, when all of the state's major mining operations were briefly shut down at once due to the global economic recession. That downturn was relatively short, lasting only a few months, but Minnesota taconite production didn't fully recover until about 2011.
Before that, the cyclical mining industry saw major downturns in 2000-2001, when LTV Steel Mining permanently closed in Hoyt Lakes, and a massive downsizing in the early 1980s when taconite production was halved, entire plants permanently closed and the Iron Range saw an outmigration of thousands of residents who never returned.
Global iron ore prices have dropped by more than 50 percent in the past 18 months, with slower demand in China and huge increases in iron ore output in Australia. Since 2011, iron ore prices have dropped by two-thirds, from nearly $190 per ton to about $57 per ton Tuesday. That's less than the price of production for some Minnesota operations. The lower ore prices have helped push steel prices down, especially in foreign nations where economies have soured. Those nations are looking to get rid of excess steel where economies continue to grow -- namely the U.S.
Minntac produced and shipped more than 13 million tons of taconite iron ore pellets in 2013, the most recent year for which state statistics are available. That's nearly double the size of any other Minnesota mining operation.
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