Mining spinoff jobs threatened in downturn
Three years ago, Mitch Robertson showed a reporter around his booming steel fabrication business in Virginia, with sparks flying and machines clanking and business as brisk as it had ever been.
In late 2012, the price of iron ore was over $130 per ton. U.S. steelmakers were pumping out finished product for new oil pipelines, trucks and refrigerators. And Minnesota’s iron mining industry was shiping iron ore as fast as the stuff could be processed.
TriTec, Robertson’s company, was booming as it helped keep the mining industry moving with repairs on heavy equipment and specially designed equipment for taconite plants — such as rock-proof fuel tanks for mining trucks.
All that has changed now, with taconite iron ore wallowing below $45 per ton, U.S. steelmakers idling production amid a sea of foreign steel imports and more than half of Minnesota's mining industry shut down or about to shut down.
For TriTec, times are suddenly tough and about to get tougher.
“Business is down about 30 percent from last year. And from what I hear it’s not going to go up fast in 2016,” Robertson said last week.
A University of Minnesota Duluth study in 2012 found that, for every job in the mining industry, another 1.8 jobs are created to service and support mining, so-called economic spinoff. But that works the other way, too.
“When all these layoffs come (in the mines) we’re feeling it,” Robertson said.
TriTec peaked at more than 70 employees before the boom went bust. Now, the company is down to 46.
Northeastern Minnesota is rife with businesses that thrived in recent years alongside the mostly good times for mining — steel fabricators such as Furin & Shea in Hibbing and TriTec; engineering companies such as Barr and Jasper; W.P. & R.S Mars Co. in Duluth, which sells and services conveyor belts and other industrial equipment; and Joy Global, which in 2012 opened a new $20 million plant on Virginia's north side to service giant mining equipment.
Now, some of those businesses are reeling as Minnesota’s taconite iron mining industry has been hit by its steepest decline in 30 years.
“If you're in the industrial sales business in Northeastern MInnesota, you are feeling it,” said Bruce Mars, vice president of W.P. and R.S. Mars. “Closed taconite plants don’t buy conveyor belts.”
Mars has offices in Duluth, Hibbing and Bloomington, Minn., with some 100 employees companywide.
“We get hit three times. The mining companies we serve are down. The railroads (that transport iron ore) are down, and we sell to them them. The docks, the terminals are down; they are our customers. So are the Great Lakes vessels,” Mars said. “We’re taking a hit, no doubt.”
Mars said sales are down “significantly” in 2015 from 2014. So far, the company has been able to avoid layoffs.
“We have to go out here and find new industries to find for customers. We need to make up for this or we’re going to have to re-evaluate things,” he said.
So far, the impact has been slow to show up in official unemployment numbers and has been limited to the core Iron Range.
While Minnesota's unemployment rate dropped to 3.7 percent in October, and Duluth's sank to just 2.9 percent, Hibbing foundered at 8.7 percent and Virginia hit 6.5 percent with Grand Rapids at 6.2 percent. St. Louis County overall was 4.5 percent. The nationwide rate sat at 5 percent.
Mining and logging lost 300 jobs in October, or 4.5 percent of that workforce — the largest percentage decline of any sector in the state’s economy, according to the Minnesota Department of Employment and Economic Development. By the end of January, when additional planned layoffs occur, more than 1,500 mining industry workers are expected to be unemployed. And some industry watchdogs say there will be more.
Meanwhile, Robertson met with salaried employees late last week to discuss the situation and its impact on wages and benefits. His goal is to keep everyone working even through the downturn. TriTec has a contract through 2016 with members of the United Steelworkers, the welders and other tradesmen who do most of the work on the TriTec floor, but he said he may need to ask to renegotiate that, too.
“It’s been a real struggle in the past few months. We have to make some changes,” he said. ‘We’ve got some work, some contracts still going. But a lot of our old customers are shut down now.”
That includes Mesabi Nugget, the iron nugget plant in Hoyt Lakes that shut down last winter and which will be shuttered for a minimum of two years. TriTec helped build some of the machinery in the nugget plant, and serviced much of the rest.
“I don’t know if they’ll ever come back,” he said.
When Grand Rapids-based Magnetation started shutting down plants and declared bankruptcy earlier this year “we took a $120,000 haircut, in one shot. That's not as bad as some of the big guys, but we felt it,” Robertson said.
There is some good news. Robertson said orders from U.S. Steel’s Minntac plant in Mountain Iron, which had seen layoffs during a shutdown earlier this year, are now coming in again. And his firm is marketing its own truck body designed for heavy industrial use, in or out of the mining industry.
“We’ve got some ideas. We’re still in the black, But we need to come up with ways to stay busy,” he said.
TriTec also is getting a good chunk of custom work for the new, $180 million U.S. Highway 53 bridge project across the Rouchleau iron mine pit lake in Virginia, only steps away from Tritec.
“They are staging some of their equipment in our yard,” Robertson said of the contractor building the new bridge. “That project is going to help keep us going.”
Robertson says he talks to companies that he buys services from and hears rumors of cutbacks across the Iron Range. Ane he’s not hearing much optimism about 2016.
“I don’t have any guess when things might get better,” he said. “The Mesabi Nugget people said two years (before any potential reopening) and that was last spring, so maybe by then.”
That would be 2017.
Bruce Mars said he expects a poor first quarter for 2016. After that, all he can do is be optimistic, he said.
“We’ve been through this before. Everyone involved in mining has seen the cycles,” Mars said. “But this one feels different. Everything is global now. You see the signals about China not using as much steel and dumping steel here in the U.S., and you see the stories about huge new iron ore mines in Brazil and Australia, and you know something is up. … But it’s really uncharted territory now.”