Three freighters in the Great Lakes Fleet will be pulled from service and the combined crews of almost 100 will be laid off as the COVID-19 pandemic roils the shipping industry.
Key Lakes Inc., which operates the Great Lakes Fleet for Canadian National Railway, will lay up its Philip R. Clarke, Edgar B. Speer and Roger Blough lakers until the demand for the goods it usually moves up and down the Great Lakes, such as iron-ore pellets, returns.
The layoffs total 94 employees and went into effect July 3, Timothy Callahan of Keystone Shipping Co., the Pennsylvania-based owner of Key Lakes, said in a letter that Duluth Mayor Emily Larson received Thursday and shared with the News Tribune on Wednesday.
"(Key Lakes) was unable to provide a greater amount of advance notice of these layoffs, due to unforeseeable business circumstances relating to the current COVID-19 pandemic and the economic decline relating to that pandemic," Callahan wrote.
Mitch Koslow, vice president of Key Lakes, and other company officials did not return calls or emails to the News Tribune on Wednesday, but he told WDIO, the News Tribune's news partner, on Tuesday that the company intends on calling back laid-off employees "when economic conditions improve and the boats return to service."
Some employees may join the company's other six boats still in service, Koslow said.
News of the layups and layoffs was first reported by the Star Tribune.
The Great Lakes shipping industry has suffered during the pandemic largely due to the fall of steel demand. Lakers often move iron-ore pellets produced on the Iron Range, where three of the six mines and taconite plants remain idled, to steel plants further down the Great Lakes.
Shipments of iron ore on the Great Lakes from U.S. ports in June fell by 29.9% to 4 million tons, according to data released by the Lake Carriers' Association on Wednesday. That's 29.7% below the five-year average.
Year-to-date iron-ore shipments are 17.2 million tons, a 14.9% decrease and 13.4% below the five-year average for the first half of the year, the association reported.
"It’s definitely sad, somber news and an indication that maritime shipping isn’t immune to the pandemic’s effects," Deb DeLuca, executive director of the Duluth Seaway Port Authority, said of the Key Lakes layoffs in a statement to the News Tribune.
She noted that the Port of Duluth-Superior has seen a 28.5% decline in total maritime tonnage through May 31 compared to 2019, with iron ore tonnage down 6%.
DeLuca said there were some bright spots, however: 25% more grain moved though the port and wind energy cargo could top last season's record.
"The pandemic continues to affect consumer activity. That combined with idling at mills and manufacturers created a situation where the nation’s blast furnace utilization rate dropped from the 80% range to the low 50% range," DeLuca said. "As a result, supply exceeds demand for materials like iron ore, and even though the utilization rate has increased incrementally in recent weeks, it’s going to take some time before supply and demand equilibrates."
The capacity utilization rate reached 56.6% for the week ending July 4, the American Iron and Steel Institute announced Monday.
Two idled iron ore mines and processing facilities are set to restart in August: ArcelorMittal-managed Hibbing Taconite and Cleveland-Cliffs' Northshore Mining in Babbitt and Silver Bay. Additionally, U.S. Steel's Minntac in Mountain Iron will restart several idled production lines later this month and restart its mining operations in August.
U.S. Steel's Keetac in Keewatin has been "indefinitely" idled.