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Layoffs looming at two Iron Range steel mines

The effects of a slowing economy are finally coming to roost on the Iron Range. Cliffs Resources said Tuesday it will immediately cut production at Northshore Mining and United Taconite by a combined total of about 300,000 tons per month. That wi...

The effects of a slowing economy are finally coming to roost on the Iron Range.

Cliffs Resources said Tuesday it will immediately cut production at Northshore Mining and United Taconite by a combined total of about 300,000 tons per month. That will reduce the plants' combined monthly output by more than 30 percent.

A statement from Cliffs said "workforce adjustments" will need to be made as it throttles back production at the mines, but spokeswoman Maureen Talarico said she could not say how many people would be laid off.

"The details have not been finalized yet," she said.

While specifics were lacking, speculation swirled through the mining community Tuesday.

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"There are rumors that it could be up to a 25 percent cut," said John Rebrovich, the subdirector of United Steelworkers District 11.

As a union, the United Steelworkers represents most of the 516 people employed at United Taconite in Forbes and Eveleth, where Cliffs plans to idle one furnace.

Another 561 people are employed at Northshore in Babbitt and Silver Bay, where Cliffs said it will shut down two furnaces. Northshore is the only non-union taconite producer on the Iron Range.

Together, Northshore and United have an annual capacity of 11.5 million tons. Both had been running full tilt until this month. In fact, Northshore invested about $40 million to bring a long-idle furnace back on line in March, boosting the facility's capacity by about 800,000 tons and creating 30 new jobs.

The latest change of gears has been jarring to say the least, according to Rebrovich.

"We've seen plenty of ups and downs before, but we've never seen things go to hell in this short a period of time," he said.

Demand is weakening, the dollar is getting stronger and making U.S. steel more expensive, and micro-mills that process scrap metal are providing stiff competition. Cliffs' largest single pellet buyer, Arcelor Mittal, recently announced plans to cut its production by up to 15 percent in light of reduced demand for its steel.

Barring a rapid improvement, analysts anticipate cuts at other area mines.

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Rebrovich said there's concern about possible production cuts at U.S. Steel's Minntac mine in Mountain Iron, the state's largest taconite operation. U.S. Steel also owns the single-line Keetac plant near Keewatin, but the multiline Minntac has more flexibility to adjust production without a costly shutdown.

While U.S. Steel would not respond to direct questions Tuesday about the outlook at its Minnesota mines, chief financial officer Gretchen Haggerty talked about production levels Tuesday in a quarterly earnings report.

"We expect a decline in fourth quarter results mainly due to softening demand and prices for flat-rolled products in North America and Europe, and we expect to continue to operate at reduced production levels, corresponding with customer order rates," Haggerty said.

The restructuring and consolidation that the U.S. steel industry has undergone in recent years may better position it to withstand the current downturn, according to Donald J. Gallagher, president of Cliffs' North American Business Unit.

"Today, the domestic steel and iron ore industries are better positioned than in the past to weather downturns such as this, and while we regret having to take this action, production and demand must be balanced to meet customer needs and to ensure the continued health of the business," he said in a statement about Cliffs' cutbacks issued Tuesday.

PETER PASSI covers business and development. He can be reached weekdays at (218) 279-5526 or by e-mail at ppassi@duluthnews.com .

Related Topics: MINING
Peter Passi covers city government for the Duluth News Tribune. He joined the paper in April 2000, initially as a business reporter but has worked a number of beats through the years.
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