NASHWAUK -- A financial manager in Grand Rapids offered what's become an often-heard comment about a $1.6 billion steel mill proposed on Minnesota's Iron Range.
"He was sitting next to me and he said: 'I didn't realize that this was going to be such a big project,' " said Peter McDermott, president of the Itasca Economic Development Corp. "It's like a lot of other people. They don't believe it until they see it."
On Monday, the largest industrial project in the history of the Iron Range gave residents one more reason to believe, taking one of its final steps toward completion. On Monday, Essar Global Limited, a steelmaker based in India, bought Minnesota Steel Industries and its steelmaking facility proposed near Nashwauk.
The project holds potential to transform the region by adding good-paying jobs, creating spinoff businesses, attracting new families to the region and boosting school enrollments.
"I think this is prettyexciting, myself," said Peter Kakela, a Michigan State University professor who studies the iron ore industry. "We've been importing about 10 million tons of steel slabs per year over the last 10 years. It would be great to have a domestic source."
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"I don't know if people understand what the magnitude of this is," Marvin Vuicich, president of American Bank in Hibbing, said of the project. "It's going to have an absolutely huge impact. It's going to create a huge housing need in several Iron Range cities, increase property values, rental rates and create a huge need for workers. Maybe it's going to be a way to keep more young people on the Range."
Minnesota Steel officials would not comment on the sale price. However, the transaction means construction of the mammoth project probably will begin early in 2008.
"Essar Steel is a global conglomerate and is now going to take the project to successful fruition," said Steve Hicks, Minnesota Steel vice chairman. "Yes, they will be able to construct the project."
Full financial closure for the steel plant, in which Essar would secure $1.6 billion for construction, is expected by January.
TIPPING POINT
The project has been about 11 years in the making.
To be built on about 20,000 acres west of Nashwauk and north of Highway 169, the operation would include a new open-pit taconite mine; crushing, concentrating and pelletizing plants; a direct-reduced iron facility; and a steel slab plant capable of producing 2.5 million tons of slabs a year.
Environmental permits have been approved.
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Steel slabs produced at the plant would range in size from 45 inches to 96 inches wide,8 to 10 inches thick, and 12 to 30 feet long. Slabs would be shipped by rail to North American steelmakers to be reheated and rolled into steel products.
North American steelmakers have been importing steel slabs for years from plants in Russia, Ukraine, Brazil and Mexico. The Itasca County plant would give North American steelmakers access to domestically manufactured steel slabs that company officials say would be produced at the lowest cost in the world.
"We haven't seen anything like this in 100 years," McDermott said. "Frankly, I see this as the tipping point. Our economy has been flat for 25 years. In the 1980s, our average wage per job [in Itasca County] was more than the state average. But we've lost mining and wood products jobs. Now, our average wage per job is $30,779 and the state average is $41,244. This is something that gets the news out to young people who have left the area that there are jobs here."
Itasca County once was a hotbed of natural iron ore mining, in which high-quality iron ore that required little processing was removed from the Earth. But depletion of the high-grade ore led to the closure of nearly all Itasca County mines. Mining and processing of lower-grade taconite ore replaced natural ore mining, but most taconite plants are east of Itasca County. Today, layoffs at wood products plants and other employers within the county have translated into an Itasca County unemployment rate of about 6.4 percent, McDermott said.
"We have a high level of unemployment in our area and have been deemed by the state to be a distressed county," McDermott said. "We need these mining jobs."
Competitive edge
Phase I construction at the steel plant would produce about 1.25 million tons of steel slabs annually.
Essar announced a $1.5 billion deal on April 16 to acquire Algoma Steel, a Sault St. Marie, Ontario, steelmaking facility. Two days later, Essar announced the deal to acquire Minnesota Steel. Slabs produced at the steel plant could help feed Algoma. Algoma produces sheet steel shipped to U.S. automakers General Motors and Ford.
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Because the site near Nashwauk has access to two rail lines, water transportation routes and natural gas from Canada, it offers Essar key advantages, Hicks said.
Butler Taconite operated a taconite plant at the proposed steel site from 1964 until 1985, when the plant was torn down after a bankruptcy. Before that, natural ore mining had occurred on the proposed steel site since 1902.
Much of the land the steel plant will be built on is abandoned Butler Taconite property such as mining dumps and an old tailings basin. An estimated 1.4 billion tons of high-quality iron reserves remain at the site.
That's enough feed for the steel plant to operate for about 100 years.
Mining, processing and producing steel at a single site would make the facility the world's lowest-cost producer of steel, company officials say.
Minnesota Steel is a privately held company with headquarters in St. Paul
A 600,000 metric ton-per-year iron nugget plant also is in development near Aurora. Steel Dynamics of Fort Wayne, Ind., will own and operate the plant. That plant would be the first of its kind in the world.
"Both [the steel and nugget plant] are starting out kind of small, but they're both pretty high up the value chain," Kakela said. "It's new stuff. It's the first time in 40 years that anything new has been made of Iron Range ore."
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LEE BLOOMQUIST can be reached weekdays at (800) 368-2506, (218) 744-2354 or by e-mail at lbloomquist@duluthnews.com .
