U.S. Steel announced Thursday that it will idle its Keetac taconite iron ore operations starting May 13, another victim of the huge glut of global iron ore and steel that’s far outpacing demand.
The company said up to 412 workers at the facility will be affected and that they are being notified as required by federal labor regulations.
Some employees will be kept on to maintain the operations, so the exact number of layoffs hasn't yet been determined, the company said.
Pittsburgh-based U.S. Steel said the Keewatin plant will be idled indefinitely “due to the company’s current inventory levels and ongoing adjustment of its steelmaking operations throughout North America to match customer demand.”
“These ongoing operational adjustments are a result of challenging market conditions that reflect the cyclical nature of the industry,” the company said in a statement Thursday. “Global influences in the market, including a high level of imports, unfairly traded products and reduced steel prices, continue to have an impact.”
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While demand for steel in the U.S. has been steady or even increasing because of the growing economy, much of that demand is being met with foreign-made steel that’s made with foreign-mined iron ore. That has thwarted demand for Minnesota taconite iron ore.
“They used the word idle and they used the word temporary, so that gives me some some hope,” said state Rep. Tom Anzelc, DFL-Balsam Township, who once worked at the Keetac facility. “But if the market conditions on the global scale don’t improve, I fear this cold be a long-term situation.”
Anzelc said he’s asked Minnesota's congressional delegation to push for stronger, broader action to stop the flood of foreign steel into the U.S. So far, those efforts have been slow to develop.
The Keetac shutdown is the second announced in recent weeks, with Magnetation last month saying it would indefinitely close its Plant No. 1, also in Keewatin, in an effort to cut costs. That shutdown will put 49 people out of work.
Keewatin Mayor Bill King said the Keetac plant manager notified him of the shutdown Thursday morning. Many of the plant’s workers live nearby, making Thursday’s mood on the west Range somber.
“It’s never easy when this happens. The only thing we can do is hope that it doesn't last very long,” King said.
The pending shutdown “doesn't really surprise me. Anyone who has followed the industry has seen the handwriting going up on the wall,” King added.
U.S. Rep. Rick Nolan and U.S. Sen. Al Franken blamed the layoffs on a lack of U.S. policy to keep foreign subsidized steel out of the country. The Minnesota Democrats have called for steep tariffs on steel imports.
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“This announcement of layoffs at Keewatin Taconite is very serious, extremely disturbing and a direct effect of U.S. trade policies that over the years have allowed nations such as China, India and South Korea to illegally dump millions of tons of cheap, low-grade, foreign government-subsidized steel into the U.S. marketplace,” Nolan said. Those policies are “depressing prices and putting more than 50,000 jobs across America’s iron ore and steel industry in jeopardy.”
Nolan said he’s asked to meet with top U.S. Steel officials later this month in Washington.
The current downturn appears to be the worst on the Range since 2009 when all of the state's major mining operations were shut down at once due to the global economic recession. Taconite production didn’t fully recover until about 2011.
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 $58 per ton Thursday. That's less than the price of production for some Minnesota operations.
U.S. Steel said operations at its much larger Minntac mine and plant in Mountain Iron will not be affected by the current move.
State Rep. Carly Melin, DFL-Hibbing, who represents Keewatin, said the experience of shutdowns and layoffs are familiar on the Iron Range where generations have had to live with the cyclical nature of the global iron ore and steel industries.
“This is difficult news for so many of my friends and neighbors whose families earn a living at Keewatin Taconite,” Melin said in a statement. “Over the last few years, foreign countries have flooded the world’s steel markets with cheap steel, undercutting the American steel industry which in turn has threatened mining on the Iron Range.”
Melin said Range lawmakers are working with United Steelworkers of America Local 2660 to provide easy access to unemployment benefits for the displaced workers.
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“Unfortunately, this situation is not an unfamiliar experience for the Iron Range. We will get through this by working together to get Keewatin Taconite back up and running and taking care of the workers in the meantime.”
Melin said workers seeking unemployment benefits can apply online at uimn.org.
Industry analysts note that the global oversupply of iron ore - the amount produced compared to demand to make steel - sat at just 14 million tons in 2013 but rose to 72 million tons last year. This year the oversupply is expected to hit 175 million tons.
Minnesota produces less than 40 million tons annually, with some production also in Michigan; they’re the only iron ore-producing states in the U.S. By contrast, one new Australian mine will produce more iron ore than all U.S. producers combined.
Analysts have reported that some foreign producers have production costs as low as $50 per ton. By comparison, Cliffs Natural Resources announced earlier this year that it hoped to reduced its cost to about $59 per ton for U.S. ore.
Keetac, which came online in 1967 as National Steel Pellet Co., produced and shipped about 5.1 million tons of finished taconite iron ore pellets in 2013, the most recent year state-certified data is available. The company announced in September that it would not move ahead with a $300 million expansion that would have doubled production and added 100 jobs. Company officials at the time said there was simply no need for more domestic iron ore.
Unlike high-grade natural iron ore still mined in Australia and other nations, taconite iron ore must first be concentrated to upgrade its iron content and then processed into pellets, a process that makes the Minnesota product more expensive than some foreign competitors. Minnesota essentially ran out of high-grade natural ore over the past 50 years, forcing the move to taconite.
