Schafer: Taconite for stadium? It's a made-up controversy

  • Article by: LEE SCHAFER , Star Tribune
  • Updated: November 27, 2013 - 6:54 PM

It’s turning out to be not that easy to build a football stadium in Minneapolis out of Minnesota taconite.

Then again, there’s no particularly good economic reason to even try.

The Minnesota Legislature did not fully grasp that, and the nature of commodity markets, when baking a preference for using American steel made from Minnesota iron ore into the 2012 legislation that enabled the stadium to go forward.

But general contractor M.A. Mortenson Co. understood the steel market just fine, apparently, having recently placed its order for structural steel with the steelmaker ArcelorMittal — based in Luxembourg.

This more-or-less routine act was later described as “sinful” by a former legislator from northeastern Minnesota, as yet another stadium-related controversy then kicked up.

This one, though, is looking like maybe the silliest so far.

ArcelorMittal happens to have taconite mining assets in northeastern Minnesota, but one of the people involved in the stadium project pointed out that even the steel producer probably can’t say where all of the iron ore came from that will go into the long-span steel to be erected in Minneapolis.

A Minnesota taconite pellet, is, in a way, kind of special. It is the end result of one of the most painstakingly created and celebrated innovations of the 20th century in Minnesota, a way to make low-grade iron ore into high-grade, roughly two-thirds iron content pellets by the time they leave a Minnesota ore dock.

But it is still a commodity product. Ore from a pile of taconite pellets delivered from northeastern Minnesota and ore that just arrived on a boat from somewhere else would get used in basically the same way when fed into a furnace to make steel.

That makes taconite pellets a close economic cousin of an agricultural commodity like wheat or corn, grown in abundance in Minnesota and other states. It was Karl Marx who famously wrote, “From the taste of wheat it is not possible to tell who produced it, a Russian serf, a French peasant or an English capitalist.”

If Minnesota corn buyers were suddenly asked to buy 10 percent more of the Minnesota crop instead of Iowa-produced corn, Iowa farmers would shrug off this news. That’s because the Iowa corn would quickly find its way to the customers who had previously been buying from Minnesota.

Meanwhile, Iowa producers would still be getting the same price the Minnesotans would get.

The iron ore market is more complex, with differences between the ore produced in different regions and different grades, but it’s the same sort of commodity market. It’s one global market with multiple players, and the price of ore fluctuates based upon shifts in demand or supply.

Let’s say that BigCo Steel promised that it would only use Minnesota ore on an order. Mortenson buys it, and BigCo then takes taconite output from the state that would otherwise have hit the market. That demand will simply be met by other suppliers. Nothing has been gained in Minnesota.

“You clearly remember your economics,” said Joel Waldfogel, the Frederick R. Kappel Chair in Applied Economics at the University of Minnesota. “They are going to use more of this commodity, and some of that demand goes here and some of that demand goes wherever.”

Maybe some of the impetus behind a “buy Minnesota” initiative is just emotional. Standing on the sidewalk looking up at the new stadium in the fall of 2016, and knowing all the public money that went into it, perhaps supporters of the project will just feel better thinking that Minnesota-produced materials are in the walls.

That also could explain talk in the past week about goals even for locally produced beer and hot dogs to be sold once the stadium opens. The Minnesota Sports Facilities Authority’s board chairwoman, Michele Kelm-Helgen, found that baffling when we talked, as no such a decision has been made.

Hopefully no legislator from a farm district will one day claim that it’s sinful not to have the corn dogs rolled in batter that contains Minnesota-grown corn.

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