Cliffs Natural Resources Inc., formerly Cleveland Cliffs, will idle half its taconite pellet production in two Minnesota plants immediately due to slowing demand, officials announced Tuesday.
"We have seen the steel market soften in recent weeks due to the slowdown in the North American economy," said Cliffs' North American President Donald Gallagher.
As a result, Cliffs is idling two of its three pellet furnaces at Northshore Mining in Silver Bay and one of two pellet furnaces at United Taconite in Forbes. Operations at Hibbing Taconite will not be affected.
The three furnaces shutting down normally produce 300,000 combined tons of taconite pellets each month. Officials said they expect to make "adjustments" to employment levels but did not elaborate.
Northshore Mining, which has a plant in Silver Bay and a mine in Babbitt, has 561 employees. United Taconite, which has a plant in Forbes and a mine in Eveleth, has 513 workers.
The news came just after the world's largest steel producer, ArcelorMittal, said it expects to slow production at its Minorca mine in Virginia and U.S. Steel Corp. said it expects to see demand soften in North America and Europe.
For five years, growth in India and China fueled roaring demand for taconite pellets, a key ingredient in steel. But a global recession and slower economic growth in China and India are now tempering production.
"I am an optimist and I think this is going to be short-term. It is a cyclical industry. But, you know this came on fast," said Cliffs spokeswoman Maureen Talarico "Frankly, nobody predicted the stock market would crash like it did. But it did happen. And now everybody is feeling the effects. Consumers are probably hesitating before they say it's time for a new dishwasher or that new Mercedes."
That affects mining companies like Cliffs, she said.
Booms and busts
The news sent shockwaves through Iron Range communities, which have long endured boom-and-bust cycles. But more recently the region has enjoyed a major resurgence and new global prominence: Essar Steel in India, PolyMet in Canada and Minnesota-based Mesabi Nugget are in various stages of investing $2.2 billion in iron, steel and precious-metal projects in northern Minnesota.
Brian Hiti, vice chairman of Iron Range Resources, the state agency created decades ago to boost and diversify the region's economy, said there is no sign that those behemoth projects will slow down. However, he said the Cliffs news shows that it "may be kind of a tough fourth quarter. ... Mining had seemed somewhat immune to the financial crisis and our general economic malaise in the country. At least temporarily it appears that there could be some impact. Our hope would be that there will, over time, be an upturn here and that this is sort of a temporary thing."
Ohio-based Cliffs is North America's largest producer of taconite, a low-grade iron ore, with Minnesota operations plus interests in Michigan and Canada.
In July, it announced it would pay $10 billion for an Appalachian coal giant. It also bought out Laiwu Steel Group of China's 30 percent stake in United Taconite in Eveleth for 1.2 million tons of taconite and $272 million in cash and stock. In September it announced that it would build a $15 million biofuel plant on the Iron Range to help offset the use of coal in its taconite plants in Eveleth and Silver Bay.
Now two of Cliffs' Minnesota plants will run at half speed for an unknown time.
Gallagher noted that after years of plant consolidations and the growth in global demand, "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 the customer needs and to ensure the continued health of business."
Dee DePass • 612-673-7725
