Today, U.S. Steel announced it will idle its Keewatin Taconite mine and processing plant in 90 days. The mine employs more than 400 people and produces about six million tons of taconite pellets annually. With about five million tons stockpiled on the property this shutdown could last several months unless market conditions improve dramatically.
On that front, the news is grim. Taconite prices hit a six-year low yesterday at $57.70. As I predicted in thisrecent post here at MinnesotaBrownwhen the price falls further below $60 it portends shutdowns at Iron Range mines. Keewatin Taconite announced its May 13 shutdowntoday, but others may follow in coming weeks unless prices rebound.
Shutdowns are a regular part of life on the Iron Range, and they usually don't last more than a couple months. But longer shutdowns happen when there is a glut of supply and flagging demand. A source familiar with U.S. Steel's plans told me that 5 million tons of ore are sitting on the ground at KeeTac. That's almost a year's worth of taconitepellets.
Keewatin will continue to operate for 90 days. Contractually, the company has to warn its labor force for shutdowns of this kind. So come June, the plant will idle for an unknown period of time -- likely through the summer, if not longer.
In a March 11 Daniel Palmer story in theAustralian Business Spectatorsome, such as Cliffs CEO Lourenco Goncalves, blamed low prices onforeign iron ore giants BHP, Rio Tinto and Vale keeping up massive production despite a flat demand. Another major producer, Australia's Roy Hill Project, is due to come online later this year as well, adding 40 million tons ofsupply.
Why? Roy Hillfeels it has position to corner the market when ore prices come back. But that market position will likely come straight out of the hide of Minnesota'staconite industry, to the chagrin of Cliffs and U.S. Steel alike. That's one reason you're seeing such earnest talk of DRI and value-added ore products from traditional mining operations; It's one way for American producers to compete with lower costs in the swelling global market.
Meantime, here on Minnesota's Iron Range we brace for another economic setback, an experience disturbingly routine within our cultural memory.