Northshore mine near Babbitt, Minn.

Richard Sennott, Star Tribune

Cliffs cuts Iron Range production

  • Article by: DEE DePASS
  • Star Tribune
  • November 19, 2012 - 9:37 PM

A decline in customer demand is forcing Cliffs Natural Resources to idle several of its operations in North America, including Northshore Mining in Minnesota, company officials announced Monday.

Cleveland-based Cliffs said non-union Northshore will freeze two of its four production lines on the state's Iron Range beginning Jan. 5, a move that will impact 125 of the 671 workers split between Cliffs' taconite plant in Silver Bay and its iron ore mine in Babbitt.

The duration of the idling in Silver Bay is unclear. The decision to shut down part of the plant, which produces taconite that ends up in cars and appliances, came after officials estimated lower production demand next year.

"In 2013, our projected volume is between 19 and 20 million tons" of taconite, said Cliffs spokeswoman Sandy Karnowski. "We are hopeful that if market conditions improve, that we can restart these furnaces in the future."

In 2012, the Silver Bay plant's sales volume expectation was for 22 million tons of taconite, a key ingredient in making steel. Meanwhile, Cliffs' unionized Hibbing Taconite and United Taconite plants in Eveleth and Hibbing remain unaffected because customer demand has remained steady at those facilities.

Tony Sertich, head of the state's Iron Range Resources and Rehabilitation Board, said Silver Bay's idling is the result of a global economic slowdown, especially in China and, to a lesser degree, India. Indirectly, global changes in steel demand are suppressing prices in Minnesota, where manufacturers transform iron ore into taconite.

Prices for taconite sank during the third quarter, as evidenced by declining revenues posted by all three taconite companies in the state. At Cliffs Natural Resources, the nation's largest iron-ore producer, sales dropped 30 percent to $1.45 billion for the quarter as prices for certain types of iron ore plummeted as much as 36 percent.

"This industry in particular goes through cycles, and most economists projected there to be a stronger cycle for taconite and steel, but that has since changed just in the past few months," Sertich said.

Sertich said that he, Gov. Mark Dayton's office and the Minnesota Department of Employment and Economic Development (DEED) reached out to Cliffs officials early Monday and offered to assist affected workers. Karnowski said decisions about which employees of the plant and mine will be affected will be made in the next few weeks.

In addition to Silver Bay and Babbitt, Cliffs will idle its Empire Mine in Michigan beginning in the second quarter. That will affect 500 workers and create an "extended summer shutdown," officials said. Cliffs is also delaying a planned expansion of its Bloom Lake Mine in Quebec.

Sertich said DEED will create a game plan to help laid-off workers in Minnesota, possibly with its Dislocated Workers Program that provides job counselors, retraining, computer skills updates and interview coaching.

City officials in Silver Bay said phones were ringing nonstop Monday morning as news of the cutbacks spread. But Mayor Scott Johnson insisted, "We will get through this. The Earth has not fallen out. We are used to the ups and downs."

Silver Bay has 887 residents and has weathered worse, he said. Northshore's predecessor, Reserve Mining, shut completely in the 1980s.

"Our town just deserted. The workers all went to work in North Dakota. And about one out of every two of three homes was either for sale, abandoned, or foreclosed," Johnson said. Compared to that, Monday's announcement is manageable, he said.

Craig Pagel, president of the Iron Mining Association of Minnesota, agreed.

"The market is down. We can continue to be cautiously optimistic that the economy will recover fully," Pagel said. "The use of iron ore globally is showing that it's rising. But the short-term market trends may not reflect a long-term outlook for iron mining."

This is not the first time Northshore Mining has weathered a production slowdown. Silver Bay operated just two production lines for years, Cliffs spokeswoman Karnowski said.

It restarted its third line in 2008. But then the plant shut down for a few months in 2009 during the recession, along with parts of Hibbing Taconite and United Taconite.

Northshore eventually restarted two furnace lines in 2009. As demand grew, it reopened a third line that year and a fourth in 2010, Karnowski said. "Northshore has always run based on what our customers need."

Dee DePass • 612-673-7725

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