First of a series on Minnesota mining.

Word that 15,000 British mill workers are about to lose their jobs dominated steel industry news last week, as the mills’ owner wants out at any price. Of course by now a “15,000 Layoffs?” newspaper headline should be no surprise to the iron miners of northeastern Minnesota.

The iron and steel industry is in an epic slump, and it’s slumping everywhere. Minnesotans can’t remember a downturn without a broader economic recession here, and the blame for this one usually gets placed on cheap foreign steel.

Actually, cheap steel from abroad is a symptom. What caused this one was way too much cheap capital. It got poured into far too many commodity processing projects all over the world.

That’s why iron mining executives looking for a quick turnaround are bound to be disappointed. Huge iron mining projects that were financed back when the industry forecast was for many more years of blue sky and sun have yet to even ramp up production.

It probably sounds odd that too much capital was the problem, when most business people only complain of never quite having enough. But a glut of capital leads inevitably to a glut of production and the eventual collapse of prices.

Minnesota mining entrepreneur Larry Lehtinen, who has worked in the industry since he was in college in the 1970s, hasn’t seen anything like this downturn before. As for the cause, he said, it starts with the expansionary monetary policies of central banks that followed the Great Recession.

The U.S. Federal Reserve tried to get the economy moving by buying debt securities to flood the banking system with money, driving short-term interest rates to near zero. The Fed ended its quantitative easing program last year, but other central banks have kept at it.

Investors, awash in capital, kept looking around for better opportunities to generate a return when the alternatives like government bonds paid interest of next to nothing.

In normal markets, the investors have a key job to play in keeping commodity markets more or less in balance, putting the brakes on new financing when growth plans start to look unrealistic. That’s when a mine expansion a long way from the mining company’s home market, or with no proven customer base, looks too risky to finance at any price and gets turned down flat.

In the last few years, in an era of very low interest rates, a mining project that no investor in 1999 likely would’ve touched suddenly looked pretty attractive.

News that Rio Tinto PLC was able to sell $1.25 billion worth of five-year bonds at 2.25 percent interest a few years ago was typical of the announcements of a handful of the biggest mining companies, which together in 2012 raised more than $41 billion by selling dollar-denominated bonds.

“There is a huge demand for debt,” a Brazilian fund manager told the Wall Street Journal, after investors had snapped up more bonds issued by the Brazilian-based mining giant Vale.

Never before had it been that easy to get funding, Lehtinen said, having watched all of this unfold. The same thing was happening in oil and other commodity industries.

Commodity producers had a good story to tell investors, too, because the same thought process that brought investors flocking to them was going on in China. The Chinese government more or less had ordered banks to put more money into more factories, apartments and infrastructure projects.

“You had people scouring the planet looking for ways to produce more iron ore,” Lehtinen said. “We were one of those parties.”

Lehtinen is the CEO of Grand Rapids-based Magnetation, an upstart he took over in early 2008. He saw a downturn coming and hurried to get Magnetation established.

“I knew iron ore prices wouldn’t stay at $191,” he said, referring to peak per-ton prices reached in 2011. “I didn’t think they’d get down to $37.”

He described himself as being in the unusual position of being a beneficiary of the cheap-capital distortion in the financial markets as well as a victim of the bust.

In the spring of 2008 it was just he and his wife working on Magnetation, hoping to prove the commercial viability of a new process that recovers the remaining iron from old iron ore waste. In a few years it grew to more than 500 employees and about $1 billion in asset value, “an amazing story in many ways,” he said.

Among those ways is that Magnetation got funded. That included $425 million of high-yield bonds at a price that was, he said, historically cheap.

Now, Magnetation is operating under bankruptcy protection. The employee count is about 400.

Magnetation’s project was an exciting development for Minnesota but it was dwarfed by the size of the new operations built by the biggest mining companies.

The news lately is of sharply reduced budgets, as when London-based Rio Tinto said it slashed its 2016 capital budget to just $4 billion, down from $17.6 billion it spent on capex as recently as 2012. Its iron ore project list as of 2013 added up to more than $20 billion in new investment.

“The Roy Hill mine in Australia is only ramping up right now and it’s a 50-million ton facility,” Lehtinen said. “That’s more than the entire Mesabi Iron Range produces in all of our operations combined.”

Vale also has a new mine project it’s been working on, in Brazil, known simply as S11D. At about $15 billion of total investment, it’s been called the biggest iron ore mining project ever. When mining gets underway, S11D will eventually add something like 90 million metric tons of annual production to the market.

Minnesota mining firms supplied Great Lakes steel companies that were hard to reach from abroad. But the Minnesotans still couldn’t avoid getting hurt when global iron ore output soared.

“The whole metallics complex gets pulled down with it,” Lehtinen said. “Scrap prices came down. Pig iron prices came down. Iron pellets are down. All because of the oversupply created by the massive overbuilding in Brazil and Australia.”

He hesitates to guess how long it will take for the excess capacity to be absorbed. The European Commission pegged the excess annual production of Chinese steelmakers at 325 million metric tons. That’s almost twice the output of the entire European steelmaking industry.

Lehtinen’s goal for Magnetation is to restructure “a company built for $100-per-ton ore” so it can “live in a $40 per-ton-world.” In a brief conversation last week, he sounded more optimistic than he had earlier, citing a hopeful pickup in demand from China.

When we met last month, he showed me a small container of iron nuggets like those produced by the Steel Dynamics plant on the Iron Range, one he had helped establish and one that will be closed for at least another year.

Recent prices for this iron were around $200 per ton, Lehtinen said, and only a recovery back to $400 or even $600 makes the plant viable again. “It will get back there,” he said. “I don’t know if it will in my lifetime.”