Minnesota iron workers worry about taconite layoffs

CHISHOLM, Minn. – Jenny Zylka and Katie DeBlack are still digesting how their lives will change after U.S. Steel idles half of its Minntac taconite operation.

DeBlack will lose her job driving a 240-ton mining truck for Minntac on June 1, along with 700 other workers there. Zylka, a waitress, will also suffer because her employer counts on business from those who work at the taconite plants.

"I was definitely caught by surprise," said DeBlack, who with Zylka bought a home in Chisholm two years ago in which to raise their children. "Now there is just so much uncertainty. Nobody knows about [unemployment] or benefits. … Reality is sinking in."

The Minntac bombshell landed two weeks ago and followed news that U.S. Steel would also temporarily idle its taconite plant in Keewatin. Magnetation LLC also is closing its Plant One operation in Keewatin.

In total, 1,100 workers will lose their jobs. U.S. Steel says its jobs will come back eventually, but no one knows when.

Anxiety is building among locals and politicians, who fear more layoffs as Minnesota's eight iron ore facilities wrestle with an ailing iron and steel industry.

"I've got family members who work in the [taconite] plants who are scared," said Mike Syversrud, president of the Iron Range Building and Construction Trades. "Everyone on the Iron Range is affected."

The price of taconite, steel's key ingredient, has plunged as global demand for steel and iron, especially in China, has slowed. Years of hyperproduction in several overseas plants has built up staggering amounts of excess steel inventory. At least nine countries have been accused of selling the steel to U.S. companies at cutthroat prices that many deem illegal.

As a result, firms such as U.S. Steel and Magnetation are idling production and announcing layoffs.

"There is no way to know how long global iron ore prices will remain at the present depressed levels," Magnetation CEO Larry Lehtinen said in announcing the Keewatin shutdown.

Income from taconite touches almost every aspect of the Iron Range economy. Product suppliers, day care centers, restaurants and bars are all bracing for millions of dollars to drain from the local economy.

Residents vividly remember a painful 2009, when U.S. Steel temporarily laid off 1,000 workers on the Iron Range. People stopped eating out, canceled vehicle purchases and took odd jobs to make ends meet.

Ore workers on the Iron Range often pull in $60,000 to $80,000 a year. Union workers estimate that if they are laid off, they will bring home $660 a week in benefits, about half of what they make working full time.

Even if the layoffs last only part of the year, it will hurt places like Sawmill Saloon, where Zylka has worked for four years. Roughly 60 percent of the customers work in the taconite industry.

"I will have to pick up more shifts," Zylka said. "We are buckling down and figuring out how to save money. We are canceling trips and may have to sell some of our assets."

The couple has a mortgage to pay, as well as health insurance bills for themselves and their 7- and 9-year-old children.

Zylka's co-worker, Deanna Kunnari, is not panicking yet, but she is realistic. Business should soar in the first weeks after the shutdowns begin as displaced workers "drown their sorrows," she said. After that, "it'll be really, really bad."

Earlier this month, Syversrud called 15 union leaders from 10 different trade groups to Virginia, Minn., to tally the damage. The leaders represent the 6,000 local mechanics, electricians, plumbers, cement masons, iron workers and carpenters who do maintenance and repair work at all eight of Minnesota's taconite facilities.

"Every one of us were scheduled to do maintenance projects this month that have now been canceled," said Dan Kingsley, with the International Union of Operating Engineers Local 49 in Virginia. "Our members thought they were going to work a couple weeks of six-hour shifts and take home maybe $2,000. But [now] they won't have that. So they are on pins and needles."

The ax fell without warning, said Aaron Wright, who represents the Iron Range for the North Central States Regional Council of Carpenters. "We had members working at Minntac last [month]. And at the end of the shift, they said get all your equipment off site. Our guys got pulled off the job."

Brief recovery

The U.S. iron and steel industry usually cycles through rough patches once every 10 years. This time, the good cycle lasted just five years.

It took just seven months for global taconite prices to plunge 50 percent to $47 a ton amid excess production in Australia, Brazil, China and the United States.

At the same time, China, South Korea, India, Taiwan and other nations are accused of dumping steel goods into the United States at unfair prices, meaning the steel is sold for less than it costs to produce.

Those forces have hurt domestic U.S. steel sales. And because the U.S. dollar is soaring, that's wrecked U.S. steel exports.

"It's like a perfect storm," said Tony Barrett, economics professor at the College of St. Scholastica in Duluth. He said the latest round of misery on the Iron Range could ebb by year's end, provided China's lackluster economic growth and steel demand pick back up.

In the meantime, Iron Rangers brace for change.

Gilbert resident Thomas "Tommy Boy" Gentilini Jr. has hauled iron-ore tailings into Magnetation's Plant One in Keewatin for six years. He learned in February that his plant was supposed to shut down March 31. He and 20 of his 41 co-workers were idled on April 7; 14 were laid off, and the rest were either transferred or found other jobs.

Magnetation brought Minnesota Dislocated Worker Program counselors and union officials into the Keewatin plant lunchroom to help affected workers with unemployment benefits, retraining opportunities and job fairs.

That helped, said Gentilini, who met with a Minnesota job counselor and attended last month's Iron Range Job Fair. He learned Essar Steel Minnesota wants drivers and taconite workers for a new mine and plant it is constructing in Nashwauk. Polaris Industries wants line workers for its recreational vehicle plant in Roseau in the northwestern part of the state.

The job fair gave him hope. "They said to call if I am interested," he said. The Roseau job would require him to move from the Iron Range, where he's lived all his life. He's not moving. "I have faith in God that I will get another job," he said.

Considering options

Others are not so confident. "It sucks being part of this downturn," said Gentilini's friend and co-worker, Sean Honeycutt. Honeycutt worked in Magnetation's Keewatin plant for two years, but months ago switched to Magnetation's rail loading depot near Grand Rapids.

The move proved a lucky break. Each day, he uses a front-end loader eight yards wide to fill 120 rail cars with ore headed to Indiana or Mexico. Honeycutt likes the new work but worries taconite prices may drop further and cost him his job. He just watched Gentilini and 19 others get their layoff news and worries he's next.

"We never thought about anything shutting down," said Honeycutt at his Goodland home while alternately snuggling with his 8-year-old on the couch and helping his 2-year-old reconstruct a Mr. Potato Head. "If I lose my job, I lose income and insurance. Unemployment pays a maximum of $660 a month" and that's not enough.

Honeycutt just enrolled in crane driving classes at his union's training center in Hinckley. He's taken three classes, passed two tests and faces a third test next month. He's also earned his forklift certification "So, now I can put that in my back pocket, too. I have always thought, 'Let's look ahead to the future.' After all, I have to make sure these guys are fed and taken care of."

Thirty miles north in Chisholm, Zylka and DeBlack picked at their chicken salad dinners and joked that Minntac's layoffs will just mean a long summer vacation.

In truth, the situation prompted calls to their parents for comfort and advice. DeBlack's job loss alone will cost them roughly $1,700 in biweekly income.

Unnerved thinking about it, DeBlack tapped the kitchen table. Then she sat back and relaxed, at least temporarily. "I'm from three generations of Iron Rangers. We will get through this."

Dee DePass • 612-673-7725