U.S. Steel Corp. will temporarily idle its iron taconite plant in Keewatin, Minn., in May and begin laying off up to 412 workers, officials said Thursday.
It is the second iron-ore plant on Minnesota's Iron Range in three weeks to idle production. On Feb. 24, Magnetation LLC announced that it will idle its Keewatin plant, affecting 49 workers.
Now U.S. Steel's "KeeTac" taconite plant will follow suit.
Both companies' decisions are in response to crushed iron-ore pricing and high inventories around the globe. Australia, Brazil and U.S. production has soared while demand from China and other nations fell. At the same time, prices plunged from $95 a ton as recently as June to $58 a ton this week. That's down from $63 a ton on Feb. 25.
At U.S. Steel's plant, the precise number of employees affected by the May 13 shutdown of the plant, formally known as Minnesota Ore Operations-KeeTac, will be determined by operational and maintenance needs, the company said.
U.S. Steel said it will continue to produce iron ore pellets at its MinnTac plant in Mountain Iron.
Dan Kingsley, business representative for the International Union of Operating Engineers Local 49, said that rumors had swirled for weeks that KeeTac might shut down.
"Everybody could see for quite some time that the iron-ore prices globally were going down," he said. "But did anyone predict that they would go this low? No. Nobody did."
He said Iron Rangers were surprised to learn that Magnetation was the first to idle a plant. People had feared that the larger KeeTac operation would have been first. Magnetation's plant idling news came two years after the company expanded in Coleraine and Calumet, Minn., and a year after it expanded in Indiana.
U.S. Steel's idling news for KeeTac hits six months after the company won approval for a $40 million expansion that would add 483 acres to its MinnTac taconite facility in Mountain Iron. It is not clear if that project will progress.
"These ongoing operational adjustments are a result of challenging market conditions that reflect the cyclical nature of the industry," U.S. Steel officials said in a statement. "Global influences in the market, including a high level of imports, unfairly traded products and reduced steel prices, continue to have an impact."
The global dilemma has gripped the attention of steel producers, Iron Rangers, unions, Minnesota legislators and Wall Street analysts.
"Other steel mills will also likely idle capacity due to falling spot prices, which are at lows not seen since the great financial crisis," said Axiom Capital research analyst Gordon Johnson II in a note to investors. "At risk of stating the obvious, we observe this does not bode well for anyone selling iron ore into the U.S."
State Rep. Tom Anzelc, who heads the Iron Range delegation in the Legislature, said previously that more plants — especially older facilities that cost more to run — could be affected, depending on how low iron-ore prices fall.
Johnson and Anzelc, among others, are watching how U.S. Steel, Cliffs Natural Resources and others respond to conditions beyond Thursday's news. Cliffs Natural Resources runs Hibbing Taconite, United Taconite and North Shore Mining on Minnesota's Iron Range.
U.S. Steel and Cliffs both struggle with inadequate pricing. But they also face new competition, especially if the much-delayed Essar Steel Minnesota taconite plant in Nashwauk, Minn., is completed later this year and begins producing 7 million tons of taconite annually as planned.
Cliffs CEO Lourenco Goncalves asked Anzelc and other Minnesota legislators eight weeks ago not to extend Essar's deadlines with regard to loans and bonds issued by the state. "Cliffs is concerned by the extension of public dollars to help subsidize new, unneeded iron ore pellets capacity that may displace existing Iron Range jobs," said Patricia Persico, Cliffs' communications director.
The woes of taconite have only grown. Australia and Brazil significantly ramped up taconite production last year.
Last summer, U.S. union workers and steel producers joined ranks to rally, protest and lobby Congress for action against South Korea and other countries accused of illegally dumping underpriced steel products in the United States.