Iron Range project advances as Essar Steel, state negotiate

As debt repayment talks continue with the state, Essar Steel Minnesota this week is touting the better-than-predicted progress made in Nashwauk, the site of a controversial taconite plant that missed a critical Oct. 1 construction deadline.

Essar Steel Minnesota said the massive $1.9 billion mine and iron pellet production project is now 86 percent built and has 720 construction workers. That's higher than the 600 jobs and 58 percent completion rate previously estimated by state officials, said Mitch Brunfelt, Essar Steel's assistant general counsel, in an interview with the Star Tribune.

"In addition, Essar has been adding to its own staff and now has 125 of its own employees working on the construction project," he said.

The job gains are the one thing giving state officials pause as they figure how to go forward with a company that has repeatedly missed deadlines and promises tied to $65.9 million in infrastructure grants and $6 million in loans.

In 2007, Essar promised that by Oct. 1, 2015, it would build Minnesota's only integrated iron ore-to-steel mill on the Iron Range. The agreement detailed plans for mining operations, a taconite plant, a direct-reduction iron production plant and a steel plant.

But today, Essar's plans for a steel mill are dead. Instead, the company owned by Mumbai, India-based Essar Global is building an iron-ore pellet plant. The state does not have a steel production mill but already has seven taconite plants.

The change in plans and the failure to meet the Oct. 1 deadline means the state can make Essar reimburse the subsidies. Essar officials have said economic conditions caused the delays and changes — iron and steel producers are suffering from a global slowdown and closing facilities in droves.

Global prices for iron ore pellets have sunk to historic lows at the same time underpriced steel imports rushed U.S. shores from China, Korea and seven other nations. This summer, Minnesota's iron-ore pellet producers idled operations and laid off 1,400 workers in Keewatin, Mountain Iron, Eveleth, Forbes, Hoyt Lakes and Chisholm.

"Yet here on the Iron Range, Essar continues to build," Brunfelt said. "The fact that Essar continues to move forward aggressively with this project demonstrates its strong commitment to this project and to establishing its presence here as a major employer."

Officials from the Minnesota Department of Employment and Economic Development say they are walking a diplomatic tightrope.

"While Essar firms will not meet the terms of the original agreement to construct a steel making facility by Oct. 1, we are certainly grateful for the work that has been done to date," they said in a statement. "We expect this work to continue."