Minnesota's iron ore producers have mostly been cutting back lately as global steel demand slumps.
But the CEO of Cliffs Natural Resources gave the state two turns of good news Wednesday, when he targeted a different state in which to idle a taconite plant and announced that he wants to build a "direct-reduced iron" plant in Minnesota that could supply high quality iron to mills across the Midwest.
If the facility goes forward, it would be the only one in Minnesota and would require millions of dollars in investments at a time when the global iron ore industry has seen prices plummet 60 percent from a year ago.
"We are working very closely with the state of Minnesota to put in place the first DR-ready facility in the state of Minnesota to supply the Midwest mini mills with DR pellets," CEO Lourenco Goncalves told analysts during a conference call Wednesday. "So we are not just sitting still here or reducing the size of our footprint. We have a plan."
Other companies, including Essar Steel Minnesota, have announced similar ambitions only to scale back. Direct-reduced-ready pellets are technologically more difficult to make, but they result in a much higher concentration of pure iron than taconite. As a result the technology is coveted by steel mills all along the Great Lakes and Canada.
The idea of possibly expanding in Minnesota caught many Iron Rangers by surprise. The sagging industry already forced Magnetation, Keetac and Minntac iron-ore factories on Minnesota's Iron Range to idle production this spring. Minnesota iron workers feared that Cliffs would simply follow suit.
Instead, Cliffs, which operates Hibbing Taconite, United Taconite, and North Shore Mining in Minnesota, chose to reduce production in Michigan.
"Cliffs has inventory problems so we knew they were going to have to do something, but he chose Michigan," not Minnesota, said Mark Phillips, Commissioner of Minnesota's Iron Range Resources and Rehabilitation Board.
He added that Cliffs wants to eventually change to a process that involves a higher grade of iron than is currently produced in Minnesota.
Goncalves said Wednesday that he is determined to slash costs across Cliffs, which has a new board after a very public proxy battle last year. To cut costs, however, Goncalves is exiting the coal business, has sold another business in Canada and will now shut Cliffs' old Empire plant in Michigan instead of one in Minnesota.
Empire mines and processes about 1.5 million tons of iron ore each year.
John Rebrovich, the assistant to the director of U.S. Steelworkers District 11, said the Michigan employees received layoff notices beginning Wednesday. "It will not affect Minnesota. … So no news on layoffs [here] is good news."
But Rebrovich said that Minnesota iron workers, who are part of his union, still fear that low taconite prices and the recent influx of cheap steel imports will continue to depress demand for U.S. steel, of which iron ore is the key ingredient.
In Minnesota, "There are no [Cliffs] layoffs as of today. But I can't predict tomorrow," Rebrovich said.