Parent company says two iron plants will stay idle at least two years

AURORA, Minn. -- Months of bad economic news on the Iron Range continued Tuesday, with an ominous new twist.

About 200 workers at the Mesabi Nugget iron plant near Aurora and Mining Resources iron concentrate plant near Chisholm learned the facilities will remain idle -- and stay idled for at least two years, parent company Steel Dynamics Inc. announced, amid a continued global decrease in iron prices.

"Management and the company's board of directors have elected to idle the operations for an initial 24-month period given the continued significant decline in pig iron pricing, which has resulted in the cost of iron nugget production being meaningfully higher than product selling values," the Indiana-based company announced in a news release.

There have been a number of notices of layoffs and plants going idle on the Iron Range so far this year, but the minimum two-year idling outlined by Steel Dynamics on Tuesday suggests a recovery may not come anytime soon.

"To mothball this project for two years -- I don't know what to make of that," said Tony Barrett, professor of economics at the College of St. Scholastica. "I find that troubling."

Barrett told the News Tribune that this is "more than just a cyclical decline in steel."

The problem of late in the iron ore industry has been a flood of imported steel, largely from China, he said. Legislation to block that takes time, but it's being worked on and "relief is coming" within a year.

"That's what's throwing me about this 24-­month period," Barrett said of Tuesday's announcement from Steel Dynamics. "This is beyond the short-­term cyclical flooding of imports. There's something more."

Comparing Tuesday's announcement to other recent layoff news on the Range, Barrett said, "This is different from everything else."

The duration of the plant idling also caught some workers off-guard.

"I was expecting a layoff, but not to the timeline that they're talking about," Mining Resources worker Rich Yuretich told WDIO-TV on Tuesday after a meeting for affected workers in Mountain Iron.

"Current global currency dynamics and world iron ore supply / demand factors support lower pig iron prices. We currently do not see strong drivers that would suggest a reversal of this trend for some time," Mark D. Millett, Steel Dynamics chief executive officer, said in a news release.

Millett said Minnesota operations were "intended to serve as a hedge to high pig iron and scrap prices." While the lower global prices of those materials are good for the company's steelmaking operations, "it has resulted in an uneconomic situation for our iron nugget operations. ...

"We deeply regret the need to take this action, as the men and women in Minnesota have made great strides in production capability and cost savings relative to this pioneering effort. I commend their dedication, hard work, and strong commitment to the company and area communities."

Steel Dynamics said it will take steps to find jobs for affected workers elsewhere in the company. A small maintenance crew will stay on the job at the two plants.

David Bednarz, vice president of iron resources for Steel Dynamics, talked to employees Tuesday and told WDIO-TV that the company is "going to maintain the facilities, with the hope being that the market will turn around and we can restart them. They did immensely good work at Nugget to make things more profitable over the past 12 months. In this market though, it's still impossible."

Mesabi Nugget, which opened in late 2009, is 81 percent owned by Steel Dynamics and 19 percent owned by Japan-based Kobe Steel. The unique plant, the first of its kind in Minnesota, turns iron ore concentrate recovered from old mine sites directly into 97 percent pure iron nuggets -- akin to pig iron -- used to enhance scrap metal in electric arc "mini-mill" steel mills.

Steel Dynamics owns 80 percent of Mining Resources LLC near Chisholm, a joint venture with Magnetation Inc. that uses Magentation's patented technology to recover valuable ore concentrate from old mining waste sites. The concentrate is then trucked to the Mesabi Nugget plant.

Both plants had been idled for months ahead of Tuesday's announcement. Other ongoing or upcoming layoffs on the Iron Range -- at Keetac in Keewatin and Minntac in Mountain Iron, among others -- have affected hundreds of workers.

"This year's been pretty brutal for communities on the Range," said state Rep. Jason Metsa, DFL-Virginia. "Folks will get through this, but it wasn't fun to hear one more domino fall."

Tuesday's news also is troubling, St. Scholastica's Barrett said, because nuggets like the ones produced at the Aurora plant had been pitched as a means of adding value to taconite and diversifying the Iron Range's products.

"The nuggets have been held out as a hopeful line for our future," he said.

The Steel Dynamics announcement is "another hit for the East Range," said Aurora Mayor Mary Hess, who received a heads-up call about the idling Tuesday morning, before the company released the news. "I wasn't completely surprised; I have heard rumblings. Like other companies they're all facing the same situation -- foreign steel. ...

"We didn't need this kind of news now," Hess said, saying the proposed PolyMet copper-nickel mine near Hoyt Lakes now takes on added importance for her community. "We're hoping and staying very positive on PolyMet. More than ever, we need PolyMet to move forward."