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Northeastern Minnesota's taconite mines
have mirrored the economic downturn in 2009 hitting the national
steel industry, with a massive hit to state and local revenues,
several experts say.

      "It's been the worst since I've been here, and I've been here
25 years," engineering specialist Bob Wagstrom of the Minnesota
Department of Revenue's Eveleth office said.

      He sees the year ending at 17 million tons of iron ore pellets
produced, down starkly from the 39.2 million tons produced in 2008.
With taconite taxes at $2.364 per ton, 2009 is on track to yield
only about $40.18 million, down more than 50 percent from $89
million in taconite productions taxes in 2008.


      The impact will be felt harshly on the Iron Range. Taconite
producers pay taxes on tonnage produced, in lieu of property taxes
or royalties. Minnesota and municipalities and school districts in
the taconite tax area benefit from the taxes. The Iron Range
Resources Board in Eveleth determines the use of most of the funds.
Money is distributed on a three-year production average.


      The previous lowest production totals Wagstrom could recall were
23.2 million tons in 1982, and 25.4 million tons in 1986, both
years of turmoil in production, mine closings and cutbacks.

      Here are expected 2009 taconite production tonnage totals for
the six mines on the Range:

      - Minntac, owned by U.S. Steel, in Mountain Iron, 7.1 million
tons.
      - United Taconite, owned by Cliffs Natural Resources, in Eveleth
and Forbes, 3.5 million tons.

      - Northshore Mining, owned by Cliffs Natural Resources, in
Babbitt and Silver Bay, 3.2 million tons.


      - Hibbing Taconite, operated by Cliffs Natural Resources, 1.7
million tons, before the plant was shut down for most of the year.


      - ArcelorMittal's Minorca Mine, in between Virginia and Gilbert,
1.4 million tons.

      - Keewatin Taconite, owned by U.S. Steel, .1 million tons, from
stockpile sales previously stored. The plant has been closed to
production all year.

      As for 2010 prospects, Wagstrom said it was a guess. "Hopefully
it can only go up," he said.

      The state measures production in dry tons, without including
flux added for pellet binding. Mining company tonnage is sometimes
higher, as pellets are weighed while still wet from the process.


      Taconite is lower-grade ore imbedded in rock with 20 percent to
25 percent iron content that is crushed, concentrated and
agglomerated into pellets of 60 percent to 65 percent iron with
binders shipped to older-style blast furnaces in the Chicago and
Cleveland areas. Minnesota's Iron Range produces the majority of
domestic U.S. iron for steel.

      While all Range plants and mines were closed down at one point
or another in 2009, four were in operation again by this fall.
Announcements of portions of 2010 startups have been made recently
for the HibTac and KeeTac operations.

      The national outlook for steel for 2010 is getting better as
well.

      "The general mood of the industry would be cautious optimism,"
said Nancy Gravatt, vice president of the American Iron and Steel
Institute in Washington, D.C.

      While 2009 saw a huge drop in demand down to about 40 percent to
45 percent of capacity domestically, the new year should see steel
production climb back up to about 60 percent to 65 percent of
capacity.


      The U.S. steel industry generally produces about 100 million
tons annually. But 2009 will come in at a total of 62-63 million
tons. Experts are predicting that 2010 should see that output go up
to the range of 75 million tons. It may take longer to see demand
return to previous levels, Gravatt explained.

      Despite the production low in 2009, every four or so weeks a
small incremental bump up in production could be seen. "Probably
in 2010 I think you'll see the trend continue," she said.

      The North American automobile industry, a major consumer of
steel, produced 8.3 million vehicle units in 2009. Some analysts
are seeing an increase to 10.5 million vehicle units this year.


      Gravatt noted that other industry sectors are seeing better
prospects - in residential construction and natural gas pipeline
work. The renewable energy market such as with wind turbines is
also expanding. "Every tower takes about 200 tons of steel," she
said. A slower sector is in commercial construction.

      Overall steel imports to the U.S. were probably down as well,
though the import market share remains at about 22 percent. If
imports are fairly traded, that's OK, Gravatt added. But China is
"the main culprit - they don't follow the rules."

      Minnesota Cliffs Natural Resources Public Relations Manager
Maureen Talarico agreed that 2009 was a challenging year. "There
were a lot of people who had a lot of uncertainty and stress," she
said.

      Hibbing Taconite was expected to be back in operation in April,
and all 540 hourly union workers back before then. United Taconite
is back to a 40-hour work week, with 550 total workers. And
Northshore Mining has 520 people back from its July shutdown, with
some hirings expected due to retirements.


      At ArcelorMittal, its Minorca Mine on the Range is at full
production and everyone back from layoffs. "The mine is scheduled
to run at full production in 2010," said external communications
manager Adam Warrington, in a Dec. 24 e-mail.

      A U.S. Steel spokesperson declined to comment on its two plants,
citing the company's policy of not giving production specifics
while matching production to demand.
      ---

Gallery

Northeastern Minnesota's taconite mines
have mirrored the economic downturn in 2009 hitting the national
steel industry, with a massive hit to state and local revenues,
several experts say.


Global recession means terrible year for taconite

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