Global recession means terrible year for taconite
Virginia, Minn. (AP) — 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. ---
Information from: Mesabi Daily News
(Copyright 2009 by The Associated Press. All Rights Reserved.)