Here’s an interesting item. Cliffs Natural Resources today announced that it has signed an extension of an existing iron ore contract to provide taconite pellets to Essar Steel’s Algoma steel mill in Ontario through 2024. They had already been providing ore to Algoma, India-based Essar’s foothold in the North American steel industry, while Essar completes construction of its new taconite mine and processing plant near Nashwauk on northern Minnesota’s Iron Range. (You can see the cranes and smokestacks of the skeletal project from my roof).
Is Essar acknowledging that it will not have enough ore from Nashwauk to meet the demands of its mill? Or is it hedging in the event that there are continuing financing problems with the Nashwauk project?
In any event, talk that there could be an Iron Range steel mill built by Essar should rightly be tagged as post-2024 at best — and that’s practically another universe of economic conditions we can’t know right now. At this point, launching the pellet plant alone appears to be the primary hope, a task that has dragged through at least two construction seasons already.
UPDATE: Essar Steel says it is a deal to bolster its supply line and that Essar Steel Minnesota’s project will be an important part of that supply line:
Essar Steel Algoma Reaches Agreement with Iron Ore Supplier
SAULT STE. MARIE, ONTARIO – Essar Steel Algoma Inc. announced today that it has reached an agreement with its iron ore pellet supplier, Cliffs Natural Resources Inc. The Agreement sets out the terms and conditions of a negotiated amendment and extension of the current Pellet Sale and Purchase Agreement which was scheduled to expire 2016. Among other things, the Agreement addresses issues that have arisen related to market price dynamics and extends Essar’s supply agreement with Cliffs for a portion of its iron ore requirements from 2017 through to 2024. The Agreement supplements Essar’s supply agreement with Essar Steel Minnesota LLC to satisfy Essar’s expected iron ore pellet requirements come 2017 and beyond.
Essar Steel Algoma Chief Executive Officer Kalyan Ghosh remarked, “This agreement delivers a revised formula that puts Essar’s iron ore cost in line with the market price from 2014 to 2024. The extension provides for supply under more favourable terms and is a necessary step toward ensuring the profitability and sustainability of the business.”
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