Star Tribune: Essar’s Iron Range project delayed a year

Dee DePass of the Star Tribune reports that Essar Steel Minnesota’s project in Nashwauk has experienced the financing delays local observers have long suspected. Essar is set back a year.

Essar Steel Minnesota will delay the opening of its Nashwauk taconite plant until the second half of 2014, officials confirmed Thursday.

The plant, 90 miles northwest of Duluth, was originally slated to open this fall with nearly 350 workers.

In a phone interview Thursday, CEO and President Madhu Vuppuluri said the delay was due to financing issues surrounding the company’s 2012 decision to increase production from 4 million tons of taconite to 7 million tons.

The original plan called for $1.1 billion in spending. The new plan requires Essar to spend $1.7 billion. The company already has spent $1.1 billion. “We are at the advanced stages of” securing the additional $600 million needed to finish the project, Vuppuluri said.

He insisted that the plant delay is not related to softened global demand for steel, as some on the Iron Range have assumed. All of Essar’s Minnesota taconite is slated for use only in the United States and Canada and not China or India, he said.

Right now in Nashwauk, all the concrete foundations have been poured and a few steel beams have been erected. Essar’s giant ore crushers have been installed. Over the next year, the remaining steel beams and factory walls must be erected and other equipment installed.

It should be noted that late 2014 was the earliest anyone expected this project to be operational. There is a lot of concrete in the ground now, and this is the first I’m hearing about the ore crushers being on site.

The agreement with the state of Minnesota for the massive infrastructure investment made several years ago calls for production (and thus repayment of some loans) to begin in 2015. That appears like it will be a tight squeeze, with little room for error. Nevertheless I expect local officials will be very accommodating to the company if they see significant progress on construction.