An uncomfortable truth about Iron Range’s mining woes

worker takes a sample at steel company

Here on the Iron Range one cannot escape the talk of impending layoffs at area iron mines. You also can’t mistake who company officials and unions alike blame for this situation: foreign steel dumping.

“Dumping” means foreign companies, sometimes as extensions of foreign governments, sell steel for less than it costs to produce, just to move it off their shores. Usually their motivation in doing this is to keep their own people working during periods of low demand, an option not afforded American mines and steelmakers. The U.S. steel industry rightly describes this as unfair.

CRASH!

Uh-oh! This blog post just got hit by a terrible storm. Right now all the insight, analysis and facts that were going to be part of this post are strewn about the street. Windows are busted out, doors swing open. Alas, things were going so well! No one expected this!

Worse yet, here come the looters. The looters are stealing my insight, analysis, and facts. Why, they’re even taking the copper from the wires of my laptop as we speak.

SO WHAT CAUSED THIS DISASTER?

Who says looters? Well, that would be wrong. Looters don’t *cause* disasters. Looting is a crime of opportunity. When a disaster strikes, looters use their base instincts to seize opportunity, often out of a perceived notion of survival.

So here’s what you need to know. Steel dumping is like looting — a crime of opportunity that benefits some players in the global economy at the expense of others. But the *cause* of the steel industry disaster is bigger, more complex and harder to predict than just saying “foreign steel.”

In this increasingly strained metaphor, the disaster is the unabated collapse of global iron ore priceswhich hit $46.70 heading into Easter weekend. We are just $10/ton away from the bottom of the glut that shut down all the mines on the Mesabi Iron Range in 2009.

Last week, I wrote about how the iron and steel crisis was not caused by environmental regulations, but those very plummeting iron ore prices. Since then, iron ore has dropped another $9 per ton, further worsening market conditions. Steel dumping has been a flashpoint before — in the ’00s, ’90s, ’80s. But what these times all have in common with today is the low cost of iron ore.

The iron ore and steel woes are so bad that some financial experts are saying they might prompt government banks to explore more rate cuts, something that runs afoul of the normal strategy in an otherwise recovering economy. The great fear is that an extended collapse in steel could detonate the whole recovery. Again, however, nothing gets better for Iron Range mines until prices improve. This could take a year, possibly more.

Why are the prices so low? It’s complicated, but in essence you have too much supply, slackening demand in Asia, the strong U.S. dollar that puts our exports at a disadvantage, low oil prices bottoming out the demand for tubular steel. Pray tell, who do you petition about these problems? I will sign that petition. I fear, however, it will be more of a prayer than a petition. For those with unflinching faith in markets, this is what you can expect.

There will be hard days ahead. Some of the hardest will be in realizing that most of the world, nay, most of our own country doesn’t care about our hard days. They’ve got their own problems. Wishing and hoping won’t change this. Complaining and screaming won’t change this. Our unbalanced economy will suffer the disproportionate pain it’s built to deliver. Only our own attitudes and actions can change.

When a terrible natural disaster strikes, there are two instincts:

1) the cold, calculating planning to avoid the same amount of damage next time.

2) the warm embrace of human beings willing to work, sweat, laugh, cry and hold each other through hard times.

The Iron Range will need both this year. Iron ore will be back, but might employ fewer people. What else can we do? No community dies if we continue to breath life into that community. Beauty, art, and humanity supply all demand, if we nurture the gardens.

The truth is sometimes uncomfortable. This fact is about the only thing on earth that doesn’t change.

###

This piece is cross-posted with my “Up North Report” blog at the Star Tribune.

Comments

  1. Ranger47 says:

    How ’bout those without “unflinching faith in markets”. The Range has quite a few of those folks. What should they expect?

  2. My generation adjusted to a prewar (WWII) mindset. Our lives, micro and macro economies, and the very nature of our existence is relative to prewar in our post-industrial environments. The service sector has replaced heavy industry as the source of survival employment. The community has reemerged as a concept and utility. Ultimately, we enjoy a freedom to be ourselves. Each of us creates within our own individual styles.

    One of the reasons we protested the World Trade Organization, and free trade in general, was the lack of democracy. All matters are dictated by an unelected group of financial elites. Items such as tariffs no longer require any form of democratic participation. The super rich serve their own self-interest with no consideration for the consequences within communities.

    We now see a burgeoning middle class in formerly developing nations, however. We sense a growing unity among working classes globally. The people are never looters. The looting happened. How do you go back? Should we want to go back?

    There is a dissonance between the Iron Range and global reality.

  3. All communities die without jobs to employ the folks who make up the community. Handouts by Govt can’t sustain a town, only jobs can. So we are back to square one on this issue again- we have logging/mining as our natural resources- let’s use them. We have IRRRB millions to attract businesses to our area- let’s use it.
    Beauty, art and humanity don’t put food on the table or pay the bills. There will always be slow downs in the mining and logging industry, that shouldn’t eliminate those from our future up here. We act like the Range is the only place hurting in the new norm of taxing and regulating any use of natural resources in our country. Oil, gas, logging, mining (coal, taconite, copper, nickel), commercial fishing, ranching- you name it- we are regulating it out of profitability, demonizing those who work in it (unless you are an illegal alien crop worker then you are exploited) and criticizing those who support using our natural resources.
    Let’s use what we have up here to employ as many folks as possible and demand the millions we waste on crazy projects by IRRRB gets used to bring up manufacturing jobs, new start up businesses of all sorts and whatever else it takes to bring jobs to the Range. In the mean time, let’s use what we have up here.

    • Ummm actually ken,Beauty, art and humanity does put food on the table and if you want to see how USSteel sustains a town and a people go take a DRIVE THRU PARKVILLE Mn and see how USS has nurtured the pavilions! That is a company that really cares! Go to my stephan hoglund photography page on Facebook and it will open your eyes to Corporate nurturing `~)

  4. Perhaps important to recall that extractive industries (like logging and mining are), in a sense, also government/public handouts.

  5. Rangers don’t like it when governments subsidize steel, but when they’re in St Paul they write legislation requiring (at least trying to require) MN sourced iron for construction projects:

    http://bringmethenews.com/2013/11/23/amid-minnesota-flavor-there-will-be-a-foreign-flair-to-vikings-stadium/

    Government protection of a volatile industry seems like a universally shared value.

  6. Irlefty says:

    A point seldom mentioned in discussing the cyclical steel saga. Foreign governments will subsidize their steel makers to keep their workers employed. We can hear the screams of “Socialism” now, if our government tried to subsidize our industry. Instead we chose to pay unemployment to our workers and in effect
    Subsidize unemployment. Go figure.

  7. Ranger47 says:

    Good point Ed. Our Range legislators continue to play this game. But it’s “woe is me” when it’s played against them.

    When Tommy Rukavina was participating at the state level, he required (therefore subsidized) socks & underwear worn by state government employees be made in the U.S. I never understood why he didn’t require them to be made in Minnesota, or for that matter, Virginia..

  8. Independent says:

    All good points but consider this scenario. We have a domestic steel industry that continues to shrink due to cheaper imported steel (why its cheaper doesn’t even mater for this). How low would our domestic production capabilities need to get before we are impotent and vulnerable to other countries that can actually produce in volume when pressed. Shuffling papers and serving someone drinks on a golf course are wonderful jobs but I fear the day we no longer have any industrial or manufacturing capability (or ability) domestically when we need it.

  9. Steve b says:

    The bottom line is that we’ve invented composite material that is stronger and lighter. Steel is no longer the best material out there anymore.

  10. I don’t know exactly why, but I think we’ll be OK this time sooner more than later. Meanwhile, a lot of people who don’t live here will give us advice about what we should do. That’s pretty much how it goes.

  11. Sniffles says:

    What the Iron Range has yet to accept is…(drum roll) **reality**.

    Seriously, I have family from up there, heck I was even born up there. But what the great folks from the Iron Range need to accept, and more importantly move on from, is that mining and logging are *not* job, and definitely not life, supporting industries.

    Destroying the very place you live is not a model for sustainability. It’s just wrong. Why do Iron Rangers think 50+ jobs every 10-20yrs are “jobs”. Hell, it’s not even an industry at that point.

    What the IR needs is jobs, in an industry, that last for life. And not just one lifetime, many. So, dear IR, do yourselves a favor and create a **panel (read: commission/association** of the best minds up there (from all walks of life) to highlight the regions skilled workforce and desire for jobs — jobs for 100s of years.

    There. Now let’s see how many chuckle-heads say “do you have any idea how much steel is in demand??” Apparently, other countries have that on lockdown now.

  12. The collapse of the global price of iron ore is largely due to two companies (BHP and Rio Tinto) that have huge operations in the Hamersley Basin, Australia. It is apparent that the management and Board of Directors of these companies wish to monopolize the industry and drive all higher cost producers out of business with their great expansions in their iron ore mining operations over the last few years.

  13. Ranger47 says:

    There’s nothing stopping us from buying our trucks, cars and all our appliances from the higher cost manufacturers. Just do it..

Speak Your Mind

*

This site uses Akismet to reduce spam. Learn how your comment data is processed.