Giant iron ships sail on

Last Saturday I was camping with my family. In the cold, dark hours of a restless second sleep, I dreamt.

In my dream I spied a pile of overburden on the edge of an Iron Range town. We call them mine dumps. Through the window of some public place, a restaurant perhaps, I observed a haul truck winding its way up the rocky spire on a bright moonlit night. When the truck reached the top, it tipped its bed, dumping out enormous boulders, scrap metal and objects I couldn’t identify. I felt a sudden panic, as though I somehow knew there were people in there, too. The debris fell off a flat edge of the man-made mountain, falling hundreds of feet to the ground below. An explosion of dust followed and the window panes rattled from the impact, though it was at least a mile away.

As with any dream, either it means something or it doesn’t. Perhaps I’ve just read too much international mining news this year.

But what follows is no dream. And it does mean something to the mining industry in Northern Minnesota’s Iron Range.

Take a look at this ship.

The CASTILLO DE NAVIA, a mini cape vessel twice the size of a Lake Superior ore ship, docks in Corpus Christi with a load of Brazilian iron ore in April 2016 (Voestalpine).

The CASTILLO DE NAVIA, a mini cape vessel twice the size of a Lake Superior ore ship, docks in Corpus Christi with a load of Brazilian iron ore in April 2016 (Voestalpine).

It’s the Castillo de Navia, an ocean-going iron ore ship, twice as wide as the ones you see in the Port of Duluth. Here she moors at a Voestalpine dock in Corpus Christi, Texas, to unload Brazilian iron ore last month for a new plant that makes iron briquettes used in specialized steel products.

This particular load of iron ore was used in a test, to determine how well the new equipment was working. But it wasn’t just a test of the new plant, it was a test of the business model. Since Brazilian ore is cheaper to mine and not terribly far from the Gulf Coast states by water, will it be more economical for steel companies to use that ore instead of hard rock Mesabi taconite from Northern Minnesota?

It very well might be. Not because of “dumping,” the practice of selling ore at a loss to swamp the market, but because it’s cheaper. Because free trade. Because capitalism.

While this ore did not arrive through the Panama Canal, the current expansion of the canal to allow ships like this to pass through will only complicate the problem. Chinese, Korean and Japanese steel will pass much more easily into southern U.S. ports in states where labor unions have little power to even complain.

Giant cranes unload Brazilain iron ore from the CASTILLO DE NAVIA in Corpus Christi, Texas. (Voestalpine)

Giant cranes unload Brazilain iron ore from the CASTILLO DE NAVIA in Corpus Christi, Texas. (Voestalpine)

Officials in Minnesota have pushed hard for trade protections to ensure the survival of the American steel and iron mining industry. They’ve had some success. President Obama approved Commerce protections against foreign steel dumping earlier this year, which corresponded with China scaling back production.

But China is producing again and some analysts predict that a recent increase in commodity pricing is only temporary. Most agree that the insanely high prices for iron ore — more than $100 a ton — will not come back in the foreseeable future. That’s trouble for Northern Minnesota mining projects that were proposed and built on such pricing.

Now the U.S. government is pursuing big tariffs on all foreign steel, regardless of its origin. The goal is clear: protect our industry. But the outcome is complicated. We might protect our industry, while starting a trade war that could spill into countless other sectors, including agriculture and manufacturing — both of which require exports to stay healthy.

The Voestalpine project in Texas is an example of what we’re dealing with in the economy that will dominate the coming century. It’s a German owned company in American port city using cheap, available iron ore to make a versatile value-added product for a fickle, fast-changing steel business.

American steel producers have advantages in an important North American market that will ensure the survival of some of our mines in Northern Minnesota. But the less those mines are able to add variety and value to their products, the fewer of them that will remain open.

The ship has sailed. There’s no turning back.

 

Comments

  1. Pru Lolich says:

    Excellent article–a lot for consideration by decision makers on all levels.

  2. Independant says:

    All very valid points. I cringe thinking of an America that cannot from its own raw materials (iron ore) produce a product like steel in volume (feel free to include any other mined commodity). Strategically it is a terrible thing for American security unless you think there will never be another world war again… that could never happen right?

  3. You must remember that concerns about “security” are for political purposes only. It has much more to do with controlling nationalism, access to oil and milking profits from defense and intelligence contracts. The owners of corporations have no “National” interest, and are perfectly willing to destroy any countru for their own purposes.

    • Independant says:

      No, I literally am talking about the ability of a country to produce what is necessary to defend itself at some point in the distant or not too distant future.

      • Gerald S says:

        From that point of view — assuring supplies of raw materials being available in the 48 contiguous states in the event of a major war — the most important thing is to not exhaust our non-renewable resources. Based on that argument we should be leaving iron, copper, oil, and so on where it is, in the ground, where they will be available at some time years or decades from now when we might need them.

        Following the same logic, we should be working hard to continue operating and updating our industries that process those resources — steel and copper plants, oil refineries, and so on — so they are available instantaneously to supply a war effort.

        That is clearly the way to position ourselves best for the threats you are concerned about. So from that point of view, buying iron ore from Brazil and Australia, copper from Indonesia or the Congo, oil from the Nigeria and Venezuela, and so on is the way to conserve our resources, while continuing to operate the industrial infrastructure.

        Economically, this may not be best, especially up here on the Range, where people are eager to deplete the ore in order to have work. But it is the best fit for the strategic concerns you envision.

        • Independent says:

          Great academic point. However if the industries don’t exist for the raw material production then the infrastructure disappears and the facilities decay or get scrapped. Getting them back operating in short amount of time when a conflict arises and supplies are cut off would be impossible.

          • Gerald S says:

            They already are operating intermittently, and have shown great expertise in shutting down and starting up rapidly, to the detriment of many Rangers.

            To suggest that we should emphasize mine output is a total contradiction of everything you are saying, since it risks the exhaustion of the resources you are concerned about just when they would be needed. The suggestion that more mining will lead to preservation of US independence for resources rests on a the fantasy that we will not see the exhaustion of available ores and oil. Extraction industries always end.

            This is not an academic point, it is reality.

            What you are actually saying is that we should search for policy positions that would allow us to protect the operation of our mines and prevent importation of ore and steel. That is a common position, especially in Northeastern Minnesota. However, the argument you are making is actually upside down in terms of that goal. Strategic reserves need to be preserved, not exploited, or they will not be there when they are needed.

            I would not argue against attempts to protect our mining industry from world competition, at least within the bounds of not starting a trade war. However it is clear that if successful that would lead to a time in the not distant future — most mining people say no more than about 20 to 30 years of continuous production — when the ores will be gone and there will be no mining industry on the Range, and when the US will be completely dependent on foreign sources. I will leave the argument as to whether that is a bad idea to others.

        • David Gray says:

          A pseudo-insightful comment. One must maintain the ability to access the resources and process them into the required form or it is simply hand waving. Preserving strategic reserves while failing to ensure their availability on short notice is essentially maintaining them for someone else.

  4. Independant says:

    My concern is about a hypothetical complete loss of the American iron ore industry which is distinctly different than what you appear to be going on about. If a few of the taconite mining and processing operations are shutdown for 6 months to 2 years and then restarted that is entirely different than restarting an entire industry after being shutdown for decades. First you will have no skilled labor force in the area the way you do after only a few months. Second the network of knowledgeable vendors and contractors who extensively support these operations would not be in existence after that amount of time. Third the plants themselves and their equipment would not be functional after that amount of time without massive rebuilding expenses and time. By the way nobody I know is saying that there will be no ore in NE Minnesota in 20-30 years (maybe at a specific location). I have worked on multiple projects over the past decade that have 70+ years of accessible taconite ore just in current reserves.

  5. Gerald S says:

    A couple of points about reserves and production in Range iron mining.

    First, the 70 year figure, which is widely cited as Independent notes, comes from a study published in 1977. It is one of those numbers that tend to be repeated over and over without much thought of the underlying facts, because it has been enshrined in common belief. Obviously, 40 of those years have already passed.

    Second, it is not appropriate to talk about exhaustion of ore as a blanket statement. Different deposits have different amounts of reserve and are being mined out as different rates.

    Here is an article, highly pro-mining and favorable to the industry, written in 2011 and based on data from 2010, addressing the question of each individual mining operation and its reserves.

    http://www.lvpmn.org/_site_components/documents/user/DNR%20Clevenstine%20Minnesota%20Sustainable%20Supplier_4.pdf

    As you can see in the slides about halfway through, two mining operations are within 10 years of exhaustion, two more within 15 to 20 years, two more within about 30 years, and only one, North Shore, with a time horizon of just under 50 years.

    The end of the iron ore industry is going to be gradual, not abrupt, with various operations becoming exhausted mostly over a period of from 10 to 30 years, the majority within 20, and one operation running 50 years into the future. Unfortunately, the jobs will disappear on the same schedule, probably made even worse by continuing introduction of higher tech methods that reduce the numbers of human operators needed.

    The actual mine operators trying to obtain permits for non-ferrous mining are all suggesting about a 20 year period of operation for their mines before they are exhausted. Obviously that clock is stopped until mining actually starts.

    One important caveat is that the rate of exhaustion is based on the rate of extraction. If mines, either iron or non-ferrous, are closed completely or partly for large fractions of the time, either because of issues of demand and price, as is currently the case, or because of political decisions to maintain reserves, the time horizon for operations recedes into the future. The figures for times of operation are NET time, time actually in operation, not straight calendar time. Significant adoption of the Gulf and West Coast model Aaron cites, using ore sourced in other countries, would actually prolong the life of mining on the Range, albeit probably with more periods of extended shut down. We have that amount of time, and can spread it out as indicated by forces outside the Range.

  6. If North Shore continues for 50 more years, Milepost 7 is a catastrophe waiting to happen–dumping its tailings burden into Lake Superior.
    Also, according to the DNR power point, Chisholm and Nashwauk are destined for removal. And it looks like a good part of Hibbing, too. Just letting you know so that no one will be surprised….

  7. Resource is what’s there that can be successfully processed from a technical standpoint. Reserves are a variable thing, ore that can be removed from the ground and processed economically. They change with economics and technology. In time of great need they expand, in times of oversupply, like now, they contract. Processable resources on the Range are there in abundance, far longer than the 30 or 50 years quoted. It’s just a matter of whether it pays to go after it.

    There was a lot of talk and some official reports just after World War II about maintaining a strategic reserve of iron ore. It never came to pass, nor was it ever needed.

    I saw forecasts and pit limit maps in the 80’s that said Minntac would be long shut down by now. Times change, markets change, technology changes. Nobody can predict what will happen 20 years into the future with any certainty.

    There’s a lot to be said for a policy of “run the other guy out first”. Indeed it seems to have been our energy policy since the 70’s.

    Developing a new processing plant from scratch similar to one of the taconite plants takes about 10 years in peacetime if it is pushed wholeheartedly. Essar was not pushed wholeheartedly and will take much longer, if it ever happens. In a World War II scenario it could be done in three to four. As mentioned above, the loss of people skills is a much larger impediment than the physical plant.

    Then the question becomes will there ever be a protracted maximum effort war like WWII again? No nation on earth can afford to maintain that kind of effort for that long with current military technology and costs. Nor would one probably need to. Most likely conflict scenarios are either low level guerilla operations like Viet Nam or the Middle East, (the best way for a weak power to take on a strong power) or a short all out conflict between equals that will be over in months, weeks, days, or even hours. The former doesn’t need a lot of resources, other than humans, and the latter will be fought from inventory. Also remember that one plane or ship can now do what it took thousands to do in World War 2.

    The biggest threat to iron mining on the Range is that our customers are disappearing. Every year there are fewer blast furnaces operating in this country and they are the only customer that can currently use our pellets. If current trends continue in 30 years the blast furnaces in North America will probably be gone. If there is no one to take them, we can’t give pellets away. Mr. Clevenstine’s (DNR) report referenced above fails to recognize this trend.

    The two DRI plants in the South need a type of pellet that is very difficult to produce from our ore, in spite of what Mr. Gonclaves says. If we have a long term future in iron ore, this is it. Even in this scenario the iron produced by DRI type methods is only a supplement to modern steel making and the quantities required will be much smaller than current production. Most of the raw materials for steelmaking will be steel scrap, as they are today. Again it all comes down to market and cost of production.

    • Gerald S says:

      Excellent points.

      A quick note: many Range mines have exceeded their predicted life in terms of calendar years, but in many cases that has been mostly because of recurring shutdowns that made calendar years much longer than actual operating years. As I noted above, the same consideration applies to mine reserves now. The clock stops when mining stops.

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