Last week, Cliffs Natural Resources CEO Lourenco Goncalves announced that his company posted a $199 million profit in 2016. That reflects a positive swing of almost $1 billion from the dismal 2015 downturn of the American steel industry.
It’s also basic math, as Cliffs finally has all its Minnesota mines up and running, filling orders for reopened steel mills across the continent. John Myers has the story, which ran in newspapers across Northern Minnesota.
Goncalves, like other mine bosses, believes that the avowed trade protectionism of the Trump Administration will benefit his company. Sure, it was the combination of increased demand and reduced foreign supply that ultimately put Cliffs back in the black — things that started happening before November. Nevertheless, the Iron Range is experiencing Trump Fever. Opinion leaders, especially those tied to mining, think a golden age lies ahead, or at least would like investors to believe as much.
The improved prospects for Cliffs, however, is only part of the story. The iron and steel business remains a chess game of sorts, and Goncalves used his statement to make some moves.
For one thing, Goncalves said he wasn’t sure where U.S. Steel was selling its pellets from Keewatin Taconite, which is re-opening next month. Maybe that’s so, but a Keewatin Taconite worker I know said they were told they had a contract for pellets through 2021. So U.S. Steel is selling them somewhere. And because they’re selling on the open market, rather than feeding U.S. Steel’s Granite City plant in Illinois, they’re competing with Cliffs.
And then there is Mesabi Metallics, aka Essar, aka the former Butler Taconite near Nashwauk. Two weeks ago, Mesabi Metallics, the successor to Essar Steel Minnesota, announced its plan to emerge from bankruptcy. If they succeed, they’ll finish the $1.9 billion taconite mine on the western Mesabi Iron Range.
Goncalves and Cliffs are on the record opposing the addition of a new player on the Mesabi, again claiming that Cliffs has the customers that once sought ore from Essar and the bankrupt Magnetation. However, last week Cliffs got some high profile help from Gov. Mark Dayton. Dayton issued a statement calling the Mesabi Metallics plan a “moonshot.”
Last summer, Dayton, the Iron Range DFL delegation and Cliffs held a press event near the Essar site. There, Goncalves announced that if Cliffs could get its hands on the former Butler site it would pursue value-added iron ore technologies, like the ones originally proposed by the failed leaders of the former Essar.
And that sound great, except it’s not clear how quickly Cliffs would really want to develop this technology. Most likely, it wants to play out its mining prospects at its other mines first, holding options on the Nashwauk property. What is more important to Cliffs is keeping a competitive new iron ore producer out of the North American marketplace.
What I take away from all this is that yes, the immediate prospects for iron ore look really good. But it’s just as clear that Cliffs, U.S. Steel and others see some limits to their euphoria. Lots of talk, but no one’s laying down big money on the future of the Iron Range mining industry just yet.