There’s an old trope you see in a lot of cartoons and movies. Someone is running through a jungle or forest, pursued by some fearsome beast. Only at some point an even more fearsome beast leaps from the shadows to snatch and devour the previous monster. And just as THAT creature takes off after our hero, a third, even MORE ferocious gargantua gobbles it up. And so forth.
I remember someone telling me about Essar Global’s first presentation to the Itasca County Board more than ten years ago. They said Essar representatives from India showed a dramatic video depicting their fast-growing company spreading its tendrils across the world. Its ambition reached all the way to Nashwauk where it would rescue and construct a new iron mining venture. Someone told me the video was spooky. “Almost warlike,” she said.
We now know that Essar Steel was in the process of overextending itself before the global financial collapse of 2008. The company built part of a mine on the site of the old Butler Taconite, but ran out of money and left millions of dollars of scrap rusting in the elements to this day.
Now we watch as a new company, Chippewa Capital Partners, and an old company, Cleveland-Cliffs, grapple for position to develop a mine and processing plant on the property.
Chippewa Capital Partners owns the plant site and first crack at the state mineral leases. Cliffs just bought critical land around the site. In fact, Cliffs argued that its land acquisition would stop Clarke in his tracks.
That story took a turn Thursday when Chippewa Capital Partners, led by Virginia businessman Tom Clarke, announced that it, too, purchased land associated with the project. The acquisition is big enough that Clarke’s company already began drilling and testing iron ore on the site.
Clarke says that his land buy forces Cliffs into, at minimum, a partnership with Chippewa Capital Partners. Cliffs CEO Lourenco Goncalves had previously expressed no interest in such an arrangement.
Coming days will show us what these companies are willing to do to gain an advantage over one another. But it’s vitally important to the Mesabi Iron Range. Both companies propose building value-added iron processing facilities that would bring local mining into the modern electric arc furnace steel market.
Meantime, a cautionary tale.
Bankrupt Essar Global now finds itself the target of even bigger companies. The world’s largest steelmaker, Luxembourg-based ArcelorMittal and Japan’s Nippon Steel are reportedly forming a bid to buy Essar. They seek to enter the competitive and fast-growing Indian steel market, where the world’s second largest population is rapidly constructing new cities, highways and infrastructure.
ArcelorMittal owns the Minorca Mine near Virginia, Minnesota, and is part owner of Hibbing Taconite.
What I take away from all this is how much we need to think before becoming enamored with the slick promises of the 21st Century commodities business. The biggest companies have so many advantages over the smaller ones. Further, Iron Range communities need to be wise in negotiating for everything they can get — not just jobs, but revenue, commitments, and gestures of long term good faith.
These beasts are eating each other. We must keep our wits about us or we will be eaten, too.
I Hope it doesn’t sell to a foreign country.
Look what happened to Blandin after a Finnish country bought it.
I have a hard time imagining that another foreign entity will be able to purchase part of the US Steel sector, especially after the Trump Administration has been blocking mergers unrelated to the sector he hopes to place tariffs on. Tom Clarke can run his operation with foreign buyers and financiers, but those financiers run the risk of being cut-off from absorbing the assets in the event Chippewa goes under… Tom Clarke has a lot of headwind pressure riding on his side of the Nashwauk deal, Cliffs does not have the upper hand with the state, but they have the customer base to make the project succeed. It’s captivating no doubt.