Essar unexpectedly slows down new plant construction

Essar Steel is slowing construction of its new taconite plant north of Nashwauk on Minnesota’s Iron Range. The India-based global industrial giant announced a two-week shut down related to global steel and taconite prices, according to company spokespeople in local media. Rumors of odd supply chain delays at the site were rampant around the area (I live very near this site).

The company says it will resume construction and stay on its production schedule of next year. The mayor of Nashwauk believes everything is fine. Nevertheless there are many odd red flags.

Just two weeks ago company officials held a tour of the construction site with local legislators and the media. No indication that anything was wrong was given, despite numerous pointed questions about the timeline. The company didn’t ask for anything. Now, there are market-based delays and while a vast amount of dirt work and infrastructure are in place (paid for in the 2008 state bonding bill funds and some IRRRB loans), the walls of the plant are not yet built.

In October, about $6 million in IRRRB loans to Essar will come due. But if the company has frozen slowed the construction site, will they still pay on time? Many anxious Range leaders and a community desperate for new jobs hope so.

With the near completion of labor deals at the Range’s existing six mines, deals that have largely satisfied the workers, an interesting game of international economics and wheeling-dealing seems afoot. American companies are trenching in for a long run at the global steel market, while Essar is exploring options all over the world. What’s next for Essar’s first American mine?

We’ll see, perhaps in two weeks.

UPDATE: I’ve edited this post to clarify the headline. The project has “slowed down,” not “shut down,” according to Essar officials. The site is not frozen; rather some contractors are still working on electrical and excavation tasks. Here’s an update.

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