A simmering economic crisis on the Iron Range

PHOTO: J. Ronald Lee, Flickr CC

Aaron J. Brown is the author of the Iron Range blog MinnesotaBrown.com.

You know the old saying. If you drop a frog in a pot of boiling water it will hop right out. But if you put a frog in a pot of cool water, gradually turning up the heat, the frog won’t realize it’s boiling to death.

Politicians of all stripes have boiled a bog’s worth of rhetorical frogs over the years. You and me, we’re always the frogs and we’re always getting boiled by something. (I’d like to know, who’s turning the knobs on this terrible, terrible stove?)

So you’ll have to pardon my use of the boiling frog metaphor today in considering the economic situation we face here along Northern Minnesota’s Mesabi Iron Range. We might be the frogs and we might be the cooks, but more on that later.

When the international price of iron ore fell from the rafters like a sack of mulch earlier this year, it prompted announcements of furloughs at MinnTac and Keewatin Taconite, temporarily shuttered Mesabi Nugget, and even helped drive the fast-growing scram mine operation Magnetation into Chapter 11 bankruptcy.

Cliffs-operated mines (which include Hibbing Taconite, United Taconite and Northshore) and Arcelor-Mittal’s Minorca Mine have remained in operation, and vow to continue through this year. Nevertheless, their parent companies are losing hundreds of millions of dollars due to the low prices. What might they do to control costs if this goes on?

It was starting to look like this was the kind of dire crisis that would demand significant economic response, perhaps springing our frog out of the boiling water toward some kind of political demand to end the status quo.

In the last couple weeks, however, U.S. Steel turned down the heat — a little.

Keewatin Taconite announced that 150 workers or so would stay on for maintenance projects until August. Last week, MinnTac did the same, using reduced hours and maintenance projects to halve its announced layoffs through the same period.

Many breathed a sigh of relief as iron ore prices moved from the mid-$40-per-ton range up to $60 last week. Low, but just above to the cost of production for Range mines. Minnesota Power issued a statement that it foresaw a short disruption to the region’s mining economy. The local papers started running weekly front-page columns about the strength and vitality of the mining industry. But does all this really mean that this economic discomfort on the Iron Range is merely temporary?

In the case of reduced layoffs at MinnTac, for instance, consider that the miners are going to be doing maintenance work that had previously been contracted out. Other laborers have been laid off as a result of the same decision. That’s the right of the company, and no one begrudges keeping more U.S. Steel workers on the job, but from a purely numeric sense there is still a negative regional economic impact.

The price of iron recovered some, but most analysts see it as a temporary rally. Industry insiders are preparing for the international price to settle around $40 per ton, which would leave the domestic price roughly equal to Iron Range cost of production for years to come. Industrialized nations are using less steel, as recycling and other materials consume more market share.

From a pure numbers standpoint fewer than 10 percent of the Iron Range workforce is employed in the mines. That’s unlikely to ever change, no matter what permits are issued in coming years. Those are undoubtedly our best-paying jobs, critical to our current economy, yet insufficient to support our aging, shrinking communities over the next generation.

A simmering boil is just as deadly as one forged in the 3,272-degree heat found in an electric arc furnace. No, the mining industry isn’t going away (and I’ve never suggested otherwise), but it’s getting leaner, smaller and will continue to employ fewer people. For Iron Range mines to stay competitive, they’ll need a big influx of investment in new iron pellets to feed those very electric arc furnaces — now replacing traditional blast furnaces at a steady rate.

It is said that a crisis is really an opportunity in disguise. Wise leaders and entrepreneurs know this is true. But a hazy crisis makes for hazy opportunity. We’ll have to cut through this fog to accomplish much of anything, be it in mining or economic diversification, in the next five years. We should still treat what’s happening in iron and steel as a crisis, because it really is. We should respond by growing industry and a diverse economy ready for the opportunity always found hidden in uncertainty.

If you still think we’re the boiling frogs, well, it’s hard to imagine a happy ending. But perhaps if we act as the cooks we can remove the pot from the stove and prepare something a little less froggy for our next meal.

Aaron J. Brown is an author and college instructor from northern Minnesota’s Iron Range. He writes the blog MinnesotaBrown.com and hosts the Great Northern Radio Show on Northern Community Radio. This post first appeared in the Sunday, May 17, 2015 edition of the Hibbing Daily Tribune.