What’s behind Mesabi Nugget’s long term idle?

Mesabi Nugget

Mesabi Nugget near Hoyt Lakes, Minnesota

This week, Indiana-based Steel Dynamics announced the indefinite idling of its Minnesota properties, including Mesabi Nugget in Hoyt Lakes and Mining Resources near Chisholm, a scram mining operation that produced iron concentrate used by Mesabi Nugget.

About 200 people will lose their jobs and there is no clear sense of when these properties will reopen, though Steel Dynamics indicates it will be at least two years. These properties had already been going through “warm idles,” slowdowns and outright production stoppages. This announcement puts an end to the uncertainty.

As previously reported, U.S. Steel’s MinnTac and Keewatin Taconite are both planning major layoffs this year, up to 1,000 jobs by summer’s end, while Cliffs has cut 100 salaried positions at its three Iron Range mines. Magnetation is in Chapter 11 bankruptcy, having idled its Keewatin Plant 1 indefinitely as well.

On Tuesday, I published my story about Essar Steel’s iron mine project near Nashwauk, a $1.9 billion investment in an efficient new taconite production facility that will open Summer 2016. It would be reasonable to ask, why is Essar able to forge ahead while Mesabi Nugget shuts down and other mines teeter on the brink?

As near as I can figure after covering the industry for more than a decade, the answer is that mining and steel are subject to increasingly fragmented, niche markets pressured by global trends. In other words, global prices swing up and down — in the case of 2015: way down. But the world still need steel: it just needs highly specific kinds of steel suited for unique products. Unique steel needs unique ore. Unique ore requires all manner of new processing near the mine site.

Word NEWS in Old Typewriter Typebar Letters Isolated on WhiteThe Iron Range was built on the notion that our ore was so good and so plentiful you could just shovel it into the furnaces like really heavy pixie dust and do whatever you wanted. Now, it’s more expensive to mine Minnesota ore and there are mines all over the world producing similar quality and much, much more quantity.

Wait a minute, though. Wasn’t Mesabi Nugget supposed to be just the sort of value-added project that would bring the Range into the future? Again, this is true, but complicated. It’s not just about adding value; it’s about adding value at the right price. Mesabi Nugget went online and thrived during historically high iron ore prices. It just wasn’t competitive at lower prices. It’s not the right fit for the current market.

This is the tricky business the Iron Range is in, and those who feel our lot is wholly tied to mining had better realize that it will take as much high thinking to keep the existing industry afloat as it will to diversify our economy. Sure, the good prices might come back in a couple years, but there will be fewer mines and fewer jobs left in our region to capture those prices.

In some ways it’s almost like what’s going on in media, or telecommunications, or the recording industry. Just when you invest in the coolest CD store in town, digital downloads take out the middleman. You start an MP3 player store, only to find out that those goddamn hipsters are buying vinyl again. The advantage, as always, is with those who control the content and those who control the delivery of that content. They are the ones with options.

Hence why the editorial slant of MinnesotaBrown is toward content- and delivery-based economic solutions, not extraction alone. Add value or perish. Win with quality and/or low cost, not quantity alone. Use your head or break your back. These words are no comfort to the workers without jobs today. They did nothing wrong but nevertheless pay the price. This summer the people of the Iron Range, and rural places like it, face a defining economic challenge together. We must not isolate ourselves from each other or the world around us.


  1. Ranger47 says

    You’re on the verge of reasoning like a conservative Aaron!

  2. There might be some behind the scenes problems affecting it. Almost everyone who has spoken to me about the actual physical plant at Hoyt Lakes, from construction workers to engineers has said the place is a dangerous death trap held together by duct tape. And please don’t think this is some sort of wishful rumor based thinking on my part. I was sort of stunned that everyone I met who had anything to do with the operation spoke of it in this way and it seemed to be public knowledge on the East Range. This ranged from construction workers from Duluth who spoke of insane practices during initial construction, local workers who described in detail such things as conveyor belts designed for lighter materials being used and causing fires not once but twice, to an electrical engineer refusing to work at the project anymore due to safety concerns and resigning,..the numbers were sort of striking and none of them knew each other. Even a former intern said he quit due to the insanity. It would be one thing if one or even a few disgruntled workers spoke like this, but when it was more than ten and ranged from ordinary production workers to an engineer, I thought there must be some truth. The opinions were always the same, and I paraphrase… “a clusterf$%k deathtrap.” I assume the scram operation was shut down as it was simply the supplier of material for the operation or due to costs. This despite all the local subsidies government and the IRRRB have dumped on the great bloated cow that is the extraction industry. It seemed to me it was almost treated as a disposable operation, from building to operation.

  3. Most people who worked at Mining Resources in Chisholm liked their jobs and the company very much; most are quite disappointed for the closing and would have continued their work there.

  4. Ranger47 says

    Interesting Paul, I hadn’t heard of this..

  5. Independant says

    As someone who has first hand knowledge of those facilities and many other industrial operations across Minnesota I feel the need to comment here. Rumors or venting by current or former employees about how screwed up everything is where they work in not unique to any plant or is it rare. Also having contractors comment about how screwed up everything is on a project falls into the same category. I have worked both sides on many industrial projects and every guy or gal with 10% of the information think they know how to do it better. It isn’t much different than some people posting comments I guess. Steel Dynamics is a company that compensates their employees very well and has never to my knowledge failed to pay a vendor or contractor. Everyone I know on the East side of the Iron Range is hoping market conditions allow for a restart of these facilities that have been a great benefit for the employees, venders and contractors that worked there.

  6. To clarify, nothing was said about the Mining Resources-Magnetation operations. I never heard a word about those. But the fact was regarding Mesabi Nugget that it was beyond “rumors”. It is the old aphorism of just how many people tell you you have a tail, you might just want to look. If it was one crew, one contractor or a group of people that know each other, I would have long since discounted it. But it wasn’t. ..it ranged from initial construction workers, to engineers to contractors to employees who went back to old jobs paying less all repeating the same words…I fear for my and others safety. For years. None of the people knew each other. Regarding the last comment, that reads like an obvious chamber of commerce/management response. Anyone who knows me knows I’m a brutal skeptic. One contractor, when informed of this, immediately thought it might have more to do with orders to clean up their act by the feds. I don’t. As a former regulator, ending an operation never happens even if 100 people die. Unlike the officials up there who justify throwing money in endless subsidies, I assume the operation is not profitable at these price levels, or never was profitable at the old levels, or despite the subsidies managing the thing was a pain in the butt.

  7. I am certain Paul really does know people who would not want to work at Mesabi Nugget, and I am just as certain that I know people who would take their jobs back immediately. (That’s probably how it is at just about any workplace.)

    It was good that a company finally tried to do something with the ore here instead of just shipping it out in its raw form. Hopefully Mining Resources and Mesabi Nugget will be able to reopen as soon as possible. Meanwhile, now sure would be a great time for the IRRRB combined with MnSCU or the University of MN to do some research and design to make value-added processes and industrial water solutions more viable for the area.

  8. Developing processes and subsidies are exactly the problem. The state has been doing this for a century in a desperate attempt to keep it going after the robber-barons had done exactly what they always do: Take what is profitable and leave the mess. The first thing they did was “sever the mineral rights”, and to make up for it, the state extorted the Duluth Steel Plant out of J.P. Morgan under threat of actually charging normal taxes. Then the state developed the modern taconite industry and changed the tax system again in 1964 to keep it going. And since the collapse in 82-84, which anyone could have seen coming when the plants were built and run cost plus, with workers sleeping, stealing and bumping into each other because of the feather bedded crowding, it has been a constant run of subsidies and various giveaways to keep the entire enterprise going out of desperation. Now the Range legislators, existing as wholly owned subsidiaries of mining companies, when they are not putting on lipstick (the males, that is) in preparation for their next meeting or house party, sneak in entire state law changes in order to ensure their friends profits at citizen’s expense, all while handing out free loans to non-existent projects that their friends use to pay for their brother’s and wive’s lobbying. If I hear one more argument about how “this project is needed to maintain our way of life”, it will be my first duty to pour verbal acid through the speaker’s ears. It is not ” a way of life”, it is a job, and many ranger’s have been privileged throughout the years of being connected or actually not having to earn their way in the world, frankly. The two tier communities of haves and have-nots are like any other extraction based community. The intellectual island that is the range now can’t even seem to understand why people downstream are simply sick of having pollution dumped on them so shareholders can profit and a bunch of people can blow money on pickups and snowmobiles then cry poverty when as usual, the things shut down for lack of profit. I will repeat what thousands of ex-rangers might say to thee: Grow up, get out of mom’s basement, get an education and go elsewhere. The rest of the world experiences greater difficulties and worse poverty, but doesn’t sit waiting in Podunkville waiting for the latest boondoggle to pay them 20 bucks and hour for sitting on their butt in a truck.

    • Independant says

      I did go elsewhere to gain experience but unlike your bitter self I was able to move back to raise my family here.

    • So very sorry Paul. I really, really do try to listen and understand your point of view, but it just gets so lost in the tone of your posts. I very sincerely hope you are happy where-ever you now live because you sound so very unhappy / overly distraught over anything that has to do with the Range.

      Though I do not live in my parent’s basement : ) again I will repeat:

      I believe now is the time that the IRRRB should be investing some of the taconite money to hire MnSCU and the University of MN to improve value-added mining processes and industrial water solutions. These things are not for the “robber-barons” or the “lipstick wearing male legislators?”, they’re for the good of the people and environment of the area (and for those who live downstream). Iron Range Engineering in Virginia is full of awesome young people with all sorts of new ideas – we should be investing in that program and those young people to let them come up with solutions.

  9. Perhaps someone can check this out further, but I don’t believe that Mesabi Nugget has ever made a profit.
    Also, rather than subsidizing some sort of value-added iron product, I believe we should be subsidizing the clean up of the pollution being left behind by taconite mining. Our young engineers need to find environmentally safe methods to clean-up the sulfates and mercury that are a legacy of taconite mining. And what about the landscape, restoration of wetlands and forests, etc.
    When taconite mining expands, it is going to eat up our towns and the roads and highways that connect us. This is happening right now with Highway 53 between Eveleth and Virginia, and Highway 5 between Chisholm and Hibbing, along with the loss of Parkville, and blasting creeping ever closer to Mt. Iron, Virginia, Eveleth, Chisholm, Hibbing, and I’m assuming Nashwauk and Keewatin. This doesn’t do much for the foundations of our homes and buildings;.
    It would be better to be pro-active rather than reactive in seeking a new future. We seem to have our heads stuck in the dirt.

  10. Perhaps a listing of some of the issues might help to understand the “offensive attitude” of my posts. First is the physical alteration of the entire northern part of the St. Louis river watershed with completely destabilized sub-watersheds such as the East Swan. The physical destabilization has caused massive erosion and will for years. Our great grandchildren will still be dealing the consequences. This is true throughout the entire northern part of the watershed. No mining company nor the IRRRB much less any city on the range is actively doing anything to mitigate. The same is true with the sulfate-sulfide-mercury cycle, Minntac’s destruction of the wild rice in the Sandy river and the elimination of wild rice in the St. Louis river downstream from the Partridge river confluence. Or the various groundwater issues that have not even been studied including Hibbing having to drill new wells due to the water table draining into the Hull-Rust pit. The range legislators fight against any mitigation or regulation, including collaboration with the republicans in changing the state’s laws and rules at the behest of the mining companies, or sponsoring legislation taken directly from ALEC, from wetlands rules to exemptions specifically for sulfide mining. In terms of business development, the track record is at best abysmal, rife with unprofitable projects and good old boy deals.We can start with the IRRRB funding the former Hibbing hockey star for a project with no collateral, no property and a technology nobody wanted. The money has never been paid back and he did manage to employ his wife and younger brother as lobbyists. Or perhaps, Giants Ridge and the adjacent property development, which did manage to make profits for exclusive cabins complete with asphalt trails for the new cabin owners. Mysteriously, the public land and the entire development went to various realtors and contractors. We won’t mention the operation itself in its now third decade of taxpayer subsidy, allowing the willing to improve their golf game and keep Vi’s pizza alive at taxpayer expense. Or we could mention government entities subsidizing prospective mining operations for multi-national conglomerates with the environmental and human rights record of Idi Amin Dada aka Glencore, now headed by the famed environmentalist Tony Hayward of British petroleum Gulf Oil spill fame. There are many more examples, too many to mention here. The public subsidy of “value added products” does not deserve mention. If something is profitable, investors will fund it and corporations will do it regardless of the public sector’s involvement. If they require public sector involvement they are merely trying to increase their profits or extract what they can and abandon, much like pro football stadiums. The value added product has been the dream for a century, and it is why the Duluth Steel Works existed…it was extracted from J.P. Morgan under threat of ore taxation. There is a problem that always remains…the Range is at the bitter end of the transport system (even Grand Rapids is in a better location) and it requires switching modes of transportation multiple times to get it to market, so it is more profitable to ship the raw material to your already existing works and ship it from there. It is why Steel Dynamics wanted to build the new Iron Nugget facility in Indiana and not the range…they already had existing facilities and shipping there at the center of the continent and not at the edge of the universe. The anger is at a system that fails to see what is right in front of it while it continues to subsidize mining in the vain hope that it will continue all while ignoring the theft of taxpayer dollars. That economy is gone and it is never coming back. It will not happen again. Production truck drivers will be replaced by drone controllers watching screens to correct programming mistakes. Automation will continue and the new companies will not be required to hire you just because you have an “ich” at the end of your name. There are and will be great difficulties but the hope of anything resembling 1964-1981 is gone. Diversification means looking both towards the past and the future, but it also means absorbing reality and not thinking Hibbing will ever have 25,000 residents short of a Digikey locating there. But the key is this…stop investing all the time and energy into future giant holes and do something else. People did not always rely fully on the mines. Up until the 60’s the fact was many people did multiple things for income as other than during wars, the mines shut down in the winter. The stories of people selling a rail carload of pulp or peeling balsam at 8 cents a stick are very real. Most people in the country actively farmed…if you had a hayfield someone was cutting it or you were to feed livestock which you used or sold. It is only post-taconite that the expectations grew and I mention the featherbedding and graft as it explains just how unreal that time was; there is a community expectation and hope that the problems will be solved by bringing that back. It won’t happen as it can’t, for mines will not be built and run on a cost-plus basis with feather-bedded employment ever again. So if things are to improve, there must be diversification, but it cannot be what has gone on so far. It has to look at communities and not miracle economic development schemes that mysteriously benefit one’s past hockey teammates. It cannot call Walmart “economic development” when every study shows it costs communities money. It cannot continue to rely on 1970’s style highway strip development when the new infrastructure is network infrastructure. It has to broaden the concept of possible employment to other industries. Looking to the past, here used to be significant agriculture in the area. What happened to it? can the agencies help the start up? Why not? Instead, it seems all resources are directed at getting new mining projects going regardless of the alternatives and consequences. It is like watching a man bury himself by shoveling further into the ground in an attempt to dig his way out.

  11. 1. Industrial water solutions would be a great thing for the IRRRB to invest in by having Iron Range Engineering work on. It would help solve a whole bunch of things at once – how to clean up issues if needed and how to make fewer issues in the future! Everyone would be happy! And, there’s probably lots of patents and new products/processes that could be designed here and built here.

    2. New mining technologies would also be a great investment. You’re right that there’s going to be “driver-less trucks”. Why don’t we come up with them, test them here, build them here? What other new mining technology could be built here?

    4. Same with value added technologies. Why don’t we invest in them, come up with them here, test them here? There’s always a better way to make something, steel included. People will pay for those processes.

    5. Diversification. Awesome. What can we think of?
    Can we farm wild rice domestically? Can people who live on a little lake grow it?
    Can we talk Walmart into having a “Made in the USA” section? What could we make? (A lot of baby-boomers have more disposable income and would be willing to support US made products.)
    Can we farm chickens that are free-roaming? We have a lot of room to roam around here.
    Can we do internet things? (Well, probably, if you live/work in town? Sorry Aaron.)
    Can we come up with better living situations/care-models for the elderly? (We have a lot of people who could benefit from that, and maybe they could in other places, too.)

    Paul, you make a some very valid points about the Iron Range. But, in the end, aren’t you sort of stuck in those “old days” too? Sure, there’s some things that weren’t right, but you can’t really go back and change them. By always being angry about them, maybe you’re not moving forward just as you say the politicians, the people, the “system” isn’t moving forward.

    Sincere best wishes for finding your “happy place” someday!

    • Independent says

      Absolutely agree with you Amy. A positive outlook and trying to solving problems and improving things trumps complaining and pouting every time.

    • Elanne Palcich says

      Yikes. Some of your suggestions are exactly what we don’t want.
      1. The current technologies for cleaning up mining pollution involve RO which creates its own pollution problems, and bio-engineered bacteria which would be placed into our waterways, not knowing what the results would be. Sort of like introducing microscopic carp into the waterways.
      We need clean-up technologies that will solve problems without creating more–ones that are in harmony with nature. So far, computer/lab technology has not been able to recreate/analyze all of the complexities of nature.
      2. Why would we want to manufacture driverless trucks for the non-existent drivers?
      3. We should be saving our natural wild rice, not replacing it with some modified version that doesn’t have the taste, quality, or nutrients of the wild source. Sort of like wild vs. commercially raised salmon.
      4. Value-added on steel does not solve what mining is doing to our water and landscape.

      However, rethinking Walmart, creating better housing options, becoming more food independent, and expanding broadband all deserve a chance. Along with educational opportunities that expand, rather than compartmentalize, our thinking.l

      • Independant says

        I am interested in your great fear of reverse osmosis (RO). Is the “pollution” you are insinuating referring to the back flushing or interval cleaning of the RO units? I am interested because when I am working in the water treatment industry RO and Membrane filtration technology is beloved by my “green” customers in that industry.

        • From what I have read, RO is not effective on the large scale of mine operations. The MPCA did not require Mesabi Nugget to use RO to assist with its sulfate problem, because it would be too costly and there was not enough evidence that it would be effective.
          Another major problem is what to do with the pollutants collected in the filters–where are they to be disposed of, on the scale required. You may have heard about the language inserted in the Ag/Environmental bill exempting sulfide mining waste from solid waste rules. The agencies are in a hurry to permit sulfide mining, even though there are no definitive solutions for the waste problems that will ensue.
          I have read that RO may work well with waste water treatment or other facilities of this type. The scale of these facilities does not compare with the tons of waste rock and tailings in a mining operation.
          And of course, RO is used for personal water filtration–but that is on a household scale using water that has already been basically treated, and hence should not contain large amounts of toxic heavy metals and sulfates.
          Hope this helps.

          • Independant says

            The largest one I have personally been involved with handled 80 million gallons a day… Didn’t help much.

  12. Ranger47 says

    Congratulations Amy! With years of pontification by Aaron about how economic diversification is the salvation for the Range, this is the first time…..the very first time I’ve heard anyone from the “diversification community” mention any tangible ideas. Now, pick one out, flesh it out, and go for it!! If you put some effort into it, you might even get the IRRRB to provide you some start up funds. If not you, who?

    Mining will always be here to provide livelihoods to send our kids to school so let’s get off that topic and start diversifying.

  13. Apparently some lessons in state-corporate capitalism are needed. Why would any producer place something like a large scale industrial manufacturer on the range? A minimum of two transport mode shifts just to get materials in or out. Dale Carnegie and Wayne Dyer not with standing, that has been the problem always. And as far as mining always being there, remembering Herbert Stein’s dictum, “If something cannot go on forever, it will stop”. There are cost and production limits to any real resource and once the cost cannot meet adequate profit or a cheaper competitor arrives, it will end. And nothing useful will happen with the current corrupt system in place as most energy is expended in trying to keep the current system going. The responses are always the same. Public exposure of questionable financial practices at IRRRB? Get a law passed keeping such information a secret. A public agency and the natives complaining about Minntac’s impacts to wild rice in the Sandy river? Interfere with the agency and collaborate with Republicans in changing the law. A mining project being questioned and fought by the public? Attach laws exempting their main byproduct from regulation. In short, extract public money, treat it like a personal fiefdom and engage in corruption. No change will occur until that system is gone and the people responsible removed from power.there are too many wetting their beaks for that to happen.

  14. mesabi nugget was the most dangerous shithole ive ever been in. it was held together with glue and duct tape, and the furnace was like working next to a bomb complete waste of time to build that dump

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