Essar layoffs signal project hibernation

Construction at Essar Steel Minnesota near Nashwauk on Oct. 8, 2015. (Aaron J. Brown)

Construction at Essar Steel Minnesota near Nashwauk on Oct. 8, 2015. (Aaron J. Brown)

Around 3 o’clock Friday afternoon, the streets of Nashwauk were busier than usual, a dozen full sized pickups parked outside the town’s two bars, DeNucci’s and Wizards.

The bars face each other at the last stop sign I see before heading past Essar Steel, north to my home in the woods of Itasca County on the western Iron Range.

“That’s not good,” I thought, on seeing the trucks.

I would later learn that earlier that day Essar Steel Minnesota laid off many of its permanent employees at its ongoing taconite plant construction project.

Project progress had already all but halted. Most contractors left the site in November. Most of the traffic in and out of the site were the Essar “regulars,” engineers and site staff. And it would seem that most of them are now on what is being called a temporary layoff.

Of course, the Iron Range mining sector is replete with temporary layoffs right now. What else do you call them? There is so much uncertainty about the future of the domestic iron and steel industry that there’s no distinction between permanent and temporary. There will probably be more layoffs before some get called back. To the same mines? For the same owners? Much could change in 2016.

The Essar project is a special case, however. It’s not a mine; it’s a proto-mine. Essar is the shadow of a much bigger ambition, and has come to stand for the diminished expectations of the last 20 years on the Iron Range.

I took two tours of Essar in 2015, one in May and another in October. In both cases, the company was excited to show off the amount of activity on site and the notable progress that had taken place. In both tours, a late 2016 date for first production was cited, along with promises to continue construction through this winter.

With the site shutdown going on now, the production deadline is now virtually impossible. Without a clear understanding of what’s going on with the project’s financing, it’s not clear when Essar will produce taconite.

Essar is clearly on track to become a mine, but it has no engine to pull it along those tracks at present. It might have forged an agreement with the state to address the money it owes the taxpayers, but it faces legitimate business challenges. Well-established Range mines are in deep trouble, so Essar’s situation is particularly fragile.

Most every expert I’ve talked to predicts at least two years of extraordinarily difficult market conditions for mines. It’s hard to imagine Essar opening until ore prices are high enough for owners to recoup their investment.

By then, the project could have new owners. Or maybe not? It seems almost any outcome is possible.

Right now, Cliffs mines United Taconite in Eveleth and Northshore Mining in Babbitt and Silver Bay are idled. Magnetation Plant Two joined that list this week. U.S. Steel’s Keewatin Taconite is also idled.

U.S. Steel’s flagship mine, Minntac in Mountain Iron, is still running and looks to be about the most stable of the Range mines right now. Arcelor-Mittal’s Minorca Mine also appears stable. Minorca is the only mine that hasn’t laid anyone off in the past year and just signed a ten-year contract with Minnesota Power. Hibbing Taconite, run by Cliffs for multiple owners, remains operating as well.

Mining accounts for about 3,500 direct jobs on the Iron Range, less than 5 percent of the overall workforce in the region, but with many related industries. Despite mining’s tumble, the state’s unemployment rate has remained low and Northeastern Minnesota’s has remained flat. This suggests that Iron Range problems are in deep danger of being written off as a simple casualty of American deindustrialization.

That’s why my work at suggests so strongly that local leaders must take an active role in building a more sustainable, locally driven economy that attracts new ideas and investment to our region.

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