Part of the taconite plant under construction at Essar Minnesota’s Nashwauk project in May 2015. (Aaron J. Brown)
While the half-finished project continues to jut from the landscape in eastern Itasca County, Essar Steel Minnesota is likely going to change considerably before work continues. In fact, it might not even be called Essar anymore if many involved have their say.
Dee DePass at the Star Tribune reports today that Essar Steel Minnesota has missed a late March deadline to pay back $10 million in state funding for an integrated steel plant it never built. Instead, the company has spent the last eight years building a taconite plant in a fit of starts and stops
That’s not surprising, since Essar Steel Minnesota has already indicated that it’s headed toward bankruptcy. Investors in the project are looking to seize control. Suitors, most notably Cliffs Natural Resources, are looking to buy the project outright.
Despite its financial problems, Essar’s plant reflects the current style of iron mine that can produce a wide variety of pellets for newer furnaces. It’s also built in a way that would allow relatively simple expansion to direct-reduced iron production some day. So even though Essar has been a logistical nightmare, it remains attractive to companies looking to survive the leap into newer, more efficient ways of making steel in the United States.
Nevertheless, contractors are owned up to $40 million by Essar, while big equipment companies are owed another $25 million. Last October I took a tour of the Essar site when Caterpillar was assembling production trucks at the mine. It turns out that while the trucks are still there, Essar has yet to pay for them, along with several other pieces of equipment from places like Ziegler near in Mountain Iron.
About the best thing that can be said is that new owners who have available funds could actually do what Essar has failed to do: finish the plant and open it for production.
From the DePass story:
[State Rep. Tom] Anzelc said he has felt more optimistic since he learned last week that Essar had hired investment bank Guggenheim Partners LLC and law firm White & Case LLP as debt restructuring advisers.
He was equally pleased when representatives from Ducera, an investment banking company, met with him and asked for meetings with other legislators and Essar’s contractors. Ducera had invested in the Essar project, and the company representatives wanted to know what it would take to not only complete the construction but also create a higher grade of iron ore that could be produced in a highly coveted electric arc furnace operation that Minnesota lacks.
“Electric arc furnaces are the way of the future” and represent how two-thirds of the U.S. market now converts iron ore into steel, Anzelc said. The current iron ore pellets produced in Minnesota are processed using old blast furnace technology.
For the first time in a very long time, “I am cautiously optimistic because of the renewed commitment from existing investors that there is an interest — without Essar’s participation — in bringing this construction project to completion, and in bringing pellet production to a start,” Anzelc said.
Yet to be determined is the health of iron mining over the long haul, and how older Iron Range mines will endure pressures to invest in new technologies.
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