Cliffs signs new deal; good news for UTac

Taconite pellets along train tracks. PHOTO: Michael Hicks, Flickr CC.

Taconite pellets along train tracks. PHOTO: Michael Hicks, Flickr CC.

Today Cliffs Natural Resources announced it has reached a 10-year agreement to supply iron ore to ArcelorMittal.

This is very good news for laid off workers at United Taconite in Eveleth. Earlier this year, Cliffs CEO Lourenco Goncalves said that reopening UTac depended upon winning this contract. Now a fall reopening of United Taconite seems likely.

The company also released news late last week that Cliffs signed a long term contract for electricity with Minnesota Power for its Iron Range mining properties, including Northshore and United. Cliffs also co-owns and manages Hibbing Taconite for other companies, including ArceorMittal and Stelco.

Reading financial news about Cliffs is an exercise in whiplash. When I looked yesterday, several analysts advised people to sell Cliffs stock as soon as possible, while others read this recent news as reason to buy it up. It seems that it all comes down to whether you believe Cliffs is a healthy company or just doing a good job of making itself seem healthy.

My read is that Cliffs is facing enormous fiscal pressures, forces that could still drag it down at a moment’s notice, but is otherwise doing a better-than-expected job of weathering the storm. This new contract means that Cliffs will retain value and relevance in the iron mining industry at least for the next few years.

Now, the thing that could still knock Cliffs off this recovery is the same threat that faces the whole industry. Iron ore prices, after a modest recovery this year, are sinking again. (Note: the previous link contains comments from an analyst named “Dang Man.”) Further, North American steel companies are exploring new imported iron ore supply lines, something I talked about last week.

Cliffs is trying to position itself as the most likely survivor in Minnesota’s mining industry. It’s the company working most earnestly on value added iron products, something absolutely critical to the local industry. Cliffs has a long way to go, but the news — particularly for those who work at United Taconite — is considerably less grim than it seemed last winter.

With that comes an important cautionary note: the years to come will be the denouement of the traditional taconite era. What follows will be a highly specialized industry that employs fewer people.



  1. The last paragraph is most important. The ratchet has clicked again and iron mining will likely never be as good as it was a few short years ago, again. The last two downturns cost us Butler Taconite, LTV Steel Mining, and Republic in Michigan. This one will cut off Empire in Michigan.

    This deal puts Essar on shaky ground too, since Arcelor was slated to take about half of their pellets if they had been completed on time.

    Still to be decided is Keetac. Part of their market is gone for now too.

    • hardrockminer says

      As a UTAC miner going back to work in August, I am thrilled with this news! The Empire Mine in Michigan is shutting down because they are out of ore. United Taconite is not to blame.

  2. Gray Camp says

    Some Gray Camp thoughts:
    1. Definitely great news that Utac is coming back on-line in October. Great for the workers and their families. Even if our goal is a “new diversified economy”, having this influx of income from “the outside world” return is beneficial to fueling new business efforts.
    2. Things change. The entire world is attempting to do things more efficiently. It only makes sense that less efficient ways of doing things get phased out. In this case it only makes sense that un-profitable mining operations get eliminated. The people / communities that are able to adapt to change are the ones that have the best chance at succeeding. Consolidation of mining operations and fewer employees in the most efficient plants is not entirely a bad thing for the region. It stabilizes and strengthens the remaining operations and gives them a chance of running constantly until their ore runs out. We just need to better adapt to having less people employed by the mines by creating more opportunities for people to work other places.
    3. “Cliffs is trying to position itself as the most likely survivor in Minnesota’s mining industry.”
    One could argue that US Steel and ArcelorMittal (as well as Steel Dynamics, Kobe Steel, and possibly even Essar) are all Steel Manufacturers who mine only in order to have more control over the iron in their supply chains. These steel companies are not likely to try and “add value” to their products that they don’t want or need. It is good that Cliffs is trying to add value to their products, but they don’t really have an apples to apples comparison with the other companies.
    4. Mining has been very good for this region for a long time. Lets keep mining as long as possible to help fuel the regions’ diversification efforts. Mines are what they are. They are very cyclical and subject to market factors, but they are great sources of income for the region and it’s people when they are operating. It is not mines fault that the region has had limited successes at diversifying beyond iron/taconite mining up to now.
    5. For those people to lazy to look up what “denouement” means, it means the climax of a chain of events, usually when something is decided or made clear (I had to look it up).
    6. Particularly if mining operations consolidate to better plants, it seems to make even more sense for someone to put a steel plant on the range (if there is enough reserve left to make the economic return work.

    • Gerald S says

      Adding fuel (pardon the pun) to the argument for a steel plant on the Range is that as the taconite industry gradually peters out, it is going to leave Minnesota Power with a huge amount of excess generating capacity no longer being used to provide power to the very electricity intensive taconite plants. That means that there will be power available for a potential specialty steel plant, using, as they do, electric furnaces.

      This large reserve of power generation capacity is one more thing for people thinking about the economy of the Range to think about. Now the potential solution is to put the excess power on the grid, sending it mostly down to Southern Wisconsin, Illinois, and Indiana. If people can dream up ways to use it here, it is there for the using, and should be priced competitively, adding one more feature to attract new industry to the Range.

      When I think of modern industries that burn through electricity, my first thought is server farms, the huge IT installations that power the cloud, the web, and companies like Facebook, Google, Apple, Amazon, and so on. These “farms” have the added interesting characteristic of generating huge amounts of surplus heat that must be bled off. That in turn can be captured and used to run everything from heating for homes and factories to greenhouse operations even in very cold climates.

      Just spitballing here, but may be worth some thought by the “new improved” IRRRB.

      • Independant says

        Good points and ideas. Our climate would help with the cooling demands of server farms and data centers 9 months out of the year!

      • Gray Camp says

        What is preventing these companies from putting their server farms on the range now? If it is good enough to put them there after the mines close, why isn’t it good enough to put them here when the mines are still operating? Is there some sort of connectivity shortage, or is too much of the power being used by the mines? The IRRRB was trying to help bring more power generation to the Range with the oft criticized Mesaba Energy project. Taconite Harbor is planning to shut down permanently soon. Boswell is facing some tough decisions on what to do with Units 1 & 2 in the upcoming years. I believe Hibbing and Virginia PUCs are operating at less than full capacity. Laskin was converted to Natural Gas and only operates during peak usage. We could definitely generate more MW on the range than we currently do.

        • Independant says

          You are absolutely correct. Even with all of the mining operations running we have excess local generating capacity that isn’t utilized and in addition to what you listed Northshore Mine in Silver Bay is planning to shut down its two power generating units by 2020 I believe.

  3. Gerald S says

    Here is some good news for the Range, at least on the surface:–sector.html?ref=gs

    In the last few months it has become apparent that China is working hard to both modernize their industrial base and to promote development of high value-added industry, de-emphasizing more basic industry, especially those with outdated operating infrastructure. The ongoing attempt to purchase a highly successful German industrial robot developer and manufacturer and recent announcements of development of electric cars and trucks are part of this.

    In doing this, China is seeking to follow the blueprints used by Germany and Japan in shaping and evolving their economies.

    Obviously, this is exactly what the Range needs to do as well, although the Range does not have either the financial resources and huge foreign reserves or the centrally controlled economy that China has, for better or worse.

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