Essar mine project faces life or death moment

Construction at Essar Steel near Nashwauk, Minnesota, as seen May 2015. (Aaron J. Brown)

Construction at Essar Steel near Nashwauk, Minnesota, May 2015. (Aaron J. Brown)

Essar Steel Minnesota may soon lose its mineral leases for its incomplete iron ore mine near Nashwauk, Minnesota. The beleaguered India-based company missed another deadline in repaying state grant money it received to build an innovative new steel mill, which Essar later scaled down to a traditional taconite processing plant.

Losing the mineral leases would essentially kill the project, leaving hundreds of millions of dollars in steel and equipment to rust in an open field northwest of Snowball Lake. Sure, the company could renew the leases with new investment. Essar has, however, shown little ability to raise funds in a timely manner. It still owes millions to contractors and vendors.

For its part, Essar seeks nine more months to secure investment and resume construction. Local towns and Itasca County all passed resolutions urging the state to honor that request, but at this point local governments are completely captive to fears that the project might die.

More likely, another company — perhaps Cliffs Natural Resources — could buy the project, but probably for pennies on the dollar and in no particular hurry. The Iron Range mining industry is just now returning to more typical iron ore production totals after almost two years of cataclysmic market conditions for commodities like iron ore.

The news has exceeded expectations, but market analysts believe the industry might yet see another downturn late this year or next.

Of course, Mesabi Range iron ore is part of a North American supply chain, not always directly tied to the Asian and Australian trade that dictates so much about iron prices. This is a good thing, because Range mines produce ore that costs more than international prices, currently about $55/ton.

But North American steel is changing, too. Herculean trade protections taken by the Obama administration stemmed the inflow of “dumped” foreign steel, the main reason United Taconite and Northshore Mining are reopening this summer.

But that only plugs the dam. Trade protections fail to change the fundamental formula of cheaper ore worldwide. Further the Iron Range still makes ore for blast furnaces. Steelmakers continue to phase out blast furnaces in favor of electric arc furnaces, which use more refined iron products in making steel.

Converting Iron Range taconite plants to direct-reduced iron plants would require billions of dollars of private investment, money that American companies don’t appear to have or aren’t yet willing to raise.

Another complication besets the Essar project. U.S. Steel’s Keewatin Taconite remains closed and is widely believed to be for sale. Meanwhile, people tell me Cliffs is picking up lots of new orders for iron ore this summer just as its Empire Mine in Michigan is closing due to exhaustion of ore.

If Cliffs wants to expand, it has options. It could buy Essar or KeeTac, or it could work with its partners at Hibbing Taconite to take over the adjacent KeeTac pit. Undoubtedly, Cliffs will make this decision based on cost. No matter what, at least one mine will be left out. As it all shakes out, workers who had jobs will be in search of new careers.

So despite callbacks at United Taconite and Northshore, and relative consistency at the Minntac, Hibbing Taconite and Minorca mines, the Iron Range mining industry remains in a delicate situation. Anything close to a recession would knock down the sandcastle.

Efforts to diversify the Iron Range economy become more important now, not less.


  1. Eighteen blast furnaces are left in the United States, some of which are operable but not currently running. This is down from over 30 ten years ago. The handwriting is on the wall.

  2. Life or death? Come on. It’s a corporation. The melodrama surrounding mining in NE MN is simply too much. We are being led to believe this one industry is all that has ever gone on here or ever will. The fact is the half century leases of large swaths of the region chain us to them. It’s time to break the chains. our elected officials are locked into the economic system developed by that industry. We need out.

Speak Your Mind


This site uses Akismet to reduce spam. Learn how your comment data is processed.