U.S. Steel’s MinnTac facility is the largest active iron ore operation in the United States, and “king” of the Iron Range mines of Northern Minnesota. (PHOTO: U.S. Steel)
During its quarterly earnings call today U.S. Steel announced that Canadian steelmaker Stelco holds the option to buy up to 25 percent of Minntac in Mountain Iron. The taconite plant is the largest in the United States and the “king” of Mesabi Iron Range mines.
Stelco will pay $100 million for this option and then $500 million if it exercises the full 25 percent purchase. The deal also includes an eight-year offtake agreement for iron ore bound for Stelco’s Hamilton Works in Ontario.
The good news: This infusion of cash and orders ensures that, at least for now, Minntac will keep running through the current economic crisis. It might be the last mine to close, even if things get worse than they already are.
The bad news: U.S. Steel also announced a $391 million loss and that it would lay off about 2,700 people nationwide. It will also shut down more steel mills in Texas and Indiana.
The Stelco development is intriguing on its own. The company seeks to reopen its Hilton Works in Hamilton, replacing old blast furnaces with electric arc furnaces. This would be huge for “The Hammer,” an industrial burg that has run into the same troubles as American Rust Belt cities like Detroit and Cleveland.
It also shows how electric arc furnaces continue to eat up the work done by expensive, large batch blast furnaces. Companies like U.S. Steel will have to do the same, but their fickle stockholders likely won’t let them.
This deal also demonstrates how North America is becoming more of a closed loop with its iron and steel industries. These companies can’t compete on price with the rest of the world, but if they serve the nearby markets exclusively they can corner the market on this continent.
At least, that seems to be the plan. But that scheme requires a strong and growing North American economy to consume the steel.
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