With mine layoffs coming, Iron Rangers prepare for hard times

Every year, Doug Ellis sells hundreds of pairs of expensive steel-toed boots to miners, and a lot of hunting rifles.

"My business is built on mining money," said Ellis, who owns the Virginia Surplus sporting goods store. "It's what drives all these towns."

Ellis has operated the store in Virginia for 25 years, through three downturns in the mining industry.

People on the Iron Range are used to the booms and busts of the cyclical mining industry. But the latest downturn has Ellis and many others worried. They're bracing for the impending layoffs of 1,100 mineworkers later this spring. The job losses likely will significantly affect a regional economy that relies heavily on mining.

The loss of 1,100 jobs on the Iron Range might not seem like much compared to the 3,100 jobs that Target eliminated in the Twin Cities last month.

But in a region where mining makes up about 30 percent of the economy, the impact of the layoffs is enormous, said John Arbogast, vice president of the United Steelworkers union Local 1938 at Minntac in Mountain Iron.

"On the Iron Range, mining is everything," Arbogast said.

U.S. Steel has announced that it will lay off 700 employees from Minntac, the largest taconite producer in the state. About 400 workers at its Keetac mine in Keewatin also will lose their jobs.

That's nearly one-fourth of the 4,500 mining jobs on the Iron Range — jobs that on average pay more than $80,000, according to officials with the Iron Range Resources and Rehabilitation Board.

"This isn't the Twin Cities. This is all we have, and they're good paying jobs," Arbogast said. "And these are hard-working people. They love living here. They love the fishing, the hunting — everything that comes with living on the Iron Range."

The miners aren't the only ones affected by the job cuts. A 2012 University of Minnesota Duluth study commissioned by the state and industry groups estimated that every mining job on the Range creates nearly two spinoff jobs.

That includes jobs at companies that service and supply the mining industry directly, as well as many in the region's restaurants, gas stations and retail stores.

Virginia is one of the largest of the nearly 20 small towns that line the Iron Range, second only to Hibbing. But the population of both has dropped by more than 4 percent since 2000.

Local residents and leaders hope the trend doesn't continue. But Virginia — surrounded on three sides by huge open pit mines — has long depended on those operations.

"When the mines catch a cold, we all catch pneumonia," Ellis said. "Everybody is impacted; nobody is exempt."

On the Iron Range, where people are hardened to the traditional boom and bust cycle, his attitude is typical.

"We're a resilient bunch, and anytime times are really tough, we always seem to find four wheel drive, dig ourselves out of the mud hole, and move on," Ellis said.

But some say the latest downturn seems different from the last one in 2009, when U.S. Steel also laid off about 1,000 workers, said Arbogast, the iron worker.

"In '09, everything was down, it was recession; you could feel it coming," Arbogast said. "Now America's doing great, unemployment is at record, low-type levels, everyone's doing well and we're the ones getting hit on this.

"So that's what makes it tough."

After the last downturn, the global price of iron ore soared to over $190 a ton in 2011. In recent months, it has dropped to about $50 a ton.

The lower prices largely stem from decreased demand for steel in China, which until recently seemed to have a seemingly insatiable appetite for iron ore to produce steel, said Andrew Lane, an analyst for Morningstar.

"We've seen lower demand from China, and China consumes about half the world's steel," Lane said. "So as goes Chinese demand for both steel and iron ore, so go steel and iron ore prices on a global basis."

Lane said a global oversupply of iron ore and steel also is hurting Minnesota's taconite operations. The world's three largest iron ore miners ramped up production in the past decade, largely to meet Chinese demand they assumed would stay strong.

The strong U.S. dollar has also encouraged a surge in foreign steel imports into the United States, one of the few places where demand for steel is strong. Minnesota politicians allege that steel companies owned by foreign governments are illegally dumping the steel, or selling it in the United States for less than it costs them to produce.

"These things have come together in a perfect storm," said Tony Barrett, an economist at the College of St. Scholastica in Duluth.

While some analysts predict the price of iron ore will drop further, Barrett thinks Minnesota's taconite iron ore industry will stabilize, for one simple reason.

"The world needs steel," he said. "I see the demand for steel recovering, and with that the demand for taconite."

The question everyone is asking on the Iron Range is when.

Locals say if workers are only out of jobs for three to four months, the effect of the layoffs won't be too bad.

For Keewatin Mayor Bill King, however, every layoff and every closed business takes its toll.

"It just seems like a small part of the town dies away. Each time," King said. "You know, you lose this business, or a couple citizens move away, so it's hard, it's hard to watch."