For Iron Range towns, a bad economy gets worse

The taconite industry looms large over the town of Silver Bay on the North Shore of Lake Superior. The hulking red steel buildings of Northshore Mining tower next to Hwy. 61.

As Silver Bay Mayor Scott Johnson points out, even from the highway it's plain to see the woes the iron ore industry is facing.

"Drive up the North Shore," he said. "We have a yard full of pellets. Just not selling."

Those taconite pellets are sitting in Silver Bay or next to the ore docks in Duluth, instead of being loaded onto cargo ships headed for steel mills across the Great Lakes.

Northern Minnesota's iron industry was already struggling, even before Cliffs Natural Resources announced Tuesday that it will temporarily close its Northshore Mining facility in Babbitt and Silver Bay.

The move will result in nearly 500 layoffs, in a region reeling from several other mine closures.

Mayor Johnson said the turmoil in the industry is having an outsized impact on his little town.

"As much as we try to diversify, our town is reliant upon taconite production," he said. "When these plants shut down, inevitably some people will leave and we'll never get them back."

The closure is also tough news for the town of Babbitt, said Mayor Andrea Zupancich. That's where the taconite ore is mined before it's shipped by rail to the pellet plant in Silver Bay.

"We need these good paying jobs, just so the town and the area can survive," Zupancich said. "It's hard to say what's going to happen."

Cliffs officials say Silver Bay and Babbitt are feeling the faraway effects of a global steel industry. Spokesperson Pat Persico said a record volume of foreign steel imports has hurt the company's customers — namely, American steelmakers.

"So their requirements are down and our inventory levels are up," she said. "So with that we had to make the decision to temporarily idle the Northshore Mine."

Persico said the mine and plant will be closed by Dec. 1. Five hundred forty people work there, but 90 employees will remain working through January, with 70 staying beyond that to maintain the plant.

With Northshore's announcement, three of Minnesota's big six iron-ore operations are now temporarily closed. Cliffs announced in July it would close United Taconite in Eveleth. Earlier in the spring, U.S. Steel idled Keewatin Taconite. And two other smaller operators, Magnetation and Mesabi Nugget, have also closed facilities. Altogether, about 1,500 of the best jobs in the region are gone.

"This is a very big deal for the Range," said Mark Phillips, commissioner of the Iron Range Resources and Rehabilitation Board. "And it trickles down to Duluth and the whole state."

Iron mining is a notoriously cyclical industry. But historically, Phillips said, when the U.S. economy was doing well, the mines would do well too. "What's so difficult about it is it's the first time we've seen this in a generally healthy economy," he said.

College of St. Scholastica economist Tony Barrett said this downturn in the steel industry has persisted much longer than he anticipated. But there are positive signs.

"There still is demand for taconite," he said. "It's just an excess inventory."

And secondly, he said, a recent decision by the U.S. Department of Commerce supports the steel industry's longstanding complaint that foreign steel companies in China and elsewhere are illegally dumping steel in the U.S. at less than the cost of production.

"And that indicates that there is a light at the end of the tunnel for the overwhelming amount of imports, most of which are probably being dumped," he said.

U.S. steel producers have filed three sets of trade cases this year alleging illegal dumping. But until those steel imports decline, hundreds of mineworkers in Minnesota are likely to remain unemployed.

Cliffs says United Taconite and Northshore Mining will remain closed through March. But Dustin Goutermont, a city council member and Northshore Mining employee in Silver Bay, worries it could be longer.

"I think everybody's a little nervous," he said. "They extended the ones up on the Range already. They told those guys it would be a few months too, so you never know."

Gov. Mark Dayton is calling for a special session to extend unemployment for mine workers whose benefits will expire soon. It's imperative to help them, he argues, because "nobody knows when this industry is coming back."