Cliffs will restart North Shore plant, recall 540 workers

Cliffs Natural Resources said Monday that it is reopening one of its taconite plants in northern Minnesota, even as the Legislature considers extending unemployment benefits for the many miners who remain out of work on the Iron Range.

Cliffs said it will recall the 540 workers laid off at the Northshore Mining operation in Silver Bay, which the company started idling in December, citing oversupply issues and underpriced imports that hit the global iron ore industry. Cliffs' United Taconite operations in Eveleth and Forbes, Minn., remain idled, along with several plants that other companies own.

But now, officials said domestic demand for iron ore is starting to pick up as underpriced steel imports slow amid powerful new trade tariffs recently implemented by Congress and the Obama administration. The benchmark price for iron ore also is a bit higher after China said it would allow a deficit to drive economic growth.

The reopening of Northshore Mining this spring will be welcome news for the Iron Range, which has been clobbered by layoffs across most of the taconite facilities there. Some 2,000 workers across the Range have been displaced over the last year as various producers wrestled with an industry downturn.

The dilemma prompted the Minnesota Legislature last week to take up efforts to extend the unemployment benefits for those miners who are still without jobs and for the thousands of related workers who also have lost jobs in the region.

"This is great news for 540 laid-off miners who are headed back to work," said Gov. Mark Dayton in a statement. "But thousands of laid-off workers on the Iron Range are still hurting. That is why I urge the Minnesota House of Representatives to take action this week to retroactively extend their unemployment benefits for 26 weeks."

In addition to United Taconite, Iron Range production lines remain idled at Mesabi Nugget in Hoyt Lakes, Mining Resources in Chisholm, Magnetation in Bovey and Keewatin and United Steel's Keetac plant in Keewatin. Excluding Northshore, about roughly 1,000 miners remain unemployed.

Still, Northshore's announcement Monday marked "unambiguous good news," said Tony Barrett, an economics professor at College of St. Scholastica in Duluth. Several of his students have parents who are laid-off miners. Barrett is hopeful that the new trade tariffs and Northshore's move will spread to other plants.

"There are still people on thin ice and in suspense, but this [Northshore recall] is indicative of better news in the future," Barrett said. "With the tariffs now in place, we know the [underpriced] steel imports are going to dry up. And we know that demand for U.S.-made steel will be needed and that means they will need taconite pellets," which is the raw ingredient to steel.

While some are not as optimistic, economists have pointed to China as the reason iron ore rose to $62 a ton at the beginning of last week and closed Friday at $57, according to Reuters.

Cliffs' stock price rose 30 percent Monday morning before closing at $2.71, up 15 percent.

Cliffs' Hibbing Taconite facility on the Iron Range and two of its Michigan operations are now operating at "normal" rates, the company said.

"The avalanche of unfairly traded steel hitting the U.S. since last year negatively affected our clients' production levels and, as a consequence, affected us," said Cliffs CEO Lourenco Goncalves in a statement. "At this time, with the trade cases approaching their final stages and preliminary duties being announced, the volume of unfairly traded steel is starting to subside. As our clients' order books improve and their need for pellets approach more normal levels, we are pleased to announce that we are bringing back to work our dedicated employees at Northshore."

In 2015, Cliffs introduced a new product at Northshore Mining. Its new "DR-grade pellets" have a higher iron ore content than traditional taconite pellets and so can be used as feedstock in the more advanced "DRI production" processes that help convert iron ore into steel.

"As we restart operations at Northshore in May, we will also resume the production of DR-grade pellets destined to EAF clients," Gonclaves said.

Cliffs expects its 2016 production volume to hit 16 million tons of ore. The company said it is maintaining its previous production cost expectations of $50 to $55 per ton. It expects to sell the ore at $55 to $60 per ton.

Mark Phillips, commissioner of the Iron Range Resources and Rehabilitation Board, said the news was "encouraging."

"It's a sign that the difficult and prolonged downturn in the domestic iron ore and steel industries may begin to be turning in a positive direction," he said. "It's our hope that restarts of other idled mining operations in northeastern Minnesota will follow."

New enforcement actions against underpriced steel imports are expected to help prices for iron ore and steel recover within the United States. While now trading at $57 a ton, up from $54 a ton in December, it was trading at about $90 a ton a year ago, according to mining research firm InfoMine Inc.

Last month, the White House announced three efforts designed to slow or stop the flow of underpriced steel from China, Korea and five other nations. It is boosting customs and border patrol personnel to step up inspections at U.S. ports of entry. The White House also ordered the increase of U.S. Commerce Department personnel who will ensure that steel dumping tariffs are enforced. Congress agreed to fund efforts that boosted trade tariffs on offenders.

In an interview with the Star Tribune on Monday, U.S. Sen. Amy Klobuchar, D-Minn., said preliminary new tariffs on Chinese steel will increase violators' costs by 266 percent. "That is a lot of money, and in some cases will be almost three times the cost of the product," she said.

"The trade tariffs are really important. It sent a message to the whole industry that the Congress and the president are behind this industry and that they are willing to actually enforce the laws instead of letting people trample all over them," she said. "It gave our own domestic steel industry faith that the foreign steel companies were not going to be able to dump as much. So then they upped their production."

Northshore Mining's reopening "represents a good first step" in the strengthening of U.S. trade laws, but it's not time to crack open the beer yet in celebration, she said. "There are still a lot of challenges ahead."

Dee DePass • 612-673-7725