Mesabi Metallics has long claimed that anticompetitive behavior by iron ore heavyweight Cleveland-Cliffs damaged its quest to build a taconite plant in Nashwauk.
Owners of ill-fated taconite plant in northern Minnesota score legal victory against Cleveland-Cliffs
A federal judge denied Cliffs’ motion for summary judgment, paving the way for Mesabi Metallics antitrust claims to go trial.
The Minnesota Star Tribune
September 6, 2024 at 5:09PM
This week, a federal bankruptcy court judge handed Mesabi a victory, ruling that its antitrust claims against Cliffs are strong enough to go to trial.
“There is sufficient evidence that permits a reasonable juror to conclude that Cliffs’ conduct was anticompetitive,” wrote Craig Goldblatt, a U.S. Bankruptcy Court judge in Delaware.
Mesabi plans to seek $1.9 billion in damages.
On Thursday, Mesabi Metallics CEO Joe Broking said in a statement the company hopes the judge’s decision will help “address the past disappointment caused to our partners and stakeholders by the previous delays to the project.”
Mesabi Metallics is the corporate successor to Essar Steel Minnesota, which started building a $2 billion-plus taconite facility about 13 years ago in the Iron Range of Minnesota. By 2016, Essar Minnesota filed Chapter 11 bankruptcy, leaving a half-built plant.
In 2017, Essar Minnesota sued Cleveland-Cliffs in bankruptcy court, alleging the iron ore merchant wrongfully used its market power to choke the Nashwauk project. Essar, which was rechristened Mesabi Metallics in late 2017, has been battling Cliffs in court for years and trying to complete its taconite plant.
Cliffs has contended it did not exercise monopoly power against Mesabi and that Mesabi suffered no antitrust injuries. Cliffs asked the bankruptcy court for a summary judgment against Mesabi, which would essentially throw the case out.
But in a Wednesday filing, Goldblatt denied Cliffs’ motion for summary judgment, saying there are enough factual disputes to merit a trial in federal district court.
“A [reasonable] jury could find that Mesabi suffered the type of injury that antitrust law is intended to prevent,” he wrote.
From 2015 to 2019, Cleveland-Cliffs was by far the largest independent iron ore merchant for the Great Lakes steel business with 73% to 78% of the “non-captive” market for taconite pellets, Mesabi claims. The term “captive” refers to iron mines owned directly by steel companies. In 2020, Cliffs bought two major U.S. steelmakers and now primarily produces iron ore for its own captive steel mills.
The Nashwauk plant would have competed with Cliffs in the non-captive market. Essar made a critical deal in 2014 to supply taconite pellets to ArcelorMittal’s U.S. subsidiary, then one of the nation’s two largest steelmakers. But ArcelorMittal terminated the contract in 2016 since Essar had yet to finish its Nashwauk plant.
Cliffs then signed a 10-year agreement with ArcelorMittal. Mesabi Metallics claims Cliffs structured the contract to give Cliffs exclusive access to Arcelor and shut Mesabi out of the market.
Mesabi Metallics also claims Cliffs’ anticompetitive conduct included blackballing construction contractors who worked on Mesabi’s project. The Jamar Co. and Barr Engineering, two prominent Minnesota contractors, had worked for both Mesabi and Cliffs. Cliffs refused to let Jamar continue to work on ongoing projects — or bid on new ones, Goldblatt’s ruling said. Once Jamar stopped supporting Mesabi, it got its Cliffs business back. A similar tale unfolded with Barr.
Mesabi alleges Cliffs’ anticompetitive conduct also includes its 2017 purchase of mineral rights from a company called Glacier Park. The Glacier Park leases were crucial to Mesabi. Mesabi claims Cliffs didn’t need the leases, but it scooped them up to undermine its Nashwauk project.
Cliffs, which declined to comment on the recent filing, has refuted Mesabi’s claims in court documents.
Mesabi Metallics was dealt a big blow when it missed yet another state deadline in 2021. The Minnesota Department of Natural Resources revoked Mesabi’s state-issued mineral leases. Last year, it awarded them to Cleveland-Cliffs.
Still, Mesabi Metallics has continued pursuing the Nashwauk project. The company has 30 employees and plans to hire up to 70 more by the end of the year. Mesabi says it will invest another $650 million to complete the plant, which it says is “on track” to open in early 2026.
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