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Cliffs to idle Northshore Mining as taconite woes worsen

Freshly made taconite pellets emerge from the 2,350-degree Furnace at Northshore Mining Company. (2008 file / Submitted by Cliffs Natural Resources Inc.)

Cliffs Natural Resources announced Tuesday that it will close its Northshore Mining operations in Silver Bay and Babbitt due to the continuing oversupply of iron ore in the U.S. and global markets.

The move will put many of Northshore’s 540 workers out of a job by Dec. 1 through at least the first quarter of 2016, although no firm date is set for re-opening.

About 70 employees will be kept on to maintain the operations during the shutdown, said Patricia Persico, company spokeswoman. Another 20 will be kept on into January to help ship remaining taconite pellets on hand.

The price of iron ore continues to plummet globally and in the U.S. thanks to a vast oversupply. That’s helped reduce the price of steel, especially foreign steel, which is being imported into the U.S. at a record clip with allegations that the steel is being “dumped’’ into the country below cost.

All that imported steel has reduced the demand for U.S.-made steel and thus the demand for its primary ingredient — taconite iron ore from Minnesota and Michigan.

"The historic high tonnage of foreign steel dumped into the U.S. continues to negatively impact the steel production levels of our domestic customers,’’ said Lourenco Goncalves, Cleveland-based Cliffs' president and CEO, in a statement Tuesday announcing the shutdown.

The move will help cash-strapped Cliffs continue to operate for the short term, cutting costs until its customers begin making new orders. Goncalves said Cliffs has never had this much unneeded taconite on hand this late in the season, with Great Lakes shipping set to close for the winter layup in January.

The news hit hard in Silver Bay and Babbitt, towns built in the 1950s specifically to support the Northshore taconite operations, then called Reserve Mining. But Silver Bay Mayor Scott Johnson said the community will pull through.

‘We’ve been here before. We were here in 1986 when Reserve when bankrupt. We can make it through this,’’ Johnson said. “Cliffs has been a good corporate neighbor. I think they will weather this and get it re-opened soon.”

It’s now clear that, except for a brief period in 2009 when most Minnesota operations closed for a few weeks, that this has become the worst downturn in the state’s mining industry since the early 1980s. That’s when the U.S. steel and iron ore industries reeled in contraction, leaving thousands of Iron Range steelworkers out of work. Many of those people moved away, and some say the Iron Range population and economy has never fully recovered.

“I’m very concerned with what we have now. We haven’t seen anything like this in decades, maybe never before, with the global nature of this crisis,’’ said State Rep. Tom Anzelc, DFL-Balsam, a life-long Ranger. “I’ve been saying for a few weeks now that the next six months are going to be worse than the last six months.”

Anzelc said he expects additional Minnesota plants to close.

“I think there are more to come and in the not-too-distant future,’’ Anzelc said. “My source at Cliffs is calling this a crisis.”

Northshore joins Cliffs’ United Taconite operations in Eveleth and Forbes which are also shut down, and now puts six of the Iron Range’s 11 major mining operations into mothballs. In addition to Northshore and United, U.S. Steel’s Keetac plant remains idled, as do two of Grand Rapids-based Magnetation iron ore recovery plants and the Mesabi Nugget iron nugget plant near Hoyt Lakes.

Cliffs also noted Tuesday that United is now unlikely to reopen until April at the earliest.

Goncalves said Cliffs’ operations will reopen only if and when his customers, U.S. steelmakers, begin to order more pellets. He said so far that hasn’t happened, but he continues to be bullish that U.S. steel production and taconite demand will increase in 2016.

During that time frame, Cliffs will continue to operate Hibbing Taconite in Minnesota, as well as the Tilden and Empire mines in Michigan, at normal rates.

The price of iron ore dipped again this week to about $47 per ton, which is less than it costs most Minnesota operations to produce it. The price had been above $50 per ton since 2007 until this year. It had been as high as $186 per ton in 2011 and was above $100 per ton as recently as May, 2014.

Cliffs shares plunged on the news Tuesday, dropping 12 percent to $2.35 per share, approaching its 52-week low. The stock had been as high as $100 per share in 2011.