Nashwauk is just one push pin on a big map for global steel company

It's been said before, but Essar Global's ongoing purchase plans of the Minnesota Steel project -- a proposed iron mining and steel-making operations near Nashwauk -- sends the Mesabi Iron Range deep into the complicated global steel market. For two decades, Iron Rangers have come to view the prospective mine and steel mill on the old Butler Tac site as a good "jobs" project, one that would make steel in the same place where ore is mined. Reading these world headlines about Essar's activities in North America shows me that we don't yet fully understand the long term goals of this company in our area, other than they need our ore -- just as all the other steel companies have needed our ore since the 1890s.

Close observers of this story knew that after Essar bought Minnesota Steel, they bought Algoma Steel in Michigan, a facility that processes iron ore much the same way the proposed Nashwauk steel plant was supposed to do itself. Now, Essar is vying for Esmark Steel, a Chicago-based steel company with customers throughout the continent. So Essar now holds ore interests, steel plants and a distribution system -- just like Rockefeller and Carnegie did back in the old days.

First, this business story from the Hindu Times of India:

Essar Steel consolidates presence in N. America

Mumbai, May 2 -- US-based Esmark, which the Essar Group is set to acquire with an enterprise value of $1.1 billion, is part of a well-planned strategy of the Indian steel maker to consolidate its presence in the controlled and well-protected North American steel market that is estimated to be over $100 million tonnes (mt).

Esmark will be Essar’s third acquisition in the North American and Canadian markets — it had acquired Algoma Steel for $1.6 billion and Minnesota Steel for an undisclosed amount in April last year.

With this acquisition, Essar will have a production capacity of 7 mt in the North American and Canadian market — 4 mt from Algoma and 3 mt from Esmark. Significantly, this is higher than that its current production capacity in India, which is at 4.6 mt.Market presence

Although Essar Steel has been exporting to the North American markets for some years now, it became clear to the company that to consolidate its presence in that market, it had to be physically present there. This was because the US steel market, which is one of the world’s largest, is known for its protective nature.

Then, today, we learn that the Steelworkers union may battle the Esmark sale over contract issues. This May 3 story shows some of the seeds of discontent. We also learn that Esmark controls steel facilities throughout the Rust Belt. Essar could conceivably hold a piece of all of the major mining and steel-making regions in the United States if these deals go through. That's not necessarily bad, but it would be foolish of us Iron Rangers to assume we are Essar's top priority. As future negotiations with this company play out, we need to make sure that our interests -- steady jobs, fair payment of taconite taxes to fund our schools and communities, and good business and environmental practices -- are represented at the table.

As far as whether Minnesota Steel ever makes steel or not, well, it would appear that the answer depends far more on the American economy than the continued growth of India and China. Essar is trying to break into the Indonesian steel market, which would provide a much more economical way to feed the steel demand in huge, growing Asian nations. (Just look at how convoluted the Indian steel market is right now; all of this now affects people sitting at the Wauk-In cafe in Nashwauk). If the U.S. needs steel, an efficient direct-reduced steel plant in Nashwauk will be very successful. If the U.S. economy falters more then it may be many years before demand gives Essar the reason it needs to continue onto the final phase of Minnesota Steel: the phase that includes actual steel production. Until then, it may just be another mine with far fewer jobs than we had originally hoped for.

Welcome to the new world order. Find yourself a Hindu translator and get ready for an interesting decade in northern Minnesota.

Cliffs looks to another good year

WDIO reported last night (sorry, no direct link available) that Cleveland Cliffs is anticipating a return to pre-2001 production levels at its Minnesota taconite operations, including HibTac and UTac, in the near future. The company is also considering building a biomass power plant to cover some of the power needs for this revived taconite production. The fuel used would be primarily some kind of wood pulp also grown and processed in northern Minnesota.

Isn't it interesting that these big companies are predicting growth on the Iron Range and yet acknowledge that new coal-fired electricity probably won't be an logistically or financially feasible option? I think that's interesting. Kind of makes you wonder about certain boondoggle energy projects doomed to fail but that enjoy widespread political support. Kind of makes you want it to go away, like the guy you invited to the party because you thought he was cool but who drank all the beer in the first two hours and is starting to creep out the girls.

Anyway, I digress. In the midst of all the potential of big ticket new projects, let's not forget that U.S. Steel, Cleveland-Cliffs and their power broker, Minnesota Power, are all having damn fine years and will have a license to print money next year, too.

Vermilion state park plan lives

One of the odd things that happened last year is that Gov. Tim Pawlenty proposed something new for the Iron Range that the state and even some local leaders didn't even ask for or especially want. Pawlenty suggested that the state buy land along Lake Vermilion from U.S. Steel to create a new state park. Vermilion is one of Iron Range's largest, most populated and affluent lake communities. With a few exceptions, million dollar properties on the Iron Range either include a private lake or they're on Lake Vermilion.

Anyway, Lake Vermilion has been developed like mad for a couple decades, with the exception of this large stretch of land owned by U.S. Steel, which wants to sell it off as expensive lots. Rather than allow U.S. Steel's entire lakeshore be developed as homes and cabins, the Pawlenty administration suggested this new state park.

I wondered at the time, and still wonder, if this wasn't just a gubernatorial pipe dream to convey a sense of action during the slow news season of last summer. But somehow the Senate included a small amount of money in the bonding bill for the park and the House is expected to include much more in its version. This thing is still a long shot, but not dead.

I guess we'll see. If I lived on Vermilion I'd rather have a state park than more lots, cabins and lake traffic.

The DNT has a roundup today.

FUN FACTS: Early explorers believed Lake Vermilion might be the Northwest Passage. (It isn't). The word vermilion signifies the reddish color created by all the iron in the ground around the lake. The Vermilion was the first producing iron ore range in Minnesota.

U.S. Steel is officially rolling in its 5.0, with its ragtop down so its hair can blow

It's official. U.S. Steel will invest $300 million into Keewatin Taconite, increasing taconite pellet production by more than 3.5 million. The whole project will take three years to fully implement. This also makes U.S. the big daddy steel company on the Iron Range as they now own the top two taconite operations here.

PRESS RELEASE
Oberstar Applauds U.S. Steel Investment in Keewatin Taconite

Washington, D.C. – Congressman Jim Oberstar says U.S. Steel’s decision to invest $300 million in Keewatin Taconite (Keetac) is an important step towards making Minnesota taconite more competitive in the global marketplace. The project will produce 500 construction jobs over 3 years and 75 – 100 permanent jobs for the Iron Range. Production at the U.S. Steel’s Keewatin plant will increase from the current six million tons a year to nearly ten million tons of taconite pellets.

“Minnesota iron ore has gone global. Our taconite pellets are feeding blast furnaces from Cleveland to China,” said Oberstar. “With this announcement, U.S. Steel demonstrates it has the vision and capacity to compete world-wide. Keetac sits on one of the richest bodies of iron ore on the Range, and this investment at Keetac will create profits for U.S. Steel and long-term, full-time jobs for iron ore miners on the Iron Range. Steel production is a mainstay of American industrial productivity, and Minnesota’s Iron Range fuels that production.”

Keeping Minnesota’s taconite industry competitive has been one of Oberstar’s top priorities throughout his service in Congress. Oberstar introduced the Water Resources Development Act (WRDA) which was enacted into law last year. WRDA included provisions to dredge, long-neglected, harbors and shipping channels across the Great Lakes.

Shallower navigation channels cause Great Lakes ore freighters to reduce their shipments by as much as 7500 tons light on each trip from Duluth to the eastern steel mills. “We have to make sure those ore boats go out with a full load to reduce Minnesota taconite costs,” said Oberstar. “If we don’t maintain our shipping infrastructure, we are giving an advantage to nations like Brazil and Russia that are competing with Minnesota taconite.”

WRDA also authorized $341 million to construct a second lock to accommodate modern ships at Sault Ste. Marie. Another $134 million is authorized to make other repairs and upgrades on the St. Lawrence Seaway.

The Keetac expansion will also embrace new technology that is more energy efficient and environmentally friendly. U.S. Steel will have to make that case to the Minnesota Pollution Control Agency to obtain the environmental permits the company will need to move forward. Oberstar says he is confident that effort will be successful. “I am ready to work with the gifted and skilled members of the Iron Range legislative delegation on the permitting process that lies ahead,” said Oberstar.

Tomorrow's news today

Business North is reporting the item about Friday's U.S. Steel announcement in Keewatin. Here's what they say:

It’s the worst-kept secret on the Iron Range: All indications point to a major expansion pending at Keewatin Taconite.

Owner U.S. Steel wasn’t commenting publicly, but told Range legislators to expect a Feb. 1 announcement that is “positive.”

U.S. Steel already has air quality permit amendments in hand for a mining expansion at the Keewatin mill. A rumored expansion on the order of $350 million would increase the plant’s production capacity by more than 3 million tons, making it second on the Range only to Minntac, also owned by U.S. Steel.
The operation produced 5.3 million tons of taconite in 2007, employing 375 Steelworkers.

I talked to Business North editor Wayne Nelson last weekend at the KAXE Annual Meeting. He knew about it and I knew about it but we couldn't say for sure, so we just nodded a lot. Then I went to work Monday and all my mining technology students already knew about it. Yeah, this one is pretty much out there. Good news, though, so U.S. Steel probably won't deploy their P.R. plumbers.

KeeTac Attack!

U.S. Steel will hold a press conference Friday at 2 p.m. at the Keewatin City Hall. My sources tell me the company is announcing a major expansion and environmental upgrade at its Keewatin Taconite plant, something like 3.5 million tons of additional pellet production capability.

Yesterday, U.S. Steel announced that their Iron Range taconite production was up in the last quarter of 2007, but down slightly for the year. Last week, news reports detailed a fine against Keewatin Taconite for environmental violations. It would seem that U.S. Steel is making an aggressive move related to both stories.

Major taconite production increase?

U.S. Steel will hold a press conference at the Keewatin City Hall on Friday, Feb. 1. They will announce the "good news" we've been hearing about for a couple weeks now. I have heard talk about something like a 3.5 million ton increase in taconite pellet production at Keewatin Taconite. That's huge, almost doubling production there. Also significant is that this would be an immediate project, not a "prospective" project as we've been talking about in the case of the east Range nonferrous mines or the Nashwauk steel mill.

Stay tuned for Friday.

Big U.S. Steel story remains unconfirmed

Here is what the Duluth News-Tribune is reporting about that credible rumor I heard the other day regarding U.S. Steel's operations on the Iron Range.

Mum’s the word on high-level meetings at Minntac Mine
Lee Bloomquist, Duluth News Tribune

Several top-level U.S. Steel executives made a rare visit to Minntac Mine in Mountain Iron this week to discuss company strategies with Iron Range legislators.

Such visits usually signal a major company decision. Iron Range legislators said U.S. Steel asked them to keep the subject of the meeting confidential.

State Sen. Tom Bakk, DFL-Cook, characterized Wednesday’s meeting as positive, saying that U.S. Steel’s strategies could lead to a significant boost for the Iron Range.

U.S. Steel officials have also contacted steelworker leaders about company strategies.

U.S. Steel owns and operates two Iron Range taconite plants, Minntac Mine and KeeTac in Keewatin.

KeeTac produces about 5.4 million tons of iron ore pellets annually. However, it has one production line that has been mothballed for years. Minntac can produce about 14.6 million tons of iron ore pellets annually.

Scott Coleman, Minnesota Ore Operations general manager, said Thursday he could not comment on the nature of the discussion.

Iron ore pellets are in high demand globally as rapidly developing countries such as China and India build infrastructure. An 800,000-ton per year expansion at Northshore Mining Co. in Silver Bay is due to become operational near the end of the first quarter.

Lee Bloomquist is the area's top mining reporter and he'd have the story if there were any leaks. All I can get confirmed is that the news is big, potentially very good, and involves permits. Permits usually mean construction, retrofitting or expansion of some kind.