Cliffs Natural Resources on Wednesday said that it will idle its United Taconite operation on the Iron Range, forcing 420 layoffs.
The company said it has a glut of taconite iron ore pellets on hand while demand from its customers, U.S. steel mills, remains depressed.
The United operations — with a mine in Eveleth and a processing center in nearby Forbes — employs about 500 people with a $60 million payroll in 2014 when it produced 4.9 million tons of taconite pellets.
The company said “the idling of production at UTAC will be initiated as soon as feasible and completed by the end of August.” Some 375 hourly steelworkers and 45 salaried managers will be laid off, Lourenco Goncalves, Cliffs CEO, said. About 80 employees will be kept on to maintain the facilities.
It remains unclear how long the operations will be shut down. But Goncalves said the shutdown will be done so that the company can “promptly bring production back as soon as the level of demand from our clients justifies” it.
That won’t happen, Goncalves said, until the current “absurdly high rate” of imported steel returns to more normal levels.
In a call with industry analysts, Goncalves faced tough questions about his firm’s oppressive debt. Cliffs has cut costs, closed unprofitable Canadian iron mining ventures, sold coal mines and paid off about $1 billion in debt in the year he’s been on the job, Goncalves said, but another $2.6 billion in debt remains. Cliffs’ ability to make money and repay that debt, even as the industry endures low prices and decreased demand, will likely decide if Goncalves can keep the company solvent.
“We are at the bottom of the cycle,” Goncalves said.
Cleveland-based Cliffs on Wednesday cut its 2015 forecast for its U.S. iron ore sales by 1.5 million tons to 19 million tons, again blaming the supply glut of taconite created by heavy steel imports.
The United layoffs, the first at a Cliffs operating facility in Minnesota during the current industry downturn, punctuate the ongoing woes of the Iron Range. They come after U.S. Steel laid off hundreds of workers at both their Minntac and Keetac operations, after Magnetation closed plants and filed for bankruptcy, and while Mesabi Nugget has shut down indefinitely.
U.S. Steel, however, confirmed Wednesday that it will bring Minntac back online next month.
Goncalves said Cliffs avoided layoffs earlier in the year because it projected that orders for domestic steel would ramp up sooner than they have.
“That didn’t happen as soon as we expected it to, so we are forced to do it now,” he said.
Still, Goncalves said there are emerging signs that a reduction in imported steel, with a resulting domestic steel industry production increase, may happen in the second half of this year. That would lead to increased demand for Cliffs’ iron ore.
“Our worst days are likely behind us,” Goncalves said, praising his employees’ efforts so far and imploring them to weather the storm. “As actions are taken to combat the influence of unfairly traded steel in the United States, we expect to see improved industry operating conditions and profitability in the second half of this year.”
U.S. Rep. Rick Nolan, D-Minn., said Wednesday that he will press White House officials to speed Trade Adjustment Assistance to the affected United employees. Trade Adjustment Assistance is designed to provide funds and resources to workers who lose their jobs as a result of unfair foreign competition.
“At the heart of the matter is that the process of enforcing our trade policies and agreements against the illegal dumping of foreign steel into our marketplace is broken,” Nolan said in a statement.
U.S. Sen. Al Franken agreed. “Our jobs, our economy and our national security are being put at enormous risk. Today’s news is simply another stark and urgent reminder that we have to step up our fight on behalf of our iron ore and steel producers against the unfair foreign steel being dumped in the U.S. market,” Franken, D-Minn., said.
Goncalves said the United shutdown may have a silver lining, offering a chance to start reworking the plant to produce a so-called ‘”superflux” taconite pellet. That new product will replace a flux pellet now made at Cliffs’ Empire/Tilden operation in Michigan, which is scheduled to shut down at the end of 2016.
Goncalves said he wants United producing the superflux pellets, which incorporate limestone in a special recipe, ready to supply ArcelorMittal steel mills when the Michigan operation closes.
“United will be producing our new Mustang pellet by then, absolutely,” he said.
Goncalves praised Minnesota Gov. Mark Dayton and the Minnesota Department of Natural Resources for moving quickly to help the company obtain necessary permits for both the United and NorthShore makeovers.
In addition to United, Northshore and Empire/Tilden, Cliffs also is operator and part owner of Hibbing Taconite.
Goncalves said he expects no additional layoffs at Cliffs’ other Minnesota facilities.
