Dueling CEOs threaten jobs of Iron Rangers

A new road and railroad line lead to an air pollution control and furnace facilities at the new Essar mine in Nashwauk.  Derek Montgomery for MPR News

A mining company based in Cleveland is threatening to throw more people out of work on the Iron Range if a mining company based in India opens up a taconite plant in Nashwauk, Minn. There’s your global economy in one sentence that seems to ignore the actual people who live on the Iron Range.

Cliffs Natural Resources CEO Lourenco Goncalves, showing a deft touch for sensitivity for the working stiff, told the Mesabi Daily News over the weekend, ““If they go online, I will shut down a plant up there the same day.”

The $1.9 billion Essar project, under construction in Nashwauk, is scheduled to go into production in 2016, amid Goncalves’ fear that it will add to an oversupply of taconite. But an Essar official says the company already has contracts for the Nashwauk ore.

Which Minnesota miners would Goncalves take his ire out on? His company owns United Taconite in Eveleth and Forbes and Northshore’s mine in Babbitt, a processing plant in Silver Bay. It also manages Hibbing Taconite.

“Business leaders can’t speak in such a casual manner of what could have such an impact on their employees,” Essar Minnesota CEO Madhu Vuppuluri said on Saturday.

Essar got $66 million from the state of Minnesota and $6 million from the Iron Range Resources & Rehabilitation Board in 2008 for a steel plant which has not now been scrapped. The company is working out a plan to return the money.

“They are not paying back what are subsidies to build their taconite plant. For iron ore, it’s like illegally subsidized foreign steel coming into the country,” the Cliffs CEO told the paper.

Aaron J. Brown, who writes at Minnesota Brown, says if the Cliffs CEO is making the threat, he’s probably going to shut a mine down anyway.

The threat implies that there is some way to stop Essar from starting. Maybe you can stop Essar, the company, from opening that mine. I tend to believe Essar is just packaging the project for sale anyway. Given the amount of progress and the fact that this is going to be a much more efficient mine, it will only mean that another company (possibly Cliffs!) will open it up and close that other mine anyway.

The issue here is that there is an ongoing contraction in the global iron ore market. These companies are jostling for position in order to survive. We are preparing for a future with fewer Iron Range mines producing the supply necessary for the domestic marketplace. Things will be better for the local mining industry if value-added iron products are developed here. Right now the plant closest to doing that is Essar — the incomplete, start-and-stop enigma under construction at Nashwauk.

Brown told KAXE Radio this morning that one of the reasons the Cliffs CEO is making the threat is he wants his company to take over the site.

He said the “mine that is on the bubble” in Goncalves’ threat is probably the mine in Eveleth, which has been winterized.