Keewatin taconite plant to be idled, affecting 412 workers

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Welcome sign outside the town of Keewatin, on Highway 169.
Bob Kelleher | MPR News 2009

Updated: 5:55 p.m. | Posted: 10:36 a.m.

U.S. Steel has announced it will temporarily idle its Keetac taconite plant in Keewatin on the Iron Range.

The move by U.S. Steel means as many as 412 workers will be laid off in May.

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In a statement, U.S. Steel officials attributed the decision to global influences in the market, including a high level of imports, unfairly traded products and reduced steel prices. The global price of iron ore dropped to a seven-year low this week.

State Rep. Carly Melin of Hibbing said people in the Iron Range are on edge.

"Unfortunately, we get used to this cycle on the Iron Range," she said. "We've been through this before, and we're going to work through it again. But it's pretty difficult news for the people that work there."

The Keetac workers have been notified about the temporary idling and been told the number of affected employees will depend on operational and maintenance needs.

Keewatin Mayor Bill King said the layoffs will affect more than just plant workers. Given how many area businesses regularly do business with Keetac, he said, the impact to the community will be "pretty dramatic."

"It not only affects our employees and the people that work there, but our businesses here in town, plus all the smaller businesses that do business with Keetac," King said.

U.S. Steel's decision to idle the plant also will lower the production tax the company pays to Keewatin and other towns, King said, which contributes to the town's general fund and helps pay for recreation and other projects.

But it won't affect iron ore pellet production at a plant in nearby Mountain Iron.

The Keetac news follows an announcement last month from Grand Rapids-based Magnetation that it's closing one of its taconite plants on the Iron Range, also in Keewatin. Nearly 50 people will lose their jobs when that facility closes later this month.

"We were afraid that Magnetation Plant 1 was sort of the first domino," Melin said. "And unfortunately it looks like that may be the case."

Keewatin may be a tiny town, but King said people there have come to understand they are a part of the global economy.

"You tend to watch the prices of iron and steel," he said. "You just can kind of tell that something is going to happen, you know, when the prices start falling so dramatically."

This week the global price of iron ore tumbled to $62 per ton — far from the $190 per ton it went for in 2011.

"It's classic supply and demand," said Tony Barrett, an economist at the College of St. Scholastica. "It could be straight out of a textbook."

Barrett, who watches the steel industry, said he's not surprised by U.S. Steel's announcement.

There is a glut of iron ore on the global market, as production in countries like Australia continues to grow, he said. At the same time, the economies of many countries are not doing particularly well.

"That means there's not much demand for steel, that means there's not much demand for taconite," Barrett said. "So it's highly predictable this would happen. I don't believe this will be the last shut down on the Range. Hopefully they will be relatively short term."

The last time taconite plants shut down on the Iron Range was 2009, when Keetac and two other plants were idled. They did not reopen for about a year.

At the time, the U.S. economy was going through a recession. This time, Barrett said, the rest of the world is slowing down. As a result, international steel companies are trying to sell their products in the United States.

Barrett said many of the companies are owned, at least in part, by their governments.

"Therefore, profit is not the main incentive for them," he said. "They're into job creation and things like that. So at a time like this, when demand is weak, and they don't want to have their mines and their steel mills shut down, they'll get quite aggressive in their pricing."

The question is whether the pricing of international steel companies is legal. U.S. Steel blames the Keetac shutdown in part on "unfairly traded products."

John Rebrovich, assistant to the director of United Steelworkers District 11 in Eveleth, said foreign steel companies are illegally selling their products in the United States at a price well below the cost of production.

"And they're dumping it at super low prices that are being subsidized by their governments," he said. "And this is leading to our plants being shut down. Period."

At a news conference Thursday, Gov. Mark Dayton said he intends to follow up on the issue with Minnesota's congressional delegation.

"As long as there's a glut on the market, the laws of international economics just overwhelm anything that a state like Minnesota can do," Dayton said.

The Associated Press contributed to this report.