Updated: July 30, 10 a.m. | Published: July 29, 2015 at 11:30 a.m.
In another blow to Minnesota's reeling iron ore industry, more layoffs were announced on the Iron Range Wednesday.
Cliffs Natural Resources will be temporarily closing its United Taconite mine in Eveleth and its pellet plant in Forbes. The moves affect 420 employees. The latest news brings the number of layoffs announced this year to more than 1,000.
Eveleth Mayor Bob Vlaisavljevich said he had been nervously awaiting an announcement for weeks, ever since he saw the huge stockpiles of taconite pellets sitting alongside the Duluth harbor, waiting to be shipped to steelmakers.
"It was kind of a scary thought, down by the harbor there. When you see them they're about a quarter mile long, three or four of them," he recalled. "A lot of boatloads."
Cliffs CEO Lourenco Goncalves cited that huge inventory of pellets as one reason the company would idle United Taconite for about six months.
The other reason, Goncalves told analysts, is that U.S. steelmakers' demand for Cliffs' pellets is down because of a flood of cheap imported steel. When Cliffs' customers are selling less steel, they don't need as many Minnesota taconite pellets to make more of it.
"As the absurdly high rate of imported steel penetration reverts back to normal levels, and our clients' blast furnaces return to normal operating levels, we expect to be able to adjust our production and our sales volume accordingly," he said.
United Taconite millwright Dan Hill is one of 420 workers at the Eveleth mine expecting to lose his job at the end of August. He said workers learned of the decision Wednesday morning.
"It was a shock," he said. "I think they were more upset the media knew before they did."
The shutdown of United Taconite is just the latest blow to the Iron Range's fragile iron mining industry.
This spring, U.S. Steel idled its KeeTac facility and part of MinnTac, the state's largest iron ore mine. Smaller producers Mesabi Nugget and Magnetation also shut down plants, with Magnetation filing for bankruptcy protection.
But Hill said the industry appeared to turn a corner last week, when Iron Range union leaders announced 400 workers would return to work at MinnTac.
"That was a light at the end of the tunnel," he said. "We thought, 'Things are starting to look a lot better now. We're out of the storm, let's move forward.' And then the news came today."
There may be a silver lining in the announcement. Cliffs said it will use the shutdown to retrofit United Taconite to make a more valuable and versatile type of taconite pellet. CEO Goncalves said the company is working with the state to acquire the permits needed to make the change.
"I can't thank Gov. Dayton enough for eliminating red tape to make us able to execute very quickly," he said. "So we are working very well together."
Dayton said Goncalves called him Tuesday night to inform him of the layoffs.
"He just said, 'We've been producing too many pellets, and we don't have the market for them.' And ironically with MinnTac coming back, that increases the oversupply overall," Dayton said.
The governor planned to travel to the Iron Range Friday to meet with affected workers. But there's not a lot state leaders can do to help the taconite industry.
Economist Tony Barrett at the College of St. Scholastica said cheap and possibly illegal foreign steel imports are hurting Cliffs and other Iron Range mines that feed the U.S. steel industry.
"This is the stress U.S. steel companies are under," he said. "And it's from imports. It's not because the U.S. economy is not doing well, it's because the rest of the world's not doing well enough to consume all the steel that's being produced."
The reality of those unforgiving global market forces is hitting home in Eveleth, said Mayor Vlaisavljevich.
"A lot of the younger employees are new to the mining industry, who have never been through this. It's a scary thing, it really is. But you've just got to kind of ride it out and plan accordingly," he said.
MPR News reporter Tom Scheck contributed to this report.