More potential layoffs loomed on the Iron Range Wednesday with Magnetation's announcement that it expects to close one of its iron ore plants in January.
Based in Grand Rapids, Minn., Magnetation recycles leftover mine tailings to produce an iron-ore concentrate that's used to make steel. The company expanded quickly after opening its first plant in 2008. But it's struggled this year, closing one small plant in February and filing for bankruptcy protection in May.
President Matt Lehtinen said it's likely that in January the company will close its Plant 2 outside Bovey, where 163 people work.
"We hope to emerge with a viable company," he said. "We are, like everybody else, concerned and not so hopeful that the steel markets and iron-ore markets are going to recover anytime soon."
Lehtinen said he doesn't anticipate the shutdown will be permanent. His father, Magnetation CEO Larry Lehtinen, said "there is no way to know how long this potential curtailment may last, but we are hopeful that Plant 2 production would resume in 2016."
The closure is driven by reduced demand from Magnetation's primary customer, steelmaker AK Steel.
At one point, Magnetation operated four iron-ore concentrate plants on the Iron Range. Now, the company will only run its newest plant, which opened last January, said Matt Lehtinen.
"The plan right now would be to run our Plant 4 in Grand Rapids full-out, trying to make every ton that we can next year since it is our lowest-cost operation," he said.
That plant also employs about 160 people. Matt Lehtinen said laid-off employees can apply for open positions at Plant 4 or at the company's taconite pellet plant in Reynolds, Ind.
When Magnetation filed for Chapter 11 bankruptcy protection in May, the company anticipated that an infusion of capital would prevent further plant shutdowns.
"So by entering bankruptcy, and acquiring the new financing, that was quite a joyous moment for us," Matt Lehtinen said.
But he added that the continued global glut of steel and iron ore made the January plant closure necessary. He said low oil and iron ore prices have enabled Asian steelmakers to produce a lot of cheap steel, and until the Chinese economy picks up, "they will be able to make lower-cost steel and find ways to get it into this country."
Industry observers say those imports have crushed American steelmakers' demand for Minnesota iron ore.
The result has been a string of temporary shutdowns of Minnesota taconite mines and pellet plants. The only facilities left standing are U.S. Steel's Minntac, ArcelorMittal's Minorca mine, Hibbing Taconite and Magnetation's Plant 4.
All together, around 1,500 mineworkers have been laid off.
Gov. Mark Dayton has called for a legislative special session to extend unemployment payments for mineworkers whose benefits are close to expiring.
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