fedgazette

Taconite industry is on the up side of a perpetual roller coaster ride

Minnesota State Roundup

Published April 1, 1995  |  April 1995 issue

Taconite mining in northern Minnesota is expanding and parent companies are funding capital improvements, yet the industry's position remains less than secure.

Since 1993 and for the first time in a decade, the integrated steel producers on whom the taconite mines rely for business were in the black, according to Doug Schrader, president of the Iron Mining Association of Minnesota. Those industry profits have meant more capital dollars for Minnesota mines and more secure jobs for the 5,500 Iron Range mine workers.

Not only did the National Steel plant in Keewatin reopen after many thought it had closed permanently, but improvements are planned for the once ill-fated operation. In January Northshore Mining Co. in Silver Bay announced a $6.1 million expansion that will increase the plant's capacity by 900,000 tons and result in the hiring of 40 additional workers. U.S. Steel plans to put $12 million into its Minntac plant in Mountain Iron, and increased production has led to new hires at Inland Steel's Minorca Mine near Virginia.

All this activity is reflected in the more than 43 million tons of taconite produced in 1994, with more than 47 million tons predicted in 1995.

The increased production is fueled by a strong economy, especially in new autos and appliances—steel-intensive consumer products that are the "bread and butter" of the industry, Schrader says.

While the news is good on the production end of the industry for the seven Iron Range mining companies, they face a downside on a state taxing issue, according to Schrader. The state's mining production tax has remained steady since 1991, but an escalator clause, which would mean an additional 5 cents to 7 cents per ton tax, will kick in automatically unless the Legislature acts to hold it steady.

"If the tax increases it will send a terrible message to corporate leaders of parent companies who are making decisions that will impact the industry over the next several years," Schrader says. The increased production of the past two years and projections for '95 will substantially boost revenues without raising the tax rate, he adds.

Regardless of the tax rate or production levels, the taconite industry still is threatened by the growth of mini-mills, steel mills that use scrap iron instead of taconite pellets. But Schrader predicts that despite the growth of this alternative method of steel-making, it is still a small segment of the industry, and taconite pellets will be in demand for traditional blast furnaces over the next 10 to 20 years. However, in the short run, some predict the industry will see a downturn in 1996-'97 that could result in perhaps 10 million tons of taconite overcapacity, Schrader says.

Kathy Cobb

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