Iron Range meets steel industry challenges head on

Minnesota State Roundup

Published July 1, 1992  | July 1992 issue

In light of low raw-steel production, new steelmaking technology and competition from importers, the taconite industry in northern Minnesota faces stiff challenges.

Taconite, an iron ore that is a basic ingredient in traditional steelmaking, has long been the mainstay of the Iron Range economy. At its peak in 1979, the industry produced 56 million tons of taconite and employed 15,000.

Following a lean period in the early '80s, the taconite industry saw the reopening of a mine and a steady level of production and employment. In 1991, more than 41 million tons of taconite were produced, and the mines employed over 6,300 people. And while predictions for 1992 call for similar figures, there are growing concerns about the future of the industry on which much of northeastern Minnesota's economy is based.

To maintain their position in the region's economy and in the steel industry, taconite companies are making some changes, says Douglas Schrader, president of the Iron Mining Association of Minnesota.

With some help from the state Legislature, the seven taconite companies operating in northeastern Minnesota have access to a special fund for capital improvements and research. The state froze the industry's production tax rate for two years at $2.05 per ton, and designated 10.4 cents of that figure to be set aside for the fund. The Iron Range Resources and Rehabilitation Board (IRRRB), northeastern Minnesota's economic development organization, will administer the fund and decisions regarding projects will be made by a committee of labor and management.

"The good thing about this plan is that the dollars are kept on the Iron Range," Schrader says. Taconite companies have had difficulty getting money from their parent companies for capital improvements, Schrader says. He explains that steel companies are pouring their money into the finishing end of the steel business, or value-added products, to make them more competitive in the market.

The IRRRB also recently proposed a revolving low-interest loan fund for taconite companies. Each company would set aside $1 million for capital improvements and research and be able to borrow from the fund when the need arises.

Taconite companies have also initiated across-the-board cost-cutting measures based on pressures from their parent companies. One company has even asked its suppliers to cut back on their charges to help meet its goal of a 20 percent cut in costs. Despite cost savings, US steel companies are selling their products at a loss—about $1.5 billion in 1991 on sales of $37 billion, compared to $200 million on sales of $39 billion in 1990—just to stay competitive with foreign steel and companies using the new electric arc furnaces.

Traditional, or integrated, steel mills that use taconite face direct competition from new electric arc furnaces, which currently produce largely low-end steel products at low prices, but according to Schrader that technology is growing and likely to cut into other steel markets in the not-so-distant future.

Kathy Cobb