When Minnesota Lt. Gov. Tina Smith met with some of the hundreds of Iron Range Steelworkers who received layoff notices last week, she said the stress was evident on their faces.
The older ones, who have been through this cycle before, really had this look of fatigue, like ‘here we go again,’” Smith said. “With some of the younger ones, there was more fear. We’re telling them we’re going to bring everything we can to help them. But mostly there’s just so much uncertainty. No one knows how long this is going to last.”
Those in attendance were among nearly 1,200 taconite industry workers who will be out of a job by June. Minnesota’s Iron Range and its mining industry are facing the most layoffs they’ve seen since 2009 thanks to an industry-crippling international trade problem that seems to be getting worse.
The prices of both finished steel and its main raw material, iron ore, are in a free fall thanks to a huge global oversupply.
Similar Iron Range downturns in the early 1980s, in 2000-01 and again in 2009 all came as part of national and even global recessions.
But this time around the Range is feeling the pain of a slowdown in the Chinese economy that’s hit the U.S. steel industry uniquely hard even as the rest of the American economy is generally performing well — and that’s causing many outside the industry to wonder what’s going on.
Here’s what: Iron ore on the global market, most of which goes to make steel in China, fell below $50 per ton last week for the first time since 2009, the last time a major crash hit the Iron Range. That’s down 75 percent from the nearly $200 mark it hit four years ago and half what it was at this time last year.
“In the past we’ve seen these steel and taconite problems paired with a U.S. recession. But this one is different. Our overall economy is going pretty well,” said Tony Barrett, a professor of economics at the College of St. Scholastica in Duluth. “This is more a result of what’s happening in China than the U.S. economy.”
More ore, more steel, less demand
Over the past decade iron ore production increased rapidly worldwide to feed a huge increase in steel production, especially in China where construction and economic growth hit double-digit increases annually.
More countries started or increased mining iron ore, and iron ore mines got bigger. One mine coming online in Australia can produce more than all Minnesota operations combined. Global mining giants such as Vale, Rio Tinto and BHP Billiton — names many Iron Range residents have never heard of — keep shipping incredible amounts of iron ore even as the price drops. One analyst described it as a race to the bottom, or survival of the fittest, as the biggest global producers try to put small operators out of business.
Now, Chinese growth is half of what it was a few years ago, slowing to about 6 percent. Yet all those new steel mills still are rolling out product.
Rather than scale back or close mills, foreign steelmakers are shipping their product to the U.S. and selling it cheaper than U.S. Steel or other producers can make it for. They are able to do that thanks to cheap fuel, cheap iron ore and — Minnesota officials say — illegal government subsidies.
The amount of steel used in the U.S. purchased from foreign steelmakers has jumped from 25 percent to more than 33 percent in recent months, Barrett said. That has reduced demand for domestic steel and the Minnesota taconite iron ore used to make it.
U.S. Steel is the first major producer to reflect the hit, with an estimated 4,000 workers nationwide having received layoff notices.
Barrett says it appears Minnesota politicians are right — that it is foreign steel dumping into the U.S. below cost that is crippling the domestic steel industry.
“And that’s illegal,” Barrett said. “But trying to document that and prove it, it’s a very long process. And that doesn’t bode well for getting Rangers back to work any time soon.’’
source: Daily Globe
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