Traverse City Record-Eagle

Business

November 20, 2012

Company cuts iron production

625 people to be laid off in Mich., Minn.

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MINNEAPOLIS (AP) — About 625 people will be laid off when Cliffs Natural Resources idles a Michigan mine and cuts production at a Minnesota operation due to declining demand for iron ore, the company announced Monday.

Two of the four production lines at Northshore Mining's taconite plant in Silver Bay will shut down effective Jan. 5, resulting in 125 layoffs, said Cliffs' Minnesota spokeswoman Sandy Karnowski. It has not been determined how those layoffs will be distributed between the plant and Northshore's mine in Babbitt, she said.

Cliffs also plans an extended summer shutdown at the Empire Mine near Palmer, Mich., which will affect 500 jobs beginning in the second quarter of 2013. Empire currently has 730 employees.

"It's a tough day for all of us at Cliffs and we're hopeful to see the market conditions improve in the future," Karnowski said. Northshore Mining has 665 total employees.

The laid-off employees will be offered supplemental unemployment pay and benefits based on their years of service and could be recalled if demand recovers, she said.

The Cleveland-based company also said in its announcement that it plans to delay portions of its Bloom Lake mine expansion in Quebec.

"We believe it is prudent and necessary to match our production volumes with market demand. We will remain operationally flexible to ramp up production volumes throughout the year if the demand increases," Laurie Brias, Cliffs' president of global operations, said in a statement.

The layoffs at Cliffs could be the first wave of production cuts on Minnesota's Iron Range, said Don Fosnacht, director of the Center for Applied Research and Technology Development, which is part of the Natural Resources Research Institute at the University of Minnesota Duluth.

The global economic slump, coupled with growing worldwide capacity in the steel industry, has depressed prices for iron ore, Fosnacht said. And the fears of automatic federal tax increases and spending cuts should Congress fail to reach a budget deal by year's end are holding back the domestic steel industry.

"All that together indicates there's a real potential for a slowdown in iron ore until we get the steel industry back and going," he said.

One factor that could spur a recovery in global demand and thus benefit the Iron Range is China's new plan for stepping up spending on its public infrastructure, Fosnacht said. Another is the rebuilding effort after Superstorm Sandy, which he said eventually will mean a pickup in the construction industry in the Northeast and higher demand for new home appliances made of steel.

Craig Pagel, president of the Iron Mining Association of Minnesota, said there are good indications that the industry expects long-term demand for iron ore will be strong, such as the new Mesabi Nugget, Magnetation and Essar Steel projects on the Range, as well as U.S. Steel's plans to expand its Keetac operation.

"I'm cautiously optimistic that the economy will continue to recover and world trends for iron ore will continue to rise. ... I don't believe a short-term market indicator is a long-term trend," Pagel said.

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