Northeastern Minnesota’s steel, logging industries appraise 2010 outlook cautiously

TWO HARBORS, MINN. — After a touchy year in 2009, leaders in two of Northeastern Minnesota’s main industries, logging and mining, are cautious as they look at 2010.

“There’s been no significant change in the last year, which is bad,” says Scott Dane, executive director of the Associated Contract Loggers & Truckers of Minnesota. “It was bad enough in 2008, and in 2009 there was no improvement.”

Logging took a hard hit when the housing market crashed and construction plummeted a couple of years ago. Dane says that while the current logging season has been going well, he’s not sure it’s sustainable through the year.

“A lot of mills depleted their inventories” and they’re building them back up again, he said. “It holds some promise of a good winter harvest carrying [loggers] through the breakup period,” which is April through June. However, he said margins are so tight for loggers that most are just trying to stay current on their bills, rather than reinvesting in new equipment.

“The best we can hope for is that the remaining industry, paper, remains stable and we don’t see a downturn there,” Dane said, adding that advances in biomass as an energy source would also be helpful to the industry, although he doubted it would make up the losses caused by the collapse of the OSB market.

2010 could be a little better for taconite
Taconite production in 2009 was 17 million tons, less than half of the production of 34 million tons in 2008, and the year was marked with slowdowns and layoffs. But companies say 2010 could be a little better.

Maureen Talarico, spokeswoman for Cliffs Natural Resources, says Hibbing Taconite is expected to have all 540 employees back to work by the middle of March. About 100 were working at the beginning of the year, 160 were recalled January 4, and the rest will be phased in as the stripping, mining and furnace work process ramps up.

The company’s United Taconite property had been idled for six weeks — four for repairs and two as a mandatory vacation for workers — but she says the union and management worked out a 32-hour workweek to stave off layoffs. “In a challenging year, it was an impressive thing to see,” she says.

Northshore Mining in Silver Bay has been operating two lines since July, Talarico says, and has also tried to keep people employed by doing safety improvements and repairs.

“We see a modest improvement as customers are increasing steel production,” Talarico says. “We’re trying to ramp up responsibly.”

U.S. Steel’s Minntac facility in Mountain Iron hit bumps in the first half of 2009 but the second half of the year seemed to go better. After a long, slow summer, lines were started back up in the fall, and the company continued pursuing an expansion and improvement of its Keetac facility.

Fourth consecutive quarterly loss
U.S. Steel reported its fourth consecutive quarterly loss earlier this week, and said in a conference call with investors that it expected to see another loss in the first quarter of 2010. However, U.S. Steel officials said that the fourth-quarter results were a small improvement over third-quarter results.

“Last year, iron mining saw one of its toughest years — as did most industries in the United States,” says Craig Pagel, president of the Iron Mining Association of Minnesota. “It’s important to keep in mind that we’re coming off two of the best years they’ve ever had, so by reacting quickly to the market downturn and reduction and steel utilization rates, the companies have probably fared much better than what they have in the past.”

Pagel said that some bright spots include the expansion and modernization plans at Keetac, which would increase the life of the facility; the production of iron nuggets at the Mesabi Nugget facility; and the continued progress of the Essar Steel facility.

The downturn also reminds people how much of the state’s economy relies on mining, Pagel said, adding that for every mining job in Minnesota, 1.8 more jobs are created.

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