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Published: August 1, 2011 10:36:16 AM CDT
Construction moves ahead on Iron Range plant
John Myers, Duluth Budgeteer News
Madhu Vuppuluri, CEO of Essar Steel Minnesota, and Al Hodnik, Allete chairman, president and CEO, look at the Essar Steel site near Nashwauk on Wednesday. (Clint Austin / caustin@duluthnews.com)
NASHWAUK — Minnesota’s first new taconite plant in 34 years is under full-fledged construction this summer on the way to becoming among the largest iron ore producers on the Iron Range.
Concrete foundations are in place, railroad track is laid and high-voltage electric lines are on the way to the Essar Steel Minnesota site on the north side of town.
An on-site plant has been built to turn mountains of cement and sand into 113,652 cubic yards of concrete. About 30,000 tons of steel is on the way to frame the crushing mill, pelletizing plant and furnace that will bake taconite into marble-sized balls.
The company expects to have the mine open and the processing plant producing taconite by the end of next year — on the way to producing about 4.1 million tons of pellets each year with about 300 workers on the job.
Construction workers are busy in all corners of the sprawling, 20,000-acre site, much of it near the now-empty grounds of the former Butler Taconite operations that closed in 1985.
“This is real progress. And they will be working all winter to get it done,” said Madhu Vuppuluri, president of Essar Steel Minnesota, a subsidiary of Mumbai, India-based steel giant Essar Group, a $20 billion firm with some 70,000 employees worldwide.
The bustling job site is good news for Iron Rangers who watched as a groundbreaking ceremony was held in 2008 but then saw little progress at the site.
“Things are really moving forward now. It’s good to see progress,” said Bill Hendricks, Nashwauk mayor.
And though the footings have just been laid for the first phase, Essar already is making plans to boost production to 7 million tons within a few years in Nashwauk, a project that would boost the company’s investment to $1.7 billion and employment to about 400.
That production would rival Hibbing Taconite for second place in Iron Range taconite production, behind only Minntac in Mountain Iron. Taconite will run out on either BNSF or CN rail lines and then on to Essar’s Algoma steel mill in Canada, to other U.S. mills through the spot market or even as far as Essar steel mills in India, company officials say.
Yet while the first new taconite plant in Minnesota in decades is adding to the recent economic revival on the Iron Range, it’s a third phase of the project that has always been the sexiest: the “steel” part of Essar Steel Minnesota.
Hopes for Iron Range steel mill
The company has plans to use its Nashwauk taconite to make direct-reduced iron to feed the first-ever electric arc steel mill at the site to produce slab steel — a long-held dream of Iron Range leaders who for more than a century have seen iron ore shipped out and made into finished products elsewhere.
It would be the first such facility — with mine, processing and mill at the same location — in the U.S.
It’s that prospect of added-value jobs (another 100 or more in the steel operations) and spinoff business that pushed federal, state and local government agencies to offer more than $65 million in loans and grants to help bring infrastructure to the plant site including roads, rail, sewer, water and electricity. It’s the prospect of the steel mill that attracted Essar in 2007 to buy the Minnesota Steel project that had languished on the drawing board for years.
The steel mill phase of the Essar project, however, also is the least certain. Essar officials talk more vaguely of the subject, but say they won’t start work on the steel mill until after the second taconite phase is up and running. That would be 2015 or later.
More importantly, the steel mill construction depends on U.S. demand for steel. While the global demand for steel remains high because of construction in China and India, U.S. demand for steel remains soft. The Nashwauk steel mill won’t make sense until that demand increases, Vuppuluri told the News Tribune in an interview at the plant site Wednesday.
The U.S. steel industry is running at only 73 percent of capacity, the U.S. Department of Commerce reports, and Vuppuluri said adding more capacity now “would only damage the industry.”
“This (Nashwauk steel mill) is more dependant on the domestic and Canada housing markets coming back much beyond where they are now,” Vuppuluri said. “We’re optimistic.”
The steel phase of the project also would cost Essar another $1 billion or so (on top of $1.7 billion in taconite investment) capital that’s been hard to come by since the global recession and lending crisis hit in 2008. The company was unable to raise capital for the taconite plant in the U.S. and fell back on India banks for the money. (Those banks demanded that India-made steel be used in construction, a development met poorly by some Range steelworkers.)
“Every dollar being spent here is coming from India, so I’m very proud of that particular achievement and we are very privileged to be associated with this community,” Vuppuluri said.
A new day for Minnesota mining?
Local officials are banking on Essar coming through as soon as possible with the steel mill, as are local businesses. None count on it more than Duluth-based Minnesota Power.
The utility on Wednesday inked a deal with Nashwauk and Essar to provide all the electricity needs of the plant. Taconite production will demand from 70 to 110 megawatts of electricity, about the same as the city of Superior. But adding a steel mill could triple demand to 300 megawatts, which would be Minnesota’s largest single electricity customer.
With Essar Steel’s long-term prospects, said Al Hodnik, president of Minnesota Power’s parent company, “the best days lie ahead for the Iron Range.”
Craig Pagel, executive director of the Iron Mining Association of Minnesota, said Essar Steel Minnesota will be using the latest technology and practices to make taconite and, eventually, direct-reduced iron and steel. That’s another example — like Magnetation’s technology that processes valuable ore out of old mine waste and Mesabi Nugget’s plant that makes iron nuggets directly out of taconite concentrate — of Minnesota mining innovations leading in a global market.
Essar claims it will be able to produce the highest-grade, lowest-cost taconite in the region, if not the world, because it will have 21st century technology as well as a high-grade, easy access ore body.
“They (Essar) are an example of this whole Minnesota mining industry retooling and developing new technology to remain competitive in a global market,” Pagel said. “Essar, like Magnetation and Mesabi Nugget, is an important milestone not just for being a new taconite plant, but for the kind of technology that’s going into it. Nobody else (in the world) is doing this.”
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