The World Comes to the Iron Range

In terms of employment and other measures of economic success, the boom hasn’t quite arrived on the Range yet. And there’s no guarantee that the current boom in taconite production won’t result in another cyclical bust. But it’s clear that the Range is no longer dependent solely on domestic steel production. And a global market for taconite could mean a smoothing out of historic boom-and-bust cycles.

Boom to Bust and Back

The original taconite plants and mines were built after World War II by steel companies. “It would not be unusual to have six different steel companies go together to build a mine,” notes Tuomi, who is United Taconite’s vice president and general manager. “The ownership would change over the years as steel companies either went out of business, were acquired by somebody else, or sold their interest in a given mine.” Until recently, foreign interest in Minnesota iron ore mines was limited to the Canadian steel maker Stelco, which Pittsburgh-based U.S. Steel acquired in November.

In the 1920s, University of Minnesota researchers began looking at taconite, a lower-grade ore containing about 30 percent iron, compared to the “red ores,” which have an iron content of 60 to 65 percent. “The whole thought was that we would run out of high-grade iron ore,” says Peter Kakela, an economist with Michigan State University who specializes in the iron ore industry. And that happened. Demand for iron in World War II accelerated the exhaustion of many of the high-grade red ore mines, which forced the industry to process lower-grade ore.

By the mid-1950s, taconite mining had radically changed the industry as well as the mining landscape of northern Minnesota. Before, numerous small mines shipped red ore directly, without significant processing. But taconite pellet production requires tremendous capital investment, larger mines, and plants that crush the taconite rock into powder in order to extract the iron, roll it into marble-sized pellets, and “bake” them before shipping them to the steel mills along the Great Lakes.

By the early 1980s, the supply of taconite pellets had outstripped demand. Meanwhile, more and more steel production was being handled by electric arc furnaces, or mini-mills, which mainly use scrap metal for raw material. Competition from mini-mills such as North Carolina– based Nucor, along with increased imports, reduced the demand for steel from the big, integrated mills in the U.S. Taconite thus suffered a double blow.