Mining town finds unlikely savior

Marketplace Staff Oct 10, 2006

KAI RYSSDAL: Three years ago Eveleth, Minnesota was on its way to becoming a ghost town. The iron mine there was shutting down. Because the U.S. steel industry has been cutting back. Falling demand in traditional markets, like cars. Then there’s China. Steel production in that country has been growing by double-digits. China’s construction boom has been gobbling up nearly a third of the world’s steel. And Bob Kelleher reports that’s been breathing new life into the U.S. industry.

BOB KELLEHER: Eveleth is a town with just a couple of stoplights and a single grocery store. In downtown you’ll find a narrow, two-story city hall . . . and Tiffany Anderson. She’s Eveleth’s economic development director.

TIFFANY ANDERSON: I think that everyone’s optimistic, and to speak from the new word on the street, business is beautiful.

Quite a contrast to what she might have said three years ago. That’s when EvTac, the town’s bankrupt taconite mining company, closed, putting 400 people out of work. It was a big blow for a town of 3,700, according to Tony Barrett, an economist with the College of St. Scholastica in Duluth, Minnesota.

TONY BARRETT: It’s grim. These are very well-paying jobs. A mine worker there could make $60,000 to $70,000 a year. You don’t replace jobs like that in small towns anywhere in America. And that’s what Eveleth was facing.

And then, just months later, the mining company was launched back to life — resurrected by money from China and the promise of a new overseas market for Minnesota ore. Operations Manager Todd Roth says the new company, United Taconite, is a rare partnership between his American employer and a Chinese steel company that was hungry for iron.

TODD ROTH: The magic of the whole deal was the coming together of Cliff’s and Laiwu Steel to jointly purchase the place.

Cleveland Cliffs owns 70 percent, China’s Laiwu Steel 30 percent. About a third of United Taconite’s output gets loaded into ships for the long haul to Shandong Province, China.

As Evtac, Eveleth’s iron mine was one of the state’s most expensive to operate. But it’s much leaner as United Taconite. The owners have invested in efficiencies. They’ve increased employment by 25 percent to about 500 workers. And they were able to start up without Evtac’s debt load, and pension and healthcare obligations were sharply reduced in the former company’s bankruptcy.

Laiwu’s contract for North American pellets is in effect another seven years. After that, many observers think the Chinese will turn to ore sources much closer to home.

Joe Strlekar is vice president of the local United Steelworkers. Strlekar sees the Chinese market as a welcome anomaly — a temporary hedge against the typical up and down cycles of the steel business.

JOE STRLEKAR: The expansion of the Chinese economy, I guess you could say, was the catalyst that got us going again. But it’s not what’s keeping us going.

In the long run, Strlekar says, the fortunes of Minnesota mines will remain tightly linked to the fortunes of domestic steel.

In Eveleth, Minnesota, I’m Bob Kelleher, for Marketplace.

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