Cleveland-Cliffs has announced it will idle Northshore Mining facilities in Babbitt and Silver Bay until at least mid-August as the COVID-19 pandemic drives down the demand for steel.
Tilden Mine in Michigan also will be idled until at least July.
In a news release Monday afternoon, April 13, Cliffs CEO Lourenco Goncalves said the pandemic has hurt North American manufacturing and steel production. Iron ore pellets produced at each mine's plants are the key ingredient in steel.
"As our steel customers rationalize their operations’ capacities, we made the decision to adjust our iron ore production during the first half of the year and not continue to build additional iron ore inventory until market conditions improve," Goncalves said. "Once the North American steel market improves, Cleveland-Cliffs will be able to quickly restart and ramp up production.”
Cliffs spokesperson Patricia Persico said 470 of the 570 employees at Northshore Mining would be laid off. The 100 remaining employees "will be retained to maintain the yard and dock crews for loading vessels and a small staff for care and maintenance of the assets and fire watch," Persico said.
At Tilden, all but 160 of the mine's 850 employees will be laid off, Persico said.
Silver Bay Mayor Scott Johnson said many residents expected layoffs after Cliffs halted construction on its hot-briquetted iron production plant last month due to the pandemic. The plant, which was expected to open in June, will be supplied by 3.5 million tons of direct-reduced iron pellets from Northshore Mining every year. Northshore began producing that DR-grade pellet last summer in anticipation of the HBI plant's opening.
"It's something we see. People that live in mining towns are used to these occurrences, and with the downturn in the market and the stopping of construction on the Toledo plant, which was going to be a major recipient of our new pellets, we kind of knew this was coming," Johnson said.
Cliffs is the first mining company on the Iron Range to idle production and make a mass layoff in the face of the economic decline caused the spread of COVID-19, the respiratory illness caused by the new coronavirus.
U.S. Steel, which operates Keetac in Keewatin and Minntac in Mountain Iron, and ArcelorMittal, which operates Minorca in Virginia and Hibbing Taconite, have not announced any layoffs in Minnesota; however, both companies have announced the idling of blast furnaces in Indiana.
In the last month, capacity utilization of the country’s blast furnaces has fallen from 80.5% to 56.1%, according to the Iron and Steel Institute.
Demand for steel has fallen not only from less consumer demand but also from companies voluntarily shuttering plants to help curb the spread of coronavirus, such as General Motors, Ford and Fiat Chrysler all halting production last month. Other factories requiring steel have also closed.
Tony Barrett, an economics professor at the College of St. Scholastica, said even when those plants reopen, demand for goods could be slow to return.
"The major uncertainty now is: how do we restart the economy and how quickly? The conventional wisdom, at least as of today, seems to be we're going to reopen the economy rather slowly. There's a lot of people that are not going to be going out and consuming because they've got to rebuild their savings, they've got to maybe pay off debt, maybe back rent, things like that. And all that is going to really make the economy slower," Barrett said.
"The correlation between the demand for taconite and overall economic activity is close to one-to-one," Barrett said. "And until the economy shows significant signs of life, it's going to be tough for the Range."