Magnetation picks Indiana for pellet plant

• Larry Lehtinen

Larry Lehtinen, CEO of Magnetation LLC.

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• Our view: A kick to the gut, then a silver lining

Magnetation will build its new iron-ore pellet plant in Reynolds, Ind., the Grand Rapids firm announced Tuesday, spurning efforts to lure the plant to Superior or Minnesota’s Iron Range.

The $300 million plant will produce up to 3 million metric tons of iron-ore pellets each year, with construction set to start early next year and production by late 2014 or early 2015.

The new plant will employ about 120 people.

After courting Minnesota, Wisconsin and Indiana sites for the pellet plant, Magnetation said in June that it had ruled out two Itasca County sites and was down to Superior and Reynolds. The company picked the Indiana site because it had ample space, rapid permitting and because it was close to the iron-ore pellets’ ultimate destination — AK Steel’s giant blast furnaces in Middletown, Ohio, and Ashland, Ky.

Magnetation will transport iron-ore concentrate from Itasca County to Indiana via the BNSF Railway, and the pellets will move to the steel mills by rail as well.

“The pellets will still be steaming hot when they arrive at the mill. That gives AK the kind of just-in-time delivery they need without having to deal with the seasonal fluctuations (in pellet supply) you get when you transport on the Great Lakes,” Matt Lehtinen, Magnetation president and chief operating officer, told the News Tribune.

Jason Serck, Superior Planning and Port Director, said the 120-acre Parkland Industrial Park site in Superior’s southeastern corner had seemed a good fit for Magnetation.

“We would have loved to get this. We feel we put together a good package for them. In the end, Indiana just had some better infrastructure availability,” Serck said. “The good news is we have learned a lot about our site and we can use that as we market it going forward.”

Serck also noted that Indiana offered more up-front incentives despite Wisconsin’s effort to attract the plant.

According to WLFI-TV in Indiana, the Indiana Economic Development Corporation offered up to $1.5 million in conditional tax credits and up to $200,000 in training grants to Magnetiation. The Indiana Department of Transportation will also improve rail service to the site where county issued tax increment financing bonds will be used. The regional electric utility also offered the company $23 million in additional energy and infrastructure incentives.

Partnership boosts Magnetation

The planned pellet plant is part of a joint venture Magnetation inked with Ohio-based AK Steel in October 2011 that gives Magnetation a stable demand for the iron-ore concentrate it recovers on the Mesabi Iron Range.

Having AK Steel as a partner, and not just a buyer, helps buffer Magnetation from the ups and downs of the global spot market for iron ore. Those prices hit nearly $200 per ton in 2011 but now have dropped to about $120 per ton as global demand for steel and ore have dipped and as additional ore mining and processing capacity has come on line, especially in developing nations.

That’s caused some companies to cut production: Cliffs Natural Resources announced earlier this month that it would idle a taconite pellet production line at its North Shore Mining operations in 2013.

“We knew those highest prices were not sustainable. Our current business model never depended on those prices staying that high,” Lehtinen said. “Historically, the price of taconite and iron ore has moved between $65 and $90 per ton in today’s dollars. So we’re still high compared to the long-term history.”

Minnesota expansion still planned

While losing the pellet plant is unwelcome news for Northland officials, the plant in Indiana will be fed with iron-ore concentrate from two new Magnetation ore recovery facilities in Itasca County. Matt Lehtinen said construction of those plants, one northwest of Coleraine and one southeast of Calumet, will start in 2013 and they will be ready to feed the Indiana plant by 2014.

Those two Itasca County facilities, which will recover valuable concentrate from long-shuttered natural iron ore mines, will employ 240 Minnesotans.

“It’s important to note that two-thirds of the jobs created by this project will be in Minnesota,” Matt Lehtinen said.

Magnetation already employs about 220 people at three ore recovery facilities on the Iron Range, two of which, near Keewatin and Taconite, the company owns and which send concentrate to a Mexican steel mill. The third plant, near Chisholm, is majority-owned by and supplies the Mesabi Nugget iron nugget plant near Hoyt Lakes.

Tags: iron range, news, business, superior, wisconsin, minnesota