Cliffs Natural Resources announced that two of the four production lines at Northshore Mining’s taconite plant in Silver Bay, MN will be shut down and the shut down of the Empire Mine near Palmer, MI will be extended because of declining demand for iron ore.

About 625 people will be laid off because of these moves.

The shut down at Northshore Mining's taconite plant in Silver Bay will result in 125 layoffs, said Cliffs' Minnesota spokeswoman Sandy Karnowski. It has not been determined how those layoffs will be distributed between the plant and Northshore's mine in Babbitt, she said.
The Empire Mine was shut down in the summer. This will affect 500 jobs beginning in the second quarter of 2013. Empire currently has 730 employees.

“It’s a tough day for all of us at Cliffs and we’re hopeful to see the market conditions improve in the future,” Karnowski said. Northshore Mining has 665 total employees.

The laid-off employees will be offered supplemental unemployment pay and benefits based on their years of service and could be recalled if demand recovers, she said.

The Cleveland-based company also said in its announcement that it plans to delay portions of its Bloom Lake mine expansion in Quebec, The Associated Press reported.

“We believe it is prudent and necessary to match our production volumes with market demand. We will remain operationally flexible to ramp up production volumes throughout the year if the demand increases," Laurie Brias, Cliffs’ president of global operations, said in a statement.

The layoffs at Cliffs could be the first wave of production cuts on Minnesota’s Iron Range, said Don Fosnacht, director of the Center for Applied Research and Technology Development, which is part of the Natural Resources Research Institute at the University of Minnesota Duluth.

The global economic slump, coupled with growing worldwide capacity in the steel industry, has depressed prices for iron ore, Fosnacht said. And the fears of automatic federal tax increases and spending cuts should Congress fail to reach a budget deal by year’s end are holding back the domestic steel industry.

One factor that could spur a recovery in global demand and thus benefit the Iron Range is China’s new plan for stepping up spending on its public infrastructure, Fosnacht said. Another is the rebuilding effort after Superstorm Sandy, which he said eventually will mean a pickup in the construction industry in the Northeast and higher demand for new home appliances made of steel.

Craig Pagel, president of the Iron Mining Association of Minnesota, said there are good indications that the industry expects long-term demand for iron ore will be strong, such as the new Mesabi Nugget, Magnetation and Essar Steel projects on the Range, as well as U.S. Steel’s plans to expand its Keetac operation.