(The following article by Peter Passi was posted on the Duluth News Tribune website on December 23.)
DULUTH, Minn. — This Great Lakes shipping season has been one of the slowest that David Torgersen can remember in 33 years of work at Duluth’s ore docks.
As port manager of the Duluth Missabe & Iron Range Railway facility, he looks forward to seeing the former EVTAC plant churn out pellets once again in Eveleth, Minn.
In mid-May, the producer, a major DM&IR customer, ran out of orders for the taconite it processes and shut down.
On Monday, however, that plant, under new management, sprang back into action. Cleveland-Cliffs Inc. and a Chinese partner, Laiwu Steel Group, reopened under a new name: United Taconite. That’s good news on the DM&IR’s ore dock, which immediately will begin receiving United’s pellets. But the benefits could be short-lived. Eventually, Cleveland-Cliffs plans to reroute United’s pellets to a loading dock formerly operated by LTV Steel Mining Co. in Taconite Harbor.
“We do own that facility, and we’re actively looking to utilize the dock for shipments,” said Dana Byrne, a Cleveland-Cliffs spokesman. Torgersen said he believes the re-emergence of Taconite Harbor as a pellet destination could have ramifications for Duluth.
“It’s a real threat,” he said. “It could really hurt us.”
Taconite Harbor offers some distinct advantages over the DM&IR dock. It takes about three hours less to sail to the Soo Locks from Taconite Harbor than it does from Duluth.
That could translate into big savings during the course of a shipping season, said Richard Stewart, director of the University of Wisconsin-Superior’s Transportation and Logistics Research Center. He said the cost of operating a 1,000-foot ore vessel can exceed $2,000 per hour.
The Taconite Harbor facility also has an innovative self-unloading system that empties pellets from cars as they roll down the track. The facility can unload a 96-car train in 15 minutes. The DM&IR dock in Duluth typically receives 140-car trains, which it unloads in 45 minutes.
But Taconite Harbor can’t take the Duluth dock’s place in the short run.
It lacks adequate pellet storage to operate year-round. Also, a direct rail link with United Taconite still needs to be established. All told, it is expected to cost $30 million to $40 million to bring the facility on line, said State Rep. David Dill, DFL-Crane Lake.
Dill supports providing a federal loan or loan guarantee to help Cleveland-Cliffs make needed improvements at Taconite Harbor. He said Cleveland-Cliffs has concluded that the work could be completed by the start of the 2005 shipping season.
United Taconite could trim its transportation costs by about $1.50 per ton by using a reopened Taconite Harbor facility, according to an estimate by Peter Kakela, a Michigan State University taconite industry analyst.
While Dill expressed sympathy for DM&IR dock workers, who could see less work as a result of Taconite Harbor’s resurgence, he said, “In a highly competitive world economy, our taconite producers must operate as efficiently as possible. We need to be looking at the big picture.”
Cleveland-Cliffs’ Byrne agreed, saying: “If producers can’t get their pellets to market at a competitive price, they won’t be around for long.”
Eventually, Hibbing Taconite Co., which is managed and partially owned by Cleveland-Cliffs, also could send pellets to Taconite Harbor, Dill said. There, too, improvements would be required, including six miles of new railroad track and a load-out facility. Dill said the ballpark cost of the work would be between $10 million and $15 million. If Taconite Harbor becomes the destination for Hibtac pellets, it would probably be at the expense of the Burlington Northern Santa Fe dock in Superior, which handles most of the facility’s production.
Byrne said Cleveland-Cliffs is “in a multiyear agreement with BNSF,” but he declined to disclose the term of that contract. “There’s nothing imminent,” Byrne said. But he added: “Transportation continues to be a major cost, and we do continue to look for the most economical options.”
BNSF spokesman Steve Forsberg declined to speculate about what it would mean for the Superior ore dock if Hibtac took its business elsewhere. The rerouting of pellets from United Taconite and Hibbing Taconite ? with respective annual capacities of 5.4 million and 8.5 million tons ? could deal a blow to the port of Duluth-Superior. To put that in perspective, the Twin Ports shipped 16.8 million tons of taconite in 2002.
Since the DM&IR’s Duluth dock shipped the last of EVTAC’s pellets in October, it has seen relatively little business. The DM&IR has been able to handle almost all of the pellets it ships through its dock in Two Harbors.
Pete Stephenson, vice president and general manager of the DM&IR, explained that the Two Harbors facility has more through-put capacity than the Duluth dock, and also offers a shorter sail to steelmakers in the lower lakes. The Duluth Seaway Port Authority lacks up-to-date tonnage figures for this year, but taconite shipments will probably show a slide because of EVTAC’s closure.
“Iron ore has been the dominant cargo for the first 100 years of this port’s operation,” said Port Authority Director Adolph Ojard. But he noted that in recent years, coal has contended for top billing. In 2000 and 2001, more tons of coal moved from Duluth-Superior.
Ojard said Duluth has a long, proud history as a taconite handler, but there’s little room for sentimentality when it comes to moving bulk freight.
“In transportation, business will almost always move to the lowest-cost provider,” he said.