Taconite plant, mine re-openings good news for CSX, BNSF

RELATED TOPICS: SHIPPERS | MIDWEST | BNSF | CSX
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REYNOLDS, Ind. — There's good news in the air for the metallic ore business units of BNSF Railway and CSX Transportation as plans were announced in late July to re-open shuttered mining facilities in Minnesota in addition to the opening of a new taconite pellet plant in Indiana.

Republic Steel and ERP Iron Ore LLC have signed a Memorandum of Understanding to form a joint venture to produce pig iron at Republic’s steel mill in Lorain, Ohio. ERP plans to ship the iron ore via CSX to Lorain from its Reynolds pellet plant. When fully operational the Lorain mill is expected to produce up to one million net tons of pig iron per annum. The pig iron would be used to produce steel for electric arc furnaces.

In recent years, American pig iron production declined in the face of imports from Brazil Russia, and the Ukraine. As electric arc furnaces are displacing traditional blast furnace steel production, Republic and ERP said the new agreement “represents an important step in protecting North American independence in steel production.”

ERP acquired the Reynolds plant in January when it purchased the assets of Magnetation LLC. Magnetation was founded in 2006 in Grand Rapids, Minn. The company used new technology it developed to extract iron ore concentrate from old mine waste-sites on Minnesota’s Mesabi Range. Magnetation built several small plants to process the concentrate, which was then trucked to a load-out near Grand Rapids for transport by BNSF Railway. In 2014, the company opened the $400 million pellet plant at Reynolds to supply AK Steel. BNSF sent a daily 120-car train of concentrate from Minnesota to Chicago, where CSX Transportation took over for the move to Reynolds. CSX then moved trains of finished pellets to AK Steel facilities in Ohio and Kentucky. Magnetation even sent trains to Mexico, with the trains moved from Minnesota to the border by BNSF.

When the open market iron ore business collapsed in 2014, Magnetation couldn’t make enough money to pay its mortgage payments, forcing the company into bankruptcy. It shut down the Minnesota and Indiana facilities in autumn 2016.

In addition to the Reynolds facility, ERP acquired three iron ore processing plants in Minnesota and their rail and loading operations. ERP plans to restart production at the Plant 4 mining and processing operation near Grand Rapids, with production from the plant to be moved by BNSF. Currently there are no plans to reopen the former Magnetation plants 1 and 2.

More good news for BNSF appears to be on the horizon. ERP affiliate Chippewa Capital Partners has confirmed a plan of reorganization to invest $250 million to sponsor Mesabi Metallics Company LLC. Mesabi Metallics is the former Essar Steel, which for years has struggled to construct a new taconite pellet plant along BNSF at Nashwauk, Minn. Financial difficulties plagued the project, and the plant is only half built. Under terms of a deal for mining leases with the State of Minnesota and the company, work on the pellet processing plant must begin before October and finish by December 2019.

In addition, construction on a separate direct-reduced iron production facility would begin in 2018 and end by 2022. The direct-reduction project was once considered by Essar but dropped years ago. It would turn taconite pellets into three million tons of iron briquettes annually that would be used in electric arc mini-mills and could be shipped via BNSF. It would be the first plant of its type on Minnesota’s Iron Range.

Tom Clarke, a Roanoke, Va., entrepreneur who made his first millions in the health care industry and then made headlines as an environmental activist, founded ERP and Chippewa Capital Partners. In recent years he has been buying troubled and bankrupt coal mines, saying he would make them environmentally responsible despite the vast amounts of carbon dioxide released when coal is burned.

NEWSWIRETrains News Wire

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