Essar Steel Halts Payments on Mill Project in Minn.
India-based Essar Steel’s plan to build an iron-ore crusher and pellet mill on Minnesota’s Iron Range has become an epic construction struggle, with non-payment to contractors, past-due loans and another total work stoppage, says Barry Davies, business representative, International Association of Ironworkers Local 612, Minneapolis. “Construction has stopped,” he says. “It’s about 60% to 70% complete, but we’ve been told that Essar is waiting for the bank to release some funds. … It’s been a big financial difficulty for our contractors.”
Essar started construction in 2008 on the $1.8-billion project, and several times contractors have been unpaid and the site idle. In late 2014, however, the company reported closing nearly $800 million in a mix of private equity and debt deals, needed to complete the project and make contractors “whole.”
Essar reported strong progress at the site throughout 2015, but as the pace of construction picked up, steel prices this year dropped about 40%, to $53 per ton at press time. Essar scratched steel-fabrication plans to focus on crushing and pelletizing taconite.
This tactic doesn’t help the Iron Range, which already has enough taconite production, says Brian Hiti, mining director for the Iron Range Rehabilitation Board, Duluth. “Essar was supposed to have steel processing [capabilities] and create a market for iron ore.
We’re trying to get out of this boom-and-bust economy on the Iron Range through efforts to diversify our gross domestic product.”
Minnesota officials supported Essar with $67 million in grants and $6 million in state-issued loans for electricity and rail linkages. Essar was to deliver a working iron-pellet-to-steel processing plant by Oct. 1.
“They missed that deadline, so now they’re trying to renegotiate … [and] not building steel processing [capabilities] at all,” says Hiti.
Essar did not return ENR’s request for comment on the work stoppage.
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