Steel Mills

SDI Idling Minnesota Iron Operations

May 26, 2015

Steel Dynamics announced this morning that it will idle its Minnesota ironmaking operations in Chisholm and Hoyt Lakes, Minn., effective immediately. The operations will be idled initially for 24 months due to the “continued significant decline in pig iron pricing, which has resulted in the cost of iron nugget production being meaningfully higher than product selling values.”

The operations are comprised of jointly owned iron concentrate production facility Mining Resources and iron nugget production facility Mesabi Nugget. The idling will affect 200 positions with opportunities for employment provided at other Steel Dynamic locations where available. A small staff will remain to maintain the site and facilities.

“With this action, we are actively responding to the unprecedented decline in iron ore pricing, which recently led to an extreme decrease in pricing for pig iron, our end product,” stated Mark D. Millett, Chief Executive Officer. “Current global currency dynamics and world iron ore supply / demand factors support lower pig iron prices. We currently do not see strong drivers that would suggest a reversal of this trend for some time. Our Minnesota operations were intended to serve as a hedge to high pig iron and scrap prices. While this lower raw material cost environment certainly advantages our steel operations, it has resulted in an uneconomic situation for our iron nugget operations.

“We deeply regret the need to take this action, as the men and women in Minnesota have made great strides in production capability and cost savings relative to this pioneering effort. I commend their dedication, hard work, and strong commitment to the company and area communities.”

Based on SMU pig iron sources, the most recent offers are $280-$285 per metric ton delivered to New Orleans (NOLA). The expectation by pig iron traders is the shut down of the Mesabi Nugget facility will results in probably two extra pig iron cargoes coming from either Brazil or Russia.