DULUTH, Minn. — It’s not that Minnesota’s congressional delegation doesn’t like Australia, mate. But the idea of a U.S. government bank loaning money to an Australian iron ore mine that will compete with Minnesota taconite?
That’s what they don’t like.
U.S. Sens. Al Franken and Amy Klobuchar and U.S. Rep. Rick Nolan, all Minnesota Democrats, are on record opposing a plan in front of the U.S. Export-Import Bank to invest in equipment for the giant Roy Hill iron mine in Australia’s northwestern Outback.
The Export-Import Bank is considering a request for $650 million in long-term financing to aid the export of $522 million of U.S.-made mining equipment to mine and process ore at Roy Hill. The rest of the money could be going to install the U.S. equipment on site at the mine.
Cleveland-based Cliffs Natural Resources, with four mines in Minnesota and Michigan, has led the charge to stop the loan, saying it threatens U.S. mining jobs and, with new Asian steel produced from Australian ore, eventually threatens U.S. steel industry jobs.
Details of the loan, including the name of the beneficiary U.S. company, are supposed to remain secret to prevent foreign competitors from getting a leg up. But the Duluth News Tribune has learned that the U.S. manufacturer is Caterpillar Inc. and that the equipment includes giant trucks, bulldozers and shovels made in Illinois and Wisconsin.
And that means the Export-Import Bank now is being squeezed by two titans of U.S. industry.
The bank is currently conducting an “extensive economic impact study” on the loan, said Phil Cogan, vice president of communications for the Washington-based bank.
The deal is expected to reach the bank’s board for a vote in the next few weeks, and that’s why lawmakers and some Minnesota mining interests are weighing in as the bank accepts public comments. Nolan, in a letter co-signed by Michigan Rep. Dan Benishek, said the loan would be “unacceptable” and threatens thousands of jobs in the two states.
“We strongly urge you to deny the Roy Hill application,” the letter said.
“While we understand and appreciate the desire to help facilitate the export of manufactured goods, it is hard to comprehend how the Bank could ignore the competitive implications of helping to establish a single new mine that is larger than the entire U.S. industry,” the congressmen wrote.
Huge new mine
The Roy Hill project is so big and so remote that entire new cities, ocean ports, roads, an airport and a 220-mile railroad are being built for a single mine that will produce 55 million tons annually — more iron ore than all U.S. mines combined.
It’s a $10 billion project by the richest person in Australia, Gina Rinehart, and funded in large part by Asian banks. It’s expected to flood the global market with iron ore as early as 2015, most of which will go to steelmakers in Asia in general and China in particular.
And that’s in direct competition with some U.S. iron ore producers, especially Cliffs. Unlike other Minnesota taconite iron ore producers that mine mostly what they use in their own steel mills, Cliffs has no steel mills, and sells not only to domestic steel producers but also globally, shipping some North American ore to Asia.
Cliffs makes more taconite here, and more money, when iron ore demand and prices are high.
The company began rallying lawmakers to the cause in iron ore-producing states — only Minnesota and Michigan — in June.
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