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Crowded railways slow ore shipments from Iron Range to Duluth

Duluth News-Tribune (MN)

Sept. 13 --Earlier this week, the problem was a shortage of rail cars to bring coal to Northeastern Minnesota to generate electricity.

On Friday, officials at Minnesota iron ore mines said they can't get all their finished taconite pellets to market because of a shortage of rail service apparently spurred by the huge increase in the amount of oil moving by rail.

Taconite industry officials confirmed Friday that they are making taconite faster than they can move it by rail, with millions tons of pellets stockpiled and waiting for trains.

The shortage of rail service is an unintended consequence of a huge increase in demand to ship crude oil by rail. Railroads now are shipping more than 15,000 train carloads of petroleum products each week, more than double the amount in 2010. Oil shipments from North Dakota are competing for rail space with many other products nationally, but especially in the Upper Midwest.

Cliffs Natural Resources , which operates three taconite plants in Minnesota and one in Michigan , said Friday its operations "are among a number of industrial facilities that have been have been significantly affected by the national logjam of rail service in the United States ."

In a statement to the News Tribune , Cliffs said the rail backlog "creates substantial and irreversible negative consequences" because the shipping season on the Great Lakes is finite, closing in early January for more than two months. If Cliffs can't get its pellets to Lake Superior and shipped out by ore boat by then, its steelmaking customers in the eastern U.S. won't get the raw material they need to make it through winter.

Last winter, as cold conditions thwarted rail shipments and more trains went to move oil, the Minntac taconite plant in Mountain Iron alone "dumped 2 million tons on the ground, and they still haven't caught up with rail service," said Mike McCoshen , president of Hallett Dock Co. in Duluth , which serves the iron ore industry.

McCoshen noted that while taconite pellets require special railcars that haven't been pulled away for other uses, there's been a logjam of other trains on tracks and a shortage of locomotives at both Canadian National and Burlington Northern Santa Fe , the major rail lines in the region.

Two mines, U.S. Steel's Keetac operation and Arcelor Mittal's Minorca Mine , are sending product -- a special taconite "pellet chip" -- from the Iron Range to Duluth harbor docks by truck.

"I've been in this business 37 years and I've never seen that before. I don't know that it's ever happened to bring it down by truck," McCoshen said, adding it's good news for Hallett -- which is transferring the taconite to lakers -- but not a viable long-term solution for the mines.

Attention from Washington

On Friday, U.S. Sen. Amy Klobuchar , D- Minn. , spoke about Minnesota's rail problems during a Senate Commerce Committee hearing on improving America's rail system. She called on railroad companies to address the ongoing delays that have kept an estimated 2 million tons of Minnesota taconite sitting in stockpiles at the mines instead of being shipped to steel mills.

That's about 5 percent of the industry's annual production of nearly 40 million tons.

"Rail service disruptions are forcing mines on the Iron Range to stockpile significant quantities of iron ore," Klobuchar said in a statement. "These disruptions hurt business and threaten jobs not only at these operations, but also at the steel mills that rely on taconite pellets to feed their furnaces. I will continue to pressure railroad companies to act quickly to ensure that pellet backlogs are reduced and that steel mills receive timely shipments of taconite."

Klobuchar last week urged the Surface Transportation Board to address rail service delays. She also has introduced the Railroad Antitrust Enforcement Act, aimed at boosting railroad competition and keeping costs down for businesses, farmers and consumers by subjecting railroads to the same antitrust laws as other industries.

On Wednesday, Minnesota Power said it will shut down several coal-burning power plants and instead buy power from other utilities for several months -- if needed -- so it can stockpile coal for the colder winter months when the utility faces its highest demand. If it didn't do that, the Duluth -based utility said, it might face a coal shortage in the winter because it can't get timely rail delivery from coal mines in Montana and Wyoming .

Minnesota Power officials said they support some sort of government action to encourage rail competition, noting they are beholden to one rail line -- BNSF -- to bring them coal at a time the railroad won't or can't provide enough coal trains.

The problem isn't confined to northern Minnesota .

Xcel Energy in August reported to the Surface Transportation Board that it was not getting enough coal by rail to power its massive Sherco coal-burning power plant outside the Twin Cities .

In Minnesota's farm country, some grain elevators have moved to using trucks instead of rail to move grain to market, unable to secure enough trains to handle the harvest.

And on Friday, officials tied to the Duluth port said the rail backlog also could hurt marine business. With spring wheat and durum wheat now being harvested in the Dakotas and western Minnesota , saltwater freighters from around the world already are on their way to Duluth to pick up loads of the fresh crop to move worldwide.

If trains aren't available to get the crop to the Twin Ports, those ships would have to wait, or divert elsewhere. David Torgerson , executive director of the Minnesota Association of Wheat Growers , said the harvest is just starting to come in because of late planting and a wet season, so it's too early to tell if a lack of rail cars will delay shipments this autumn.

In a rail car update in late July required by the Surface Transportation Board , BNSF said it had 4,942 past-due rail cars in North Dakota averaging 32 days late. Canadian Pacific estimated a backlog demand of 10,000 to 12,000 cars.

BNSF officials have said the company has invested billions of dollars in the past two years, and is adding thousands of new employees, in an effort to keep up with the added demand.


(c)2014 the Duluth News Tribune (Duluth, Minn.)

Visit the Duluth News Tribune (Duluth, Minn.) at www.duluthnewstribune.com

Distributed by MCT Information Services

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
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