A massive new Australian iron ore mine will get a $694 million loan from the Export-Import Bank of the U.S. under a deal approved this morning in Washington that some say could cost jobs on Minnesota’s Iron Range.
The bank’s board of directors gave final approval to the loan for Australia’s Roy Hill mine with the money going to buy U.S.-made bulldozers and trucks from Caterpillar, locomotives from General Electric and drilling rigs from Copco.
The deal was praised today as an effort to bolster 3,400 U.S. manufacturing jobs and U.S. exports for mining equipment that, if not for the loan, otherwise might be purchased from China, Japan or Korea.
“After a comprehensive review, the Bank determined that this transaction represents a significant opportunity for American exporters to create and sustain American jobs,” Fred P. Hochberg, president of the Export-Import Bank of the U.S., said in a statement. “Our financing positions American companies on a level playing field so they can close the sales and expand their homegrown workforces. Projects this size can be difficult to finance — that’s where Ex-Im comes in.”
But the loan, first reported by the News Tribune in August, has been strongly criticized by Minnesota mining interests and some members of Congress who say it’s helping an Australian mine gain a foothold in the global iron ore trade that could hurt Minnesota jobs.
Because the Australian ore probably will go to Asian steel mills, Minnesota officials fear that additional Asian steel someday will displace U.S.-made steel, and that will cut demand for Minnesota taconite and could threaten jobs on the Iron Range.
Minnesota U.S. Rep. Rick Nolan and Sens. Amy Klobuchar and Al Franken, all Democrats, wrote letters urging the Export-Import Bank to deny the loan, as did Michigan lawmakers, all to no avail.
The loan, which received preliminary approval in November, has been especially criticized by Cliffs Natural Resources, the Cleveland-based mining company that operates three taconite iron ore mines in Minnesota and one in Michigan.
The Roy Hill project in Australia’s outback 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 annually will produce 55 million tons — more iron ore than all U.S. mines combined. The project is owned by billionaire Gina Rinehart, the richest person in Australia.
Cliffs says the deal unfairly benefits the massive mine in the competitive global market for iron ore. (Cliffs also owns and operates iron mines in Australia and Canada.) It’s not the Australian mine that Cliffs had any thoughts of stopping, but the investment by a U.S. government-sanctioned bank tilting the playing field.
Cliffs officials had said Roy Hill will “substantially injure U.S. iron ore producers” by pushing down the global price of iron ore by increasing the supply of iron ore. Cheaper ore to Asia probably will displace any potential North American ore sales to Asia. But it also means cheaper Asian steel that could displace U.S.-made steel, further reducing demand for Minnesota ore.
Cliffs estimated Roy Hill’s output would displace nearly $600 million of U.S. iron ore exports and cause a reduction of about $1.2 billion in U.S. domestic sales. The United Steelworkers Union joined Cliffs, some domestic steel producers in opposing the loan.
Caterpillar said the $694 million contract to provide giant haul trucks, bulldozers, lift shovels and more is a huge contract that will spur jobs in places such as Decatur, Aurora and East Peoria, Ill., and Milwaukee.
The little-known Export-Import Bank generally operates without much public attention. It was formed in the 1940s with the intention of boosting exports of U.S. products to foreign nations. But the bank has come under fire before from global aircraft manufacturers, free-market think tanks and others for backing some U.S. business interests over others.
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