Thursday, November 19, 2015

Will the Iron Range be going in circles?

The Timberjay has a very worthwhile read on competing visions for the future of northern Minnesota. It prompted me to do a little checking on the context for those future visions, particularly regarding what to expect for future demand of metals mining. Fortunately, McKinsey & Co., "the trusted advisor and counselor to many of the world's most influential businesses and institutions," has a relatively recent (2013) report on Resource Revolution: Tracking global commodity markets, in which they write about:
"transport sector" headed for Duluth
"transport sector" headed for Duluth
Photo by J. Harrington

Disruptive demand-side technologies and recycling. There is a large opportunity to curtail future demand for metals through technology that increases the efficiency with which we use metals, and through increased recycling. Past McKinsey research has found potential to address up to 13 percent of 2030 steel demand through, for example, higher use of high- strength steel.51 Even more impact on demand could be achieved through the adoption of the “circular economy” concept that aims to reduce, re-use, and recycle resources. A circular economy is an industrial system that is restorative or regenerative by intention and design. It replaces the “end-of-life” concept with restoration; shifts toward the use of renewable energy; eliminates the use of toxic chemicals, which impair re-use; and aims for the elimination of waste through the superior design of materials, products, systems, and within this, business models.52 Take the example of washing machines. Over a 20-year period, replacing the purchase of five 2,000-cycle machines with the lease of one 10,000-cycle machine would also yield almost 180 kilograms of steel savings. In total, the Ellen MacArthur Foundation estimates that more than 100 million tons of iron ore use could be avoided by 2025 if the circular economy were to be broadly applied in the steel-intensive automotive, machining, and other transport sectors that account for about 40 percent of demand. The opportunity to boost recycling is significant. Strong demand for metals over the past decade that has led to high resource prices means that a significant amount of scrap metal is available. Recycling of precious metals has more than doubled since 2005.53 [emphasis added]
When I think about the number of times I've encountered a reference to a "new normal," and I anticipate the rock (business as usual) and the hard place (transition to a low carbon economy) and see more and more reports on what it will cost if we don't monumentally reduce iur greenhouse gas emisions and fossil fuel consumption, I see increasingly greater likelihood we'll have a circular economy to go with our renewable energy future. I don't think that combination bodes particularly well for the recovery of iron mining or the economic future of copper mining in Minnesota. McKinsey offers these insights on the environmental implications of future mining:
Incorporating environmental externalities. The mining industry could face increasing pressure from regulators to pay for inputs such as carbon and water that are currently largely un-priced. A carbon price would have the most direct impact on coal producers (discussed in the energy section of this survey) but would also have an indirect impact on other operators through increases in the cost of energy inputs. Pricing water could have a dramatic impact on costs—and constrain output—given that 32 percent of copper mines and 39 percent of iron ore mines are in areas of moderate to high water scarcity, according to Trucost. Analysis by McKinsey and Trucost shows that pricing water to reflect its “shadow cost” (i.e., the economic value of the water if put to its best alternative use) could increase iron ore costs by 3.3 percent across the industry. A price of $30 per tonne of carbon emissions could increase the cost of iron ore by 2.5 percent. Goldman Sachs has estimated that a hypothetical $10 per tonne carbon tax would have reduced profits of mining companies by around 2 percent in 2011.50 In water-scarce regions, some operators could face increased costs of up to 16 percent from the combined costs of water and carbon emissions.
Grand Marais harbor
Grand Marais harbor
Photo by J. Harrington

It seems to me that too many who support hard rock mining and anticipate the "return" of taconite mining are missing the point that the Iron Range may well have lost much of its competitive advantage of selling to nearby markets. From what I read, there are much larger, less expensive mines being developed and the prospect that mining at Minnesota's scale can be successful in a global market looks questionable to me. Minnesota's Eighth District congressman recognizes the added dangers that a TransPacific Partnership trade agreement would impose on northern Minnesota's mining sector, but a Democratic president and a Republican congress may not care. How many times do we need to hear the lyrics to North Country Blues before the message starts to sink in? Increased costs, increased regulation and increased reuse don't offer much in the way of a bright, shiny future for ore-based metal commodity market growth, do they?

Urban Affection

By Emanuel Xavier
for Walt Whitman 
Besides the obvious technological and architectural advances, only one thing has really changed between our generations:
We now live in an America where blacks are not only allowed the right to vote but can become the Redeemer President of the United States
Otherwise, we still live in an America where the audacity to openly enjoy the pleasures of sex and being respected for wisdom are contradictions without reconciliation
We still live in an America where the economy collapses while the masses are consumed with preventing the rights of anyone with a fancy for anything out of the ordinary
We still live in an America where rotting leaves, tufts of straw, and debris are found in more homes than poetry books
We still live in an America where Christ and Dracula provide both excitement and fear for restless lives longing for a simple touch
We still live in an America where the impact of urbanization reaches out to the common person more than the obscene nature of poetry
We still live in an America where writing about prostitution is considered trashy and profane
We still live in an America where poets have to work while publishing to survive financial difficulty unless they are fashioned like Shakespeare
We still live in an America where, unless you belong to a church, you are a religious skeptic believing in nothing
We still live in an America where overt sexuality, siding with the barnburners, and authoring disreputable books limit poets to a vagabond lifestyle
We still live in an America where breaking tradition and the boundaries of poetic form are considered the trademarks of a pretentious ass
We still live in an America where everything from thieves to dwarfs to fog to beetles deserve validity
We still live in an America where books cannot prevent war and the sick and wounded need healing
We still live in an America where not everyone can appreciate the beauty of immigration, crowded streets, brutal differences, urban affection
We still live in an America where the same sun that once invigorated your passion continues to provide us with the beauty of life worth fighting for
We still live in an America where America still lives in us
  

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