Steel slump prompts Iron Ore Co. to cut production

The Iron Ore Company of Canada said Friday it will review expansion plans at its Labrador City mine. (CBC)

The Iron Ore Company of Canada said Friday that a drop in demand for steel is forcing it to curb production at its operations in Labrador and Quebec.

In a statement, IOC said it was also reviewing expansion plans that it had only recently developed to respond to once-booming global demand.

IOC, which operates a large mine at Labrador City, said no layoffs of permanent employees "are being contemplated at this time."

However, the Rio Tinto-controlled company, the largest producer of iron ore pellets in the country, said it will need to curb production to respond to slumping market demand.

IOC is shutting down one of six pellet machines for what it called "an essential maintenance rebuild." It said the same work "will follow sequentially" on a second machine.

The company said it needed to take "prudent action" to handle reduced demand for its product.

IOC, which also owns its own railway for transporting iron ore pellets from Labrador to the Quebec port of Sept-Îles, indicated it would attempt to implement production cuts with only a moderate effect on its 2,300 employees.

"All production, except for the mine, some rail and shipping from the terminal in Sept-Îles, is planned to be suspended for a four-week shutdown in July 2009, during which time most employees would take their vacation," the company said.

Perhaps more importantly, the company said its planned expansion programs — which had helped spark an economic boom in western Labrador, where housing prices have soared in value — are now under review.

Only last March, IOC unveiled an ambitious, $500-million expansion plan that would have seen production climb from a current level of 17 million tonnes of ore per year to about 25 million tonnes by 2011.

Earlier this month, Wabush Mines, which operates in the nearby town of Wabush, warned employees that steep production cuts and layoffs were pending, as the company also reacted to the global economic crisis.

IOC is the latest company to react to a drop in demand for steel and related products, including cars and consumer goods. On Thursday, Luxembourg-based ArcelorMittal, which operates Dofasco in Hamilton, said it will be cutting about 9,000 positions worldwide, or about three per cent of its workforce.

IOC said, however, that it did not expect the global downturn to be permanent.

"We expect that iron ore demand will improve in the medium term," the company said.

Slowdown surprising

For George Kean, president of the United Steelworkers Local 5795, the news of a slowdown at the iron ore operation came as a disappointment, since only a few weeks ago IOC's expansion plans were still a go. Considering the world economy, however, it was not that surprising, he added.

The only good thing, according to Kean, is the way the company has decided to weather the economic turmoil.

"There's no members getting laid off, and we're continuing doing our work, and we're still going ahead with the new equipment that's coming on, new shovels and new equipment, and we're rebuilding our machinery," he said.

"So when she do pick up, we're ready to take advantage of any market conditions."

The news spread to people at the local mall doing their Christmas shopping, including Iris Tremblett, who said people in Labrador West still have a lot to be thankful for.

"Well for one month in the summer, that's only like someone taking holidays, I guess. We're lucky to be here for as long as we are. So lots of towns close down for good and never come back, right? So I think we're doing pretty good," she said.

Newfoundland and Labrador's Natural Resources Minister Kathy Dunderdale declined CBC's request for an interview, and offered no comment on IOC's announcement.