The Labrador Trough may have seen a feeding frenzy in its day, but the herd seems to be thinning. Lured by cheaper iron from competitive sources, customers have been moving on to greener pastures.
The latest victim: Labrador Iron Mines, which announced Wednesday it’s suspending operations on both sides of the Labrador-Quebec border.
Over the past financial year, the company lost $105.2 million, compared to a net loss of $129.7 million a year ago. It said 2014 will be a “development year” as it concentrates its efforts on its Houston Mine, located near Schefferville in northern Quebec. That project is slated to begin production in April 2015.
In February, Cliffs Natural Resources announced it was idling its operations in Wabush indefinitely, leaving 400 employees out of work.
But optimism still springs eternal among government and industry officials.
Two days after the February closure, Premier Tom Marshall was in Wabush announcing that Newfoundland and Labrador Hydro had been instructed to forge ahead with a third line to supply power from Churchill Falls to Labrador West.
The 160 megawatts of electricity is touted as being for future developments and industrial growth, as well as improved reliability for customers in Labrador West. But the main customer will be Alderon, assuming it stays on track with its Kami mine project. The company announced this week it has temporarily suspended further engineering work, and has still not completed its financing plan.
The third line was enthusiastically endorsed by business interests throughout the province, including the St. John’s Board of Trade.
“The third line is desperately needed,” said chairwoman Sharon Horan, “not only to maintain existing operations industrially, commercially and for residents, but the new power is needed for new mining developments that are on Labrador West’s doorstep.”
Such expectations may seem a little unrealistic, though, given that even existing operations are foundering.
In May, Alderon CEO Tayfun Eldem spelled out the challenges in a talk to the Atlantic Provinces Economic Council gathering in St. John’s.
Canada produces about 45 million tonnes of iron ore a year, almost all from the Labrador Trough region on the Quebec-Labrador border. That represents less than two per cent of the total seaborne trade.
As well, Chinese steelmakers have helped keep prices low by expanding its sources for iron, creating more competition.
But Eldem remains optimistic. How can he not?
After all, iron demand does rise and fall. And unlike Voisey’s Bay nickel, the government will allow Kami’s iron ore to leave Labrador unrefined.
Still, that’s little reassurance for those whose livelihoods are being tossed around in a sea of market uncertainty.