Essar bets $18 billion on America’s biggest steel plant after its Minnesota bust

India’s Essar Group has spent the better part of two decades trying to turn Minnesota iron ore into American steel, and its first attempt ended in bankruptcy. Its new plan is far larger: a mine-to-mill bet, made through its US arm Mesabi Metallics, that ties its iron ore mine on the Mesabi Iron Range to a steel complex in southeast Iowa that its backers call the largest steel plant in the United States.

Steel is a hidden cost inside cars, washing machines, bridges and warehouses, and American buyers have paid more for it since import duties on foreign steel went up. A mill of this size would add domestic supply aimed at automakers, defense contractors and infrastructure builders. Buyers in Europe or Asia, outside that duty wall, see no direct change in what they pay.

The price tag is $18 billion, and the target is up to 10 million tons of steel a year, more than a tenth of current US output, sold into a market where imported steel now pays a 50% duty. The design matters as much as the size. Mesabi plans to turn its own taconite pellets into direct-reduced iron with natural gas, then melt it in electric arc furnaces powered by Iowa’s wind-heavy grid, skipping the coal-fired blast furnaces that still anchor America’s older steelmakers. Cleveland-Cliffs, the region’s dominant iron ore and steel group, chose to keep a blast furnace running in Ohio instead. “With the new steel complex in Iowa, we will complete the fully integrated American supply chain, from mine to mill,” said Rewant Ruia, Mesabi’s chair.

The track record is the reason for caution. Essar broke ground near Nashwauk, Minnesota, promised a finished plant within a few years, then ran short of cash, left contractors unpaid and never reimbursed the state for about $65 million in infrastructure work before its Minnesota unit sought bankruptcy protection. Years of litigation over state mineral leases followed. In India, the group lost its steel flagship, Essar Steel, to ArcelorMittal and Nippon Steel through insolvency. The Minnesota mine is only now approaching production, with pellet output expected within weeks, according to the company.

In Iowa, the hard part has not started. Lee County, a Mississippi River county of about 32,000 people, has received no permit applications, land records show no major purchases tied to the project, and the site remains undisclosed, KCRG reported. The incentives are not yet law either: legislators are being asked to double the refundable investment tax credit in the state’s mega-project program from 5% to 10%, a gap that on a $15 billion build could reach hundreds of millions of dollars. Ginger Knisley, who chairs the Lee County board, framed local hopes with care: “Something of this scale, if it does end up landing in Lee County, chances are we’ll benefit from improvements to our infrastructure, utilities, roads.”

The clearest loser is Minnesota’s Iron Range, which has shipped ore to mills elsewhere for more than a century and hoped to finally keep one. Mesabi chief executive Joe Broking told the Itasca County board that other states offered more: “The reality is when you talk to other states, they are more competitive on this subject.” Nashwauk will still grow its permanent staff from 200 to 350, the company says.

Mesabi splits the total into $3 billion for the Nashwauk mine and pellet plant and $15 billion for the Iowa complex, which it expects to create more than 6,000 construction jobs and at least 1,750 permanent ones, with steel production starting in 2030. The plan was presented at the White House on September 28. Essar first broke ground in Minnesota in 2008 and the project entered Chapter 11 in 2016; ArcelorMittal and Nippon Steel completed their takeover of Essar Steel India in 2019.

The next test comes on Friday, October 2, when Iowa lawmakers return for a special session to vote on the incentive changes. Until that vote, America’s largest steel plant is a memorandum, a press event and a Minnesota mine about to make pellets with no furnace yet built to melt them.

Tags: Cleveland-Cliffs, Essar Group, Iowa, iron ore, Mesabi Metallics, Minnesota