Klobuchar, Franken, Levin, Stabenow Express Concern Over Australian Mine Deals Affect on U.S. Iron Ore Production
In letter to Export-Import bank Chairman, senators question the potential impact of the banks proposed $650 million financing for an Australian mine that could potentially hurt U.S. producers and miners
U.S. Senators Amy Klobuchar (D-MN), Al Franken (D-MN), Carl Levin (D-MI), and Debbie Stabenow (D-MI) expressed their concern over a potential Export-Import Bank deal's affect U.S. iron ore production. In a letter to Export-Import Bank Chairman Fred Hochberg, the senators questioned the potential impact of the Bank's proposed $650 million financing for an Australian iron ore mine. The mine is expected to produce 55 million metric tons of iron ore annually, more than the entire annual iron ore production in the U.S. This dramatic increase in iron ore production could cause a price shock on the international markets that would harm U.S. ore producers and miners.
"My grandfather worked 1500 feet underground as a miner, and countless other men and women in Northern Minnesota have worked hard providing iron ore to the world," Klobuchar said. "It doesn't make sense for our government to be funding our competition, especially when this project could have such a negative impact on local economies and the livelihoods of so many miners."
"Mining is critically important to Minnesota's economy and to the well-being of our communities across the Iron Range," said Sen. Franken. "I'm strongly opposed to any action by the Export-Import bank to finance foreign operations that would hurt Minnesota's iron ore industry."
The full text of the letter is below:
July 12, 2013
The Honorable Fred Hochberg
Chairman and President, Export-Import Bank of the United States
811 Vermont Avenue, NW
Washington, DC 20571
Re: Economic Impact Notice: Iron Ore/Australia
(May 23, 2013; FR Doc. 2013-12272)
Dear Chairman Hochberg:
We write regarding the Federal Register notice published on May 23 describing a $650 million Export-Import Bank (Ex-Im Bank) financing application to support the export of approximately $522 million worth of mining equipment to Australia. The requested financing would enable the Australian mining company Roy Hill to establish a production capacity of up to 55 million metric tons of iron ore per year. That production is presumed to be targeted for the Asian market.
We are concerned the proposed Ex-Im Bank financing and the large amount of iron capacity that it would subsidize will contribute to the already existing global overcapacity of iron ore and, in, turn substantially injure American iron ore and steel producers and their employees that are competing in the same global marketplace.
As you may know, U.S. iron ore production is concentrated at mines in Michigan and Minnesota that are operated by U.S. companies. Domestic iron ore producers are deeply affected by developments in the global iron ore market. The Roy Hill project would harm U.S. iron ore producers by competing directly against them and significantly reducing the price for U.S. iron ore, both domestically and abroad. It is estimated that, over the life of the financing, Roy Hill's output would displace nearly $600 million of U.S. iron ore exports and would cause a reduction of approximately $1.2 billion in U.S. domestic sales, for a total loss to the U.S. iron ore industry of $1.8 billion.
From 2005 to 2012 alone, a single domestic producer, Cliffs Natural Resources, exported approximately 6.7 million gross tons of iron ore from its U.S. mines to Asia and Europe and expects to export as much as 2 million gross tons of U.S. iron ore this year. Although foreign producers compete directly with these U.S. exports, an American company such as Cliffs should not be forced to compete with a foreign producer that has received a subsidy from the U.S. Government. In fact, the Ex-Im Bank's own charter provides clear guidance when it comes to making loans that would result in imposing additional competition on domestic commodity production. Specifically, Sec. 2 (e)(1)(A)(ii) of the Ex-Im Bank charter states that "the Bank may not extend any direct credit or financial guarantee for establishing or expanding production of any commodity for export by any country if the Bank determines that the resulting production capacity is expected to compete with U.S. production of the same, similar or competing commodity."
The charter's language could not be clearer and we hope you will adhere to the spirit and letter of this charter when reviewing this loan request. We look forward to your prompt response to our concerns.