Steel Dynamics Inc. (STLD - Snapshot Report) declared that it intends to idle its Minnesota iron-making operations in Chisholm and Hoyt Lakes, MN, effective immediately. Management and the board of directors took the decision to idle the operations for an initial 24 months due to the continued fall in pig iron pricing.

The decline in pricing has resulted in significantly higher cost of production of iron nuggets than the selling prices of products. The Minnesota operations consist of a jointly-owned concentrate production facility (Mining Resources) and a jointly-owned iron nugget production facility (Mesabi Nugget).

According to the authority at Steel Dynamics, global foreign currency translations coupled with world iron ore demand and supply conditions are factors weighing on pig iron prices. Moreover, the company cannot see any strong factors which could reverse this trend. The Minnesota operations acted as a hedge against high pig iron and scrap prices. Though the lower raw material cost environment is beneficial for the company, it has caused an uneconomic situation for Steel Dynamics’ iron nugget operations.

Steel Dynamics stated that it deeply regrets this decision which involves lay off of 200 employees in Minnesota. However, the company is undertaking several initiatives for creating employment opportunities at its other locations and subsidiaries. Steel Dynamics will retain only a few employees to maintain the site and facilities at Minnesota.

Steel Dynamics currently carries a Zacks Rank #3 (Hold).

Better-ranked companies in the steel space include Olympic Steel Inc. (ZEUS -Snapshot Report), Evraz Highveld Steel & Vanadium Ltd. (HGVLY - Snapshot Report) and POSCO (PKX - Analyst Report). While Olympic Steel sports a Zacks Rank #1 (Strong Buy), both Evraz Highveld Steel & Vanadium and POSCO carry a Zacks Rank #2 (Buy).