The Hindu Business Line : Essar Algoma Steel investing in capacity expansion

Essar Algoma Steel will spend Canadian $ 170 million (about Rs 770 crore) on re-starting an idle blast furnace, expanding plate heat-treatment and installing a second ladle metallurgy furnace (a refining facility).

N. Ramakrishnan

Sault Ste. Marie, Ontario, Canada, Oct. 2

It is a little over a year since Essar Steel took over the Canadian steel company Algoma Steel Inc.

And, going by the reactions from a cross-section of employees the change in ownership has helped improve things at this 106-year-old steel company based in the quaint city of Sault Ste. Marie in Ontario.

Located on the shores of Lake Superior, one of the five Great Lakes in North America, Algoma Steel had gone through major changes, including two restructuring exercises — in the 1990s and in 2001. Essar Steel Holdings acquired the company in June 2007 for Canadian $1.85 billion (about Rs 6,000 crore). In June this year, the company’s name formally changed to Essar Algoma Steel Inc to reflect its new ownership.

Now, Essar Algoma Steel is buzzing with activity — the company will spend Canadian $ 170 million (about Rs 770 crore) for the financial year ending March 31, 2009 on re-starting an idle blast furnace, expanding plate heat-treatment and installing a second ladle metallurgy furnace (a refining facility).

A bulk of this money will come from internal accruals, according to Mr Sandeep Dixit, Vice-President – Finance, Essar Algoma Steel. “Re-starting the blast furnace (about 0.91 million tonnes capacity) that had remained idle for long convinced the employees that Essar was serious about running the steel plant,” a company spokesperson told a team of visiting Indian journalists on a trip sponsored by Essar Steel, at the plant.

The blast furnace, which had remained idle since 1995, was commissioned in August 2008, providing the company another 0.91 m.t. in liquid iron production facility.

Production up

It is an overcast Tuesday with the occasional sharp showers as the journalists are on a visit to the company’s facilities. We are told that steel production has gone up from 2.1 m.t. a year to 2.8 m.t. and the intention is to increase this to 3.6 m.t. in the next 12 months. A Canadian $ 135 million (Rs 610 crore) project to set up a 70 MW cogeneration facility using the waste gas generated by the steel mill is under execution.

The turbines have come from Mitsubishi of Japan and the boilers from Indek of the US. This cogeneration facility will reduce the company’s dependence on the provincial grid by close to 50 per cent — the company needs about 130 MW of power. This project, which was conceived before Essar took over Algoma, is expected to go on stream in early 2009.

Officials tell us that the company has entered into a 20-year power purchase agreement with Ontario Province for the power generated by the cogeneration plant. They decline to reveal the price that they will get for the power they sell to the grid. At present, the company pays Canadian cents 6.5 (Rs 2.94) for a unit of electricity.

The cogeneration project will also bring down the Nitrous Oxide emissions by 15 per cent; at present, the emissions are around 2,000 tonnes a year.

Essar Steel Algoma is spending Canadian $ 90 million (about Rs 410 crore) on emission control measures — to reduce coal pile emissions by 50 per cent, reducing road development emission, investing in additional emission control systems for the steel strip and installing baghouses that will trap emissions from the blast furnaces. Essar Steel’s iron ore mine in Minnesota, US is likely to start producing iron ore pellets in two-three years. This is likely to be shipped across the border to Essar Steel Algoma for making steel.

Essar Steel Algoma has a 15-year agreement (of which nine years are remaining) with Cleveland-Cliffs Inc of the US for iron ore. Company officials indicated that once iron ore pellets from Minnesota are available, Essar Steel Algoma is unlikely to continue buying iron ore from Cleveland-Cliffs.

The company also plans to have a port on its western perimeter that can handle bigger and more number of ships, for which it is in talks with other companies in Sault Ste. Marie such as Tenaris, a pipe manufacturer; Purvis Marine; and St Mary’s Paper, which would also be looking to use the port for possible investment in the facility. Company officials were not in a position to say when work on the port will start.

It has nine docks from which it handles ships to unload iron ore, coal and other raw material and also to ship finished products.

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Essar Steel consolidates presence in N. America
Essar-Algoma: A fair deal

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