ArcelorMittal to create 8,900 jobs with $2.1 billion iron ore expansion in Quebec

Global steel giant ArcelorMittal will create 8,900 construction and mining jobs with a $2.1 billion expansion of its Quebec iron ore operations near Labrador.

The company said Friday the major expansion of its Canadian capacity will help it raise annual production of iron ore to 24 million tons from 14 million tons by 2013.

ArcelorMittal Mines Canada is also evaluating doubling its annual iron ore pellet output to 18.5 million tons as the company looks for a secure supply of the raw material used to make steel at its blast furnaces in Hamilton, Quebec and elsewhere.

The investment at ArcelorMittal’s Mont-Wright mining complex and construction at Port-Cartier will create 8,000 construction jobs and 900 permanent mining positions.

The company is the world’s largest steel producer and owns the former Dofasco Inc. of Hamilton, one of Canada’s major steelmakers.

Peter Kukielski, head of mining for ArcelorMittal, said the Canadian mining complex is a flagship asset for the global steelmaker, offering considerable expansion opportunities.

“We have already announced our intention to grow our iron ore production to 100 million tons by 2015 and this expansion forms an important part of that,” he stated in a release announcing the expansion.

Iron ore is the most expensive ingredient in traditional steelmaking, where iron is mixed with other materials and heated in giant blast furnaces to create finished steel.

Iron ore prices have surged on world markets despite sluggish demand.

With its 7.9 billion tons of iron ore reserves, Canada had nearly 42 per cent of the global resources as of 2009.

The Quebec expansion is part of the steel producer’s previously announced plan under pre-feasibility study to increase its internal supply of iron ore.

ArcelorMittal wants to expand its own production of iron ore to 85 million tons from 50 million tons in 2010. That would raise its internal production by 13 percentage points to 85 per cent by 2015.

Morningstar analyst Bridget Freas said expanding its vertical integration is a key way for the company to shield itself from wild fluctuations in iron ore prices.

It’s a strategy the company has been developing for years. But it gained steam in the last two years because iron ore has been in relatively short supply.

“This has been a big cost problem for steel mills all around the world and ArcelorMittal considers this to be a strategic advantage for them that they have at least in part some access to source the material that they need internally,” she said from Chicago.

“It lowers their cost base and gives them a little bit more secure supply of the raw material.”

The Chinese have been pushing to increase their internal production.

Freas said ArcelorMittal’s steelmaking rivals would love to make similar moves but many don’t have the capital or mining expertise to succeed.

Mining for iron ore requires very different capabilities than making steel, but Arcelor possesses both skills, she added.

Friday’s announcement took place at the Mont-Wright complex and was attended by Quebec Premier Jean Charest, mayors of Fermont and Port-Cartier and representatives of the Innu and local communities.

The project is subject to environmental and other regulatory approvals.

Charest recently unveiled an ambitious plan to develop Quebec’s north – an area about twice the size of France – by expanding energy development, mining, infrastructure, tourism and conservation. The sweeping plan would require $80 billion of public and private investment over 25 years.

The plan foresees 11 new mining projects during the next few years which, the government says, would generate $8.2 billion in investments and create 11,000 jobs during the construction phase alone.

ArcelorMittal was formed a few years ago by the merger of Mittal family owned European and Asian companies and Arcelor, a French-Spanish company. It now operates mills, mines and other businesses in more than 60 countries.

It is a leader in all major global steel markets, including automotive, construction, household appliances and packaging and has an industrial presence in over 20 countries.

In 2010, ArcelorMittal had revenues of $78.0 billion and crude steel production of 90.6 million tonnes, representing about six per cent of world steel output.

In early 2006, Luxembourg-based Arcelor, then the world’s second-largest steel producer, outbid rival German steel producer, ThyssenKrupp AG, to buy Dofasco for about $5.5 billion.

In 1994, an ArcelorMittal predecessor company acquired Quebec steel maker Sidbec-Dosco, Canada’s fourth-biggest steel company.

The Canadian Press