Essar Steel Limited, part of the Essar Group (Mumbai), recently announced plans to invest $154 million in its Canadian steel operations, Essar Steel Algoma (Ontario, Canada), during the current financial year. The investment will go toward capacity expansion, development of captive power generation and emission control measures. Essar, which acquired Algoma Steel from the Ruia brothers in June 2007 for $1.63 billion, will ramp up production capacity to 4 million tons per year by March 2009. The firm will resort to internal accruals to fund its capital expenditure. The company has committed to making investments of about $500 million in Essar Steel Algoma over the next five years.
Essar Steel's plans for the current financial year include the revival of an idle blast furnace, expansion of the plate heat-treatment facility, and installation of an additional ladle metallurgy furnace to provide a refining facility. Since the acquisition of Algoma Steel, Essar Steel has spent $42.3 million toward reviving of the plant's second blast furnace, which came into operation in August this year. The blast furnace that had remained idle since 1995 now provides the steel plant with 910,000 tons per year of additional liquid iron production capacity. This increased steel production capacity of the plant from 2.1 million to 3.2 million tons per year, registering a 30 percent increase in productivity.
Essar Steel will also invest $122 million to set up a 70-megawatt (MW) cogeneration power plant that is expected to reduce the plant's dependence on the provincial grid by half. Essar Steel Algoma currently requires about 130 MW of power. Waste fuel generated by the steel plant will be used as feedstock for the proposed captive power plant. Mitsubishi Heavy Industries Limited (Tokyo, Japan) will supply turbines for the cogeneration plant while boilers are being procured from Indeck Power Equipment Company (Wheeling, Ill.). This project was conceived before Essar Steel's acquisition of Algoma Steel and is expected to be commissioned by January 2009. Essar Steel has reportedly entered into a 20-year power purchase agreement with the Ontario province for the cogeneration power project.
Essar Steel also plans to invest about $82 million on emission control measures that include 50 percent reduction in coal pile emissions, reduction of emissions in road development, and provision of additional control systems for the steel strip unit, and installation of bag-houses to filter emissions from blast furnaces. The proposed cogeneration project is also expected to bring about a 15 percent reduction in the emission of nitrous oxide from the steel plant.
The firm also wants to source iron ore from its mine in Minnesota for its Canadian operations. The mine is expected to come into production within the next two to three years. Essar Steel is investing $1.6 billion in setting up a pellet plant, a concentration unit, a direct reduced iron (DRI) plant, and steelmaking units at its facility in Minnesota's Iron Range. The firm is then likely to terminate its 15-year agreement with Cleveland-Cliffs Incorporated (Cleveland), from which the company currently procures iron ore. Essar Steel estimates that its capacity expansion activities will increase its requirement of iron ore from the present 4.64 million tons per year to 5.7 million tons per year and of coal from the present 1.7 million tons per year to 2.3 million tons per year.
In September of this year, Essar Steel declared that it has lined up investments to the tune of $4 billion for its North American operations including Essar Steel Algoma, Minnesota Steel (Hibbing, Minn.) and greenfield plants in Tobago and Trinidad. The firm is looking to penetrate the North American market and serve end-clients in the automobile sector such as General Motors (Detroit) and plans to double its steel production from the present 9 million tons per year by 2012.
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