Diverse Industrial Growth Brings Bright Future to Sept-Îles, Quebec

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Researched by Industrial Info Resources (Sugar Land, Texas)--There is a tremendous sense of optimism in the city of Sept-Îles, Quebec--and rightfully so. Until the 1950s, the city, located in Quebec's Côte-Nord region on the Gulf of St. Lawrence, was little more than an isolated, sleepy fishing town. Today, the city is home to the largest aluminum smelter in North America, as well as iron ore pelletizing and shipping facilities that are aiming to dramatically increase production and shipping loads in the near future. And more growth is just around the corner.

While Sept-Îles, which has a population of about 26,000 people, is no longer a sleepy fishing town, one feature that hasn't changed is its isolation. The nearest town, Port-Cartier, is about 40 miles from Sept-Îles and has approximately 6,600 people. Beyond this, the nearest city of substantial size is another 100 miles away. Such isolation makes the relationship between the community and the continuing unfolding industrial development in the area all the more important--a lesson that Sept-Îles learned the hard way in the late 1970s and early 1980s, when global iron ore markets collapsed. Ultimately, such lessons have provided the area with valuable insight into how communities and industrial undertakings need to function in a symbiotic relationship, providing mutual support and benefits to one another.

The structure of Sept-Îles shifted radically in the 1950s, when Iron Ore Company of Canada, which is now majority-owned Rio Tinto plc (NYSE:RIO), constructed a railroad to the city and port facilities to ship 10 million tons per year of iron ore extracted from its mines in northern Quebec and Labrador. This was followed by construction of a pelletizing plant near the port. The new industry brought about an economic boom in Sept-Îles, leading to rapid population growth and the construction of houses, schools and medical facilities, as well as an influx of residents.

However, several years of growth and prosperity came crashing down in the late 1970s and early 1980s when the iron ore market crashed. Not only were the jobs within the iron and steel industries disappearing, but the entire economy of Sept-Iles, built around iron ore production and shipping, came crashing down with it. Those who lived in the area at the time still speak of this period grimly. "It was an absolutely horrible time," says Luc Dion, who is the chairman of Sept-Îles Economic Development Corporation and whose father was mayor of Sept-Îles from 1973 to 1993. "Young people left the town because there were no jobs to be had. Families were split up as fathers and brothers moved elsewhere to simply make ends meet. Many houses were simply abandoned and left to the banks."

However, a unique mix of industrial construction and economic incentives helped put the community back on its feet, offering the potential for continued, sustained growth up to the present day. In 1985, the provincial government of Quebec finished construction on a new harbor facility in the Point-Noire area of Sept-Îles in the hope of attracting industry and economic growth to the beleaguered region. In addition, hydropower projects from both far and near provided access to a large amount of inexpensive power. Although it took a few years, Aluminerie Alouette, a joint venture of various global companies, made the decision to site its corporate headquarters and a new state-of-the-art aluminum smelter in Sept-Îles. Construction on the smelter began in 1989 and was completed in 1992. On May 31 of this year, Alouette celebrated the 20th anniversary of the commencement of production at the smelter.

Phase I construction gave the smelter an annual production capacity of 240 million tons of aluminum via two 141-pot lines. Phase II construction added two 256-pot lines, bringing the smelter's total capacity to above 550,000 tons per year, easily making the facility the highest producing smelter in America. This year promises to be the first year that Alouette will produce more than 600,000 tons in a single year. Cutting-edge technology and the use of hydropower make the plant one of the cleanest-operating smelters in the world and a benchmark for other aluminum manufacturers. In addition, the Phase II expansion added 18 pots designated solely for researching different properties and techniques in the aluminum production process.

The opening of the smelter gave the city of Sept-Îles a much-needed economic boost. The smelter currently employs 1,000 people from the community and an additional 150 contractors, making it the largest employer in the area, and helping the people of Sept-Îles enjoy significantly higher average wages than those of Quebec as a whole. Realizing the value of the surrounding community, Alouette repeatedly gives back through fundraisers and events, including a donation of $10 million to Cegip de Sept-Iles, the local vocational college, to construct a new building dedicated to metals research.

At the end of October last year, the board of Alouette gave approval to a third phase of the project, which will bring the smelter's annual production capacity to approximately 970,000 tons. Although the additional power needed for this fifth line will not be available until 2016 at the earliest, a power purchase agreement has been made with HydroQuebec that would provide enough power to operate the smelter (and a possible Phase IV addition) through 2041. The new production line will bring another 350 jobs to the community.

While the smelter itself has contributed greatly to the community in the form of jobs and community support, it has added another important aspect to the local economy: diversity. While the Canadian iron ore sector is once again booming, the city is no longer as vulnerable to the rise and fall of global iron ore prices and markets.

That being said, increased global demand for steel is driving Canada's iron ore sector to new heights, again fueling continued development in the Sept-Îles area. Tremendous mining expansions are planned in northern Quebec and Labrador that will substantially increase the shipping volumes from Sept-Iles and neighboring Port-Cartier. Companies such as IOC and Cliffs Natural Resources (NYSE:CLF) plan to more than double production at many of their mines. In addition, global steel producers such as Tata Steel (Mumbai, India) are entering the Canadian mining sector in order to secure steady supplies of iron ore without being subjected to variable iron ore market prices. For additional information, see June 12, 2012, article - Quebec's Côte-Nord Sees Massive Economic Development from Increased Iron Ore Demand.

While the recent economic boom of the city is obviously good for residents, it has not been without its challenges. Additional workers and housing will be needed to keep up with the industrial expansions. In addition, the city hopes to attract other companies and industries to the area. In late May, the story broke that Russian aluminum giant Rusal is considering construction of a smelter in the city. Norwegian company Yara International ASA is in the process of developing an apatite (a phosphate mineral used in fertilizers) mine near the city, adding further diversity to the economy. Construction of hydropower facilities will make another 3,500 megawatts of power available to the area.

City leaders would also like to see steel production occur locally; however, natural gas would need to be brought into the city for this to occur. A feasibility study was recently completed in regard to bringing gas to the area, which seems likely to occur if industrial concerns agree to purchase enough gas to make pipeline construction and gas delivery profitable for the supplier.

The remoteness of Sept-Îles might very well work in its favor in regard to continued industrial and residential development. While most of the land in the city's Point-Noire area and surrounding the bay is owned or developed, surrounding tracts of land are available for purchase. Seven Islands Development Corporation is selling 5,000 acres of land near the city. The contiguous tract of land is located in close proximity to the airport and existing rail lines, and boasts three miles of ocean frontage and two miles of river frontage, making it an ideal location for development. For additional information, see related story - Seven Islands Development Corp. Offers Opportunity for Industrial Firms Looking for Port Access and Infrastructure in Sept-Iles, Quebec.

The Cote-Nord region and the city of Sept-Isles are in the process of tremendous economic development, and now is the perfect time for developers and investors to seize available opportunities in the area.

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