Essar Steel to Build North America's First Mine-Mouth Steel Plant in Minnesota

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Researched by Industrial Info Resources (Sugar Land, Texas)--Essar Steel Limited (BSE:500627) (Mumbai) will invest $1.65 billion to set up a 2.5 million-ton-per-year mine-mouth project in northeastern Minnesota's Mesabi Iron Range. The decision follows Essar Steel's acquisition last year of Minnesota Steel Industries LLC, which is now known as Essar Steel Minnesota LLC.

The proposed mine-mouth project, which Industrial Info has been tracking since it was envisioned in 1998, will be North America's first integrated iron-ore mining, processing and steel manufacturing complex. It is expected to be complete by 2009. Apart from the iron ore mine and steel plant, the facility will include a concentration plant, a pellet factory and a direct reduced iron plant. The project will be fed by Essar Steel Minnesota's iron ore reserves, which are estimated to be more than 1.4 billion tons. According to company sources, the reserves are sufficient to support steel production for more than 100 years. The Mesabi Range is among the United States' largest sources of quality iron ore for steel manufacturing. Minnesota has welcomed the project as a great economic opportunity and has sanctioned $66 million for infrastructure. The steel project will employ 2,000 construction workers during the course of its completion, and generate more than 500 direct jobs and 1,500 jobs in support services.

Steel produced from the Minnesota facility will support the Algoma plant in Ontario, Canada, which Essar Steel acquired for $1.63 billion in 2007. The company increased the capacity of the Algoma plant from 2.4 million tons per year to 4 million tons per year within a year of acquiring it, and has committed $500 million for the plant in the next five years. The plant primarily supplies steel to major American automobile manufactures like General Motors (NYSE:GM) (Detroit, Michigan).

The acquisitions in North America are part of Essar Steel's strategy to become a leading Indian steel maker with a significant global presence. The company, which is India's fourth largest steel company, has earmarked $4 billion, including the cost of building the new Minnesota plant for expanding its presence in North America. The expansion plan includes brownfield projects in Canada and a greenfield steel plant in Trinidad and Tobago. Earlier this year, the company made an unsuccessful attempt to acquire U.S. steel company Esmark, which was ultimately bought by Russia's Severstal (MCX:CHMF) (Cherepovets). Essar Steel has already established its presence in Southeast Asia with a 400,000-ton-per-year cold-rolling complex in Indonesia. Next on the drawing board is a 2 million-ton-per-year hot strip mill in Vietnam that is expected to be operational by 2010.

In India, the company pioneered the steel retail movement through its Essar Steel Hypermarts. Currently, the 82 retail outlets account for more than 20% of the company's total sales. Essar Steel is the largest steel producer in western India with a production of 4.6 million tons per year in Hazira, Gujarat. The company also has an 8 million-ton-per-year beneficiation plant in Bailadila, Chhattisgarh, and an 8 million-ton-per-year pellet factory in Vishakhapatnam. Essar Steel plans to augment the capacity of its Hazira facility to 10 million tons per year and has started work on a 6 million-ton-per-year integrated steel complex in Paradip, Orissa. Through its expansion plan in India and abroad, the company is eyeing a capacity of 25 million tons per year by 2013.

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