Algoma Steel, which was acquired by Ruias-promoted Essar Group last year and renamed Essar Steel Algoma, is firing on all cylinders after the USD 42.3 million revival of its second blast furnace. The furnace was brought back into operation on August 12, this year and has helped increase output from to 2.6 MT from 2.1 MT.

"We are delighted that we have successfully implemented the best technological and engineering practices from across both the organisation. This has resulted in a 30 per cent improvement in productivity. I am happy to say the integration has produced extremely positive results, with both organisations aligned with a view to growth," Essar Steel Algoma's COO Armando Plastino said.

The company would spend USD 160 million to further increase production by 1 MT in the 12 months to March 31, 2009. "Most of the (funds for) capital expenditure will come from self generated cash," Essar Steel Algoma Vice President (Finance) Sandeep Dixit told visiting Indian reporters at Sault Ste Marie.

A chunk of the investment would go towards setting up a co-generation power plant that would cut the steel plant's energy requirements by half. The captive power plant would use waste fuel from the steel plant to produce electricity and is expected to be commissioned by January next year.

Essar Steel Algoma also hopes to achieve greater synergies once its sister concern Essar Steel Minnesota, an integrated plant with its own iron ore reserves in the US, starts feeding it with the key raw material.

Dixit said the company hopes to achieve synergies once ore supplies start from Minnesota, as part of the vertical integration strategy adopted by the parent company in India.

The Algoma plant currently sources ore from Cleveland Cliffs and coal from Massey in West Virginia in the US. The company last month announced an USD 1.6 billion investment in its Minnesota operations, where it would be setting up a 2.5 MTPA steel plant. This would complement Essar Steel Holdings Ltd's plan to shore up capacity in Asia and the Americas to 20 to 25 MTPA by 2012. The company's Indian operations have a capacity of 4.6 MTPA and would go up to 10 MTPA by 2010.

The Canadian market accounts for 49 per cent of Essar Steel Algoma's total sales, while the majority 51 per cent of the products are shipped to the US. Estimates suggest that demand for the alloy in North America would grow by 3 per cent, although according to the International Iron and Steel Institute, consumption in the US fell by 11 per cent in 2007 from year ago levels.

The company's product mix is made of 20 per cent plate and 80 per cent sheet, which includes 28 per cent to the auto industry.

The Indian group, which acquired the over 100-year-old plant that governs the fortunes of this industrial city's 75,000 strong population, is also investing USD 84.7 million to clean up the environment over 18 months ending December next year so that residents do not suffer any longer. Part of this funds would come from the USD 160 million capital expenditure.

Last week, a group from a US city described the air in the city as carrying the "distinct smell" of industry. "We might be on their backyard, pretty soon we hope they won't know it," said Jerry Freeman, Manager, Environmental Control Services, Essar Steel Algoma, which is located just 500-700 metres away from a residential area.