TORONTO (Reuters) - ArcelorMittal, the world’s largest steelmaker, is suspending a major project at its Mont-Wright iron ore mine in northern Quebec due to poor market conditions, the company said on Thursday.
The company, which employs some 2,500 workers at the mine, informed the United Steelworkers union this week that it will not start an “offload” project in June as planned. The project, which removals surface layers overlaying the deposit, would have extended the mine’s lifespan by 15 years to 2045.
The decision was based on the project cost, “fairly high” mine production costs, low iron ore prices and global competition, said ArcelorMittal spokesman Paul Wilson.
Oversupply and waning demand have depressed spot iron ore prices to $49.30 a tonne, down from an all-time high of about $190 in 2011.
“Due to the current iron ore market conditions and the resulting need to reduce ArcelorMittal Mining Canada’s operating costs further, one specific project – which was originally due to start this summer – has been indefinitely delayed,” ArcelorMittal Mining said in a statement.
“ArcelorMittal Mining Canada is in discussions with unions regarding the best way to proceed with this project.”
Current annual production at Mont-Wright is 27 million tonnes with cash production costs of $25 per tonne, the company said.
In 2013, ArcelorMittal sold a 15 percent stake in Mont-Wright to South Korean steelmaker Posco and Taiwan listed China Steel Corp for $1.1 billion.
Champion Iron, which will decide on a plan to restart its northern Quebec Bloom Lake iron ore mine at year end, said the timing of ArcelorMittal’s decision “couldn’t be better.”
Chief Executive Michael O’Keeffe said that ArcelorMittal customers will eventually need to replace production and that the Quebec government will be keen to keep supporting development at Bloom Lake, an 830 million-tonne ore body.
Champion acquired the asset for C$10.5 million ($8.03 million) last year and expects it will take tens of millions of dollars to restart the mine. Cliffs Natural Resources bought it for $4.9 billion in 2011 and invested more than $2 billion in upgrades.
Luxembourg-based ArcelorMittal said in February it was launching a new five-year plan designed to improve each of its five business segments.
The company, which makes about 6 percent of the world’s steel, said apparent steel consumption in 2016 would be flat to slightly higher, as stronger demand in the United States and Europe would be outdone by declines in China, Brazil and former Soviet states.
Reporting by Susan Taylor; Editing by Alan Crosby