(CBC) -- International steel conglomerate ArcelorMittal will invest $2.1 billion to expand its iron ore facilities in Mont-Wright, Que.
The facility, near the town of Fermont, will be upgraded to be able to produce 24 million tonnes of iron ore concentrate by 2013 -- a major upgrade over the 14 million tonnes currently produced.
The company is also considering upgrades at a facility in Port Cartier. The expansion will create 8,000 construction jobs during the process, and 900 permanent ones once the upgrade is completed, the Luxembourg-based steel titan said Friday.
"There will be substantial financial benefits for the Quebec government in the years to come with additional income tax revenues and mining rights revenues worth billions of dollars," the head of mining for ArcelorMittal, Peter Kukielski, told CBC News.
Soaring global demand for the raw materials that allow economic expansion has caused a rush of investment in the commodities sector in recent months and years. ArcelorMittal, which has operations in more than 60 countries, has committed to hike its iron ore production to 100 million tonnes by 2015 to keep up with demand.
Iron ore is the most expensive ingredient in traditional steelmaking, where iron is mixed with other materials and heated in giant blast furnaces to create finished steel.
Iron ore prices have surged on world markets. With its 7.9 billion tonnes of iron ore reserves, Canada had nearly 42 per cent of the global resources as of 2009.
Ike Kaja, an iron ore specialist with Salman Partners, a research firm in Toronto, said demand from China has spiked over the past few years.
"We could definitely be developing or producing a lot more iron ore and so this plan on ArcelorMittal's part helps to advance Canada's profile as an iron ore producer," Kaja said.
Morningstar analyst Bridget Freas said expanding its vertical integration is a key way for the company to shield itself from wild fluctuations in iron ore prices.
It's a strategy the company has been developing for years. But it gained steam in the last two years because iron ore has been in relatively short supply.
"This has been a big cost problem for steel mills all around the world and ArcelorMittal considers this to be a strategic advantage for them that they have at least in part some access to source the material that they need internally," she said from Chicago.
"It lowers their cost base and gives them a little bit more secure supply of the raw material."
The world's largest steel producer, ArcelorMittal acquired most of its Canadian assets during the last round of consolidation in the steel industry in 2006. Among other holdings, they also own the former Dofasco steel-making facilities in Hamilton, Ont.
Earlier this year, the company took over Baffinland Iron Mines Corp. and its massive iron ore development in Mary River, about 160 kilometres south of Pond Inlet, Nunavut.