ArcelorMittal Dofasco is reviving plans to fire up a third blast furnace at its Hamilton plant as steel markets show tentative signs of improvement.

The $100-million project will see the steelmaker hire new staff and increase use of its electric arc furnace in a bid to hike steel production by 20 per cent.

"Our goal is to get the blast furnace up and running by next summer," said Andrew Sloan, spokesperson for the firm. "We believe this will allow us to better serve our customers and the market."

A similar plan to expand production was shelved last year when the global economic downturn caused a dramatic decline in steel prices and demand. Markets have improved since then, in part because of government stimulus plans, such as Cash for Clunkers.

ArcelorMittal Dofasco currently has two blast furnaces running at full capacity, though it is unclear how long the current strength in the markets will last, Sloan said.

"We had stimulus funds, we had Cash for Clunkers and right now ArcelorMittal Dofasco is experiencing robust demand," he said. "The question mark is whether it is sustainable into 2010."

The company's plans include recruiting 100 new workers next year to replace staff moving into retirement. The new project will add another 30 jobs to that figure.

"Dofasco is a low-cost mill so it make sense to add capacity there rather than build new facilities," said Chuck Bradford, a New York-based steel industry analyst.

"The market isn't ideal just now but this will lower their costs."

Currently, Dofasco does not produce enough steel slabs to feed its hot mill, capable of rolling five million tons of steel each year.

The new furnace will help increase production from 4.2 million tons to five million tons, closing that gap and enabling Dofasco to cut the cost of shipping slab from ArcelorMittal's Quebec operations.

The firm will outfit the furnace with a pulverized coal injection system, reducing its dependence on costly coking coal. Hot metal from the furnace will then be either cast into steel slabs or poured into an electric arc furnace, a separate device used to melt scrap steel.

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Dofasco to start third furnace