U.S. Steel is restarting the blast furnace at its Hamilton, Ontario, mill after a nine-month shutdown, a company said on Friday, saying that demand for the metal was picking up.

The decision comes ahead of a Monday hearing at which the Canadian government will argue that the U.S.-based company has failed to meet commitments on production and employment made when Ottawa cleared its 2007 acquisition of Stelco.

The furnace -- the core of a steel plant -- is one of two acquired by U.S. Steel when it bought Canadian steelmaker Stelco. The other furnace is in Nanticoke, Ontario.

We're restarting our primary operations, which generally incorporate the blast furnace and our steel shops, said Trevor Harris, a spokesman for U.S. Steel's Canadian operations.

The Hamilton operation -- which can produce about 2 million tons of steel annually -- also consists of galvanizing lines and a cold mill, which will not be restarted at this time, he said.

U.S. Steel shut the Hamilton blast furnace last November, and then suspended the remainder of the Hamilton operation, as well as the Nanticoke operation, in March due to weak steel demand.

The restart will have no impact on staffing levels, as the company recalled its Hamilton employees in July, and has had them working on maintenance since then.

GOVERNMENT SUIT

In a federal court in Toronto on Monday, the government will ask that the company be fined if it does not live up to its agreements.

Also at the hearing, Lakeside Steel, a small Canadian pipemaker, will seek intervener status in the hopes of convincing the government to compel U.S. Steel to divest the Canadian assets, which closely held Lakeside would like to buy.

The United Steelworkers' Union, which is also seeking intervener status, said on Thursday it supports Lakeside's efforts.

Harris said he would no comment on a case before the courts.

($1=$1.09 Canadian) (Reporting by Cameron French; Editing by Frank McGurty)

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