STEEL company Corus UK has been been given six months to stop red dust from affecting nearby residents.
Several concerned residents complained about the dust from the steel plant and an investigation was launched on November 8.
Officers from the Environment Agency inspected the Teesside plant and found that the red powder was deposits of rust linked to the handling of iron ore at the Redcar site.
An improvement notice has now been issued, which gives the company a list of 11 actions to carry out -and six months to complete the work.
The points include looking into whether the dust, which builds up on iron ore, can be removed before it is brought to the site.
The agency has also suggested improvements to the systems workers use for handling, storing and moving the iron ore.
Corus will be required to set up monitoring systems to ensure there will be no repeat of the incident.
Howard Stuttard, industry team leader for the Environment Agency, said: "We took this incident very seriously, even though we were sure fairly early on that there would be no effect on people's health.
"We understand the concerns of the community, and the improvement notice we served will make Corus reassess how it handles iron ore in the future to prevent this happening again."
A spokeswoman for Corus said last night that action had already been taken to reduce the dust. She said: "We have co-operated fully with the Environment Agency, and we have already taken steps to reduce the lift of dust from the iron ore."
The spokeswoman added that the company did not know the total cost for the improvements at this early stage.
She said: "We will be doing everything in our power to take on board these improvements within the six months."
A spokeswoman for the Environment Agency said further action could be taken if the 11 actions were not met in the time limit.
She said: "It will all depend how far the company has gone to implement these changes as to whether there will be further action.
"If the company had shown complete willingness to address the problems, but had not completed them in time, a short extension could be handed out.
"In extreme situations, we have the power to force them to do what we ask."
Iron oxide, or rust, is not toxic, although there are some dangers when fumes or dust are inhaled in large amounts.
Inhalation of any metallic fumes or dust can cause irritation to the throat and nasal area. They can also irritate the eyes.
But only when the dust or fumes are inhaled in higher concentrations can more serious problems, such as metal fume fever, be caused.
Symptoms for this can include a fever, a sore, irritated or dry throat and mouth, and a metallic taste. This fever usually lasts only from 12 to 48 hours.
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