Federal, provincial government announce C$150 million in support for Canada's Algoma Steel

  • Friday, January 11, 2019
  • Source:ferro-alloys.com

  • Keywords:Canada,Algoma Steel, investment
[Fellow]Federal, provincial government announce C$150 million in support for Canada's Algoma Steel

[ferro-alloys.com]The federal Canadian government and provincial government of Ontario on Thursday announced financial support of up to C$150 million ($113.4 million) for Algoma Steel to support planned capital investments and employment at the mill.

Canada's federal government will invest up to C$90 million ($68 million) in Algoma to create and maintain 3,050 jobs at the mill, Navdeep Bains, Canada's minister of innovation, science and economic development, said Thursday during a live-streamed event at the mill. The flat-rolled mill, located in Sault Ste. Marie, Ontario, has an estimated capacity of 2.8 million st/year and is Canada's second-largest steelmaker.

"Algoma will use this funding to adapt to new technologies, improve production and improve competitiveness in the global market," Bains said.

Algoma Steel, which emerged from creditor protection after three years at the end of November, is undertaking C$600 million ($453.5 million) in capital investments over an eight-year period. The improvements are aimed at modernizing the mill's core production assets, including the steel rolling and plate mills.

Ontario's provincial government is giving Algoma an additional C$60 million ($453.5 million) in the form of a repayable loan. These additional funds are part of the purchase and restructuring of the mill, Greg Rickford, minister of energy, Northern development and mines for Ontario, said Thursday. The restructuring includes a long-term commitment to protect jobs and fund Algoma Steel's three defined benefit pension plans, benefiting approximately 3,000 current and 6,300 former or retired employees, according to Rickford.

Algoma, formerly Essar Steel Algoma, filed for creditor protection on November 9, 2015 under Canada's Companies' Creditor Arrangement Act. In July, it entered into an asset purchase agreement with a British Columbia-incorporated company associated with Essar's term lenders and consenting senior secured noteholders.

"This support is vital to support the growth of Algoma, and in sustaining our competitive position as an advanced manufacturer in Canada," Algoma CEO Kalyan Ghosh said. "It will help us to make important investments in new technology and will enhance our ability to extend asset life and reduce our environmental footprint."

It is a difficult time for the Canadian steel industry, Ghosh said, particularly with the US Section 232 tariffs in place for Canada's exports. The 25% tariffs, which the US began collecting on Canadian steel June 1, are costing Algoma roughly C$1 million every day, according to Ghosh. Additionally the company must also be prepared for an inevitable decline in steel pricing, he said.

During his remarks, Bains highlighted the updated trade agreement reached between Canada, the US and Mexico in October, but said the government recognizes the Section 232 tariffs on steel and aluminum are still a major issue that needs to be addressed.

"We recognize that we did not solve all of the challenges; that there are still unprecedented, unfair and unjust tariffs imposed under Section 232 by the American administration under the guise of national security," Bains said.

The US' decision to impose tariffs on Canadian steel is "hard to understand," particularly because Algoma has a plaque hanging at its mill from the US Marines acknowledging its contribution to the US military, Bains said.

Canada continues to press the US for an exemption to the tariffs.

In a phone call Monday, Prime Minister Justin Trudeau raised the issue with President Donald Trump, and on Wednesday, Canada's Finance Minister, Bill Morneau, spoke with US Secretary of the Treasury Steven Mnuchin regarding the tariffs, Bains said. Bains said he also has spoken directly with the US Ambassador to Canada, Kelly Craft, regarding the tariffs.

"We are fighting with you every single day to make sure we remove these unfair and unjust tariffs," he said. "...This is top of mind for us and it's a full-court press."

In the wake of the US slapping the Section 232 tariffs on steel and aluminum imports, the Canadian government announced in March it would be taking steps to protect its domestic metals industry, including steps to crack down on imports and making available up to C$2 billion to protect Canadian workers and businesses in the steel, aluminum and manufacturing industries.

In October, the federal government announced it would invest up to C$49.9 million ($38 million) in ArcelorMittal Canada to help the company modernize its facilities. ArcelorMittal Canada, which operates plants in Ontario and Quebec, is undertaking a C$205 million project to modernize its facilities and enhance its competitiveness.

(S&P Global Platts)


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