Steel Mills

US Steel and US Steel Canada Head to Court on Wednesday

October 6, 2015

U.S. Steel Canada will be in court Wednesday and Thursday presenting its arguments for suspending pension contributions and property tax payments. The company will also ask for an extension of CCAA protection.

Parent company US Steel has said it will not include US Steel Canada in any bids for 2016 automotive contracts and plans to shift 15,000 tons of monthly production from the Canadian mills to the U.S. US Steel is canceling its raw material supply agreements for coal, coke and ore with US Steel Canada. It is also asking for court approval to discontinue administrative and operational services after Dec. 10, 2015.

US Steel Canada says that in order to keep the mills operational, significant cost savings must be taken which include the pension and property tax suspension. In an “Independent Business Plan” scenario, USSC will try to expand markets and secure new automotive business to offset the loss of automotive steel volume. This would include adding new sales staff to negotiate new automotive contracts without US Steel’s assistance.

By following the Independent Plan, USSC says operations could be continued at a reduced level for the next 12 to 15 months when a blast furnace reline may be necessary. US Steel would be required to continue providing intercompany administrative and operational services. The extra time would allow USSC to develop other markets for its products and develop a long term restructuring or sales option.

Court appointed monitor Alex Morrison concurs with the USSC Independent Business Plan and recommends the court allow the suspension of pension and property taxes.

“The Monitor specifically recognizes and respects the concerns which Mr. Howe has raised and agrees this will impact many individuals who have no responsibility for what has happened,” wrote Morrison in the 13th Report of the Monitor. “However, the unfortunate (but inevitable) fact is that USSC does not have access to liquidity or financing to honour these obligations in the present circumstances.”

Morrison adds that if the order USSC seeks is not approved, “a near term cessation of operations will be necessary.” He also recommends that the Court deny US Steel’s request to end administrative and operation services and require that the parties negotiate acceptable terms.

Gary Howe, president of USW Local 1005, said the Monitor’s report was disappointing but not unexpected.

“In every single monitor’s report, they’ve steered the way of U.S. Steel Canada,” said Howe in a CBC article. Commenting on the upcoming court appearance by US Steel Canada, he added, “This is utterly appalling and I’ve even used the words unthinkable.”

The USW will rally outside the Toronto courthouse on Wednesday.