Steel Mills

Essar Steel Algoma Finds New Iron Ore Supply

October 14, 2015

Essar Steel Algoma announced it has secured an alternate, interim iron ore supply and is withdrawing its motion for a Temporary Restraining Order against Cliffs Natural Resources. Essar will continue to pursue resolution of the matter of breach of contract through the court system. Cliffs Natural Resources, as of Oct. 5, canceled its 3 million tonne iron ore supply agreement with Essar Algoma claiming breach of contract.

“We are focusing on the things we can control. We were able to source iron ore and we have taken these steps to assure our customers of continued supply. We will address the matter of Cliff’s breach of contract in due course,” said Essar Steel Algoma CEO Kalyan Ghosh.

Key Banc analyst Philip Gibbs does not see this as “a game-changing announcement” for Cliffs, but added in a Key Banc report that it “clearly puts the NA iron ore pellet supply-demand further in the flux zone.”

Gibbs expects Essar’s new arrangement will result in Cliffs lowering its iron pellet shipment guide for the year (currently at 19 million tonnes).

“The ‘interim’ agreement underscores the availability/supply overhang of iron ore pellets within the North American market on the account of weak blast furnace operating rates, with Essar potentially able to secure pellets from other miners like X [US Steel],” wrote Gibbs.