Steel Mills

Essar Algoma Seeks Court Order for Reinstatement of Iron Ore Shipments

November 30, 2015

Essar Steel Algoma is asking that courts in Ontario and Delaware order Cliffs Natural Resources to reinstate shipments of ore that were terminated two months ago.

Cliffs canceled its contract with Essar Steel Algoma in October claiming breach of contract and triggering Essar Algoma’s filing for CCAA protection. The steel mill is concerned that it will not have enough ore to sustain production through the winter months. At the present time, Algoma has about two-thirds of the iron ore it needs and said in a court filing that “failure to re-establish Cliffs’ supply of iron ore pellets may prove disastrous for Algoma and the many people who depend on it.”

Algoma wants Cliffs to be declared a critical supplier by the Ontario Superior Court, which would force the ore producer to resume shipments.

Cliffs Natural Resources said that it is willing to negotiate with Essar Algoma but that Algoma is attempting to use its CCAA protection to pay less for its ore. Cliffs responded with a filing at the U.S. Bankruptcy Court in Delaware saying the dispute should be settled by an Ohio federal court where it already under consideration. Algoma filed for and received credit protection under Chapter 15 of the U.S. Bankruptcy Code from the Delaware court.

“Having refused Cliffs’ reasonable offers for a negotiated resolution, Algoma is attempting to use the CCAA proceeding to obtain greater rights than it has under state contract law or U.S. bankruptcy law,” Cliffs said in the Delaware filing. “There is no precedent for this relief under the CCAA. There are no prior cases in which a court applying the CCAA deemed a party not currently in a supplier relationship with the debtor a ‘critical supplier’ and compelled that party to supply the debtor.”

The ore producer added, “What Cliffs is unwilling to do is supply on terms that are onerous and provide little benefit to Cliffs based on Algoma’s failure to live up to its obligations.”