Steel Mills

Essar Steel Algoma Ore Inventory Set for Winter
Written by Sandy Williams
October 6, 2016
Essar Steel Algoma is approaching the end of one year of protection under the Canada’s Companies Creditors Arrangement Act. The company entered protection on November 9, 2015. The latest court monitor report by Brian Denega, senior vice principle of Ernst & Young, shows the company maintaining its production and stocking up on iron ore for the winter months.
In September 2016, Algoma amended its iron ore supply agreement with Cliffs Natural Resources to provide for additional ore volume to be delivered in Q4 and in January 2017. The agreement was contingent on an amended DIP facility that runs to at least January 15, 2017 and a continued stay of proceedings until that date, both of which have been satisfied. An additional condition by Cliffs was that there would be “no agreement to sell all or a material part of the business or assets of Algoma to an Essar Global entity.”
As of October 3 monitor’s report, Essar Steel Algoma believes it has sourced enough iron ore to meet its requirements during fall and winter to prevent a loss of production during the winter freeze of the Great Lakes shipping lines.
Algoma’s operating cash flow was negative $10 million from Sept 3 to Sept 30, 2016 which was an improvement of $19 million over the last projection. Cash on hand was $22 million and Algoma has fully drawn the Amended DIP Term facility of $273 million. Most of that has been released to Algoma to maintain operations through the current projection period, with $62 million being held in an escrow account for future needs (all amounts are in Canadian dollars). Based on the cash flow projections, the Monitor believes that Algoma has sufficient liquidity to maintain production through the current projection period as well as maintaining a “prudent” cash buffer.
The Port of Algoma filed a motion returnable on October 6, 2016 seeking immediate payment of cargo handling charges. Denega maintains that a determination should not be made until proceedings filed by Algoma on September 26 regarding Portco have been dealt with. Resumption of payments under the Cargo Handling Agreement with the Port, would jeopardize Algoma’s projected liquidity said Denega.
No mention was made by the court monitor about the status of a potential sale of the company to the Term Lenders.
 
			    			
			    		Sandy Williams
Read more from Sandy WilliamsLatest in Steel Mills
 
		                                Ternium swings to Q3 loss, eyes 2026 recovery
Ternium closed the third quarter with steady shipments and improving margins. But trade policy uncertainty and subdued demand in Mexico weighed on the Latin American steelmaker’s results.
 
		                                Algoma’s losses widen in Q3 as tariff troubles continue
Algoma Steel’s net loss more than quadrupled in the third quarter on trade woes and its EAF transition. Separately, the company announced a change in leadership, as CEO Michael Garcia will retire at the end of the year.
 
		                                Cliffs, POSCO announce MoU for ‘transformative’ partnership
Cleveland-Cliffs on Thursday said it had signed a memorandum of understanding (MoU) with POSCO to forge a strategic partnership, one Cliffs bills as "transformative."
 
		                                Cliffs touts steel stamping solution to replace aluminum in automotive
Cliffs said it successfully completed a defect-free trial production of exposed steel parts using aluminum-forming equipment in collaboration with an unnamed OEM,
 
		                                Nucor navigates mixed flat-rolled markets with strategic muscle
Nucor entered the fourth quarter with clear forward momentum: stronger-than-expected results, solid sheet and plate demand, and construction progress on a major new mill that should add capacity next year.
