Steel Mills

More Challenges for Essar Steel Algoma

Written by Sandy Williams

More complications for Essar Steel Algoma as it nears a deadline to emerge from the CCAA protection. Union disputes and lawsuits continue to frustrate the process.

Labor Negotiations

Union workers were reportedly outraged by a mandate by Superior Court Justice Frank Newbould requiring parties involved in the collective agreement negotiations to keep a lid on mediation discussions.

An order by Newbould following a court hearing on March 6 instructed the company, the lenders who seek to purchase Algoma, the negotiating committees of USW Local 2251 and 2724, and the retirees negotiating committee to meet to negotiate a new labor contract with the guidance of a court appointed mediator.

The order included a provision that “the mediation is to be held in private without any public pronouncements or discussion of any nature or kind by any person.”

The order was misunderstood by Local 2551 President Mike Da Prat who interpreted it to mean that the union’s negotiating committee was not allowed to discuss the mediation with its membership. His comments were published by the SooToday prompting a follow-up meeting and memorandum by Newbould on March 8 clarifying, “There was no requirement that the negotiating committees of Locals 2724 or 2251 could not discuss the negotiations with their membership.” The follow-up memorandum was sent to SooToday for publication by request of Justice Newbould in order to clear up the confusion.

A further memo was issued by Newbould on March 14:

“I understand that notwithstanding the foregoing, the president of Local 2251 continues to take the position that the negotiating committee is unable to discuss the negotiations in the mediation with its membership.

“To be clear, there is no basis for the president of Local 2251 to take that position. The order of March 6, 2017 was to prevent public discussions, not prevent discussions with the membership of the Locals. As acknowledged by counsel on March 6, 2017 and again on March 8, 2017, including counsel for Local 2251, the purpose of the order was to prevent the negotiations from effectively taking place in the media.”

Newbould reiterated that the mediation discussions were to be held in private without public announcements to avoid “artificial barriers.” Newbould has been dismayed in the past by comments and allegations quoted by the media in regards to the Algoma restructuring, including a letter by Essar Global, and strike threats by the local union.

“I urge the parties to have meaningful negotiations of the issues surrounding a collective agreement and leave public discussion of the negotiations or threats of action out of it,” said Newbould in a January 24 order.

Website Control

On March 13, counsel for Essar Steel Algoma filed a motion to take control of the web domain from Net4India.Ltd, the registration account of Essar Steel India.

Algoma fears that because the account can be altered by the administrator at Essar India, third parties could potentially access sensitive commercial and confidential information of Algoma. Requests to the Essar administrator to facilitate the transfer were unanswered. In its court motion, Algoma requested that it be granted the authority to take steps to transfer registration of the website domain to Algoma’s customer account.

In response to the motion, Justice Newbould ordered that no action whatsoever by any parties regarding the domain could be made until the dispute is settled. A hearing will be held on March 30, 2017 at 10:00 a.m.

Coal Lawsuit

Algoma has filed a lawsuit against Virginia-based supplier, Southern Coal Sales Corp, for failure to deliver the agreed upon a quantity of coal to the mill and supplying substandard product. Algoma said the supplier breached its contract to supply 780,000 tons of coal between April 2016 and March 2017, delivering only 274,000 tons.

“In order to build sufficient coal inventory before the Great Lakes froze and vessel shipments became impossible, Algoma Canada was forced to purchase along the way the majority of the remaining 378,837 tons that Southern Coal was to deliver pursuant to the amending agreement from third parties,” the complaint states. “This will result in Algoma Canada paying higher prices per ton for the 378,837 tons that Southern Coal failed to deliver.”

According to a report by Law 360, Algoma says that the breach of contract required an outlay of more than $13 million to find suitable coal replacement. Southern Coal failed to pay $1.2 million in penalties connected to the agreement. Algoma is asking the U.S. Bankruptcy Court for the District of Delaware to award damages for breach of contract as well as and pre- and post-judgment interest.

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