Steel Mills

Algoma Pushes to Complete Restructuring
Written by Sandy Williams
January 4, 2018
Operational problems this past fall impacted Algoma Steel earnings and the mill’s winter build-up of raw materials, according to the latest report from CCAA bankruptcy monitor Brian Denega.
Delays on a stove rebuild project along with an unplanned shutdown of the blast furnace at the end of November affected Algoma’s production and shipments. The rebuild was not completed until mid-December, and a problem with the cooling system allowed water to get into the furnace in November resulting in the shutdown.
The operational problems caused an increase in stockpiles of excess raw materials, preventing receipt of additional raw materials for winter operations. Delivery of iron ore is now scheduled between January and March, weather permitting, and should provide an adequate inventory to continue ordinary operations into spring, said CFO Rajat Marwah.
The snafu resulted in legal proceedings by U.S. Steel for failure to take delivery of 172,000 net tons of iron pellets. Algoma was ordered to put $12 million in escrow with the court monitor for payment to U.S. Steel when the pellets are delivered.
During the last reporting period, net cash flow of $16 million was $3 million less than forecast. Cash on hand as of Dec. 15, 2017, was $34 million with a DIP facility balance of $158 million.
Algoma is anxious to finish recapitalization, but has been stalled by collective bargaining negotiations. So far no agreement with USW Locals 2251 and 2724 has been reached and talks are currently suspended. An agreement with the union is crucial to a successful turnaround of the company, said Denega in his report. “Reaching an agreement on collective bargaining arrangements represents the most significant outstanding condition to a successful restructuring of the applicants,” said Denega in the Dec. 20 report.
A Jan. 25 hearing is scheduled to ask the Ontario Superior Court to reopen collective bargaining. “Algoma cannot restructure without negotiating new collective agreements with the unions, including necessary amendments with respect to pension funding,” said Denega.
The processes of ratifying an agreement with workers and getting approval of regulations regarding the pension funding is expected to take eight to 12 weeks. The current Companies’ Creditors Arrangement Act will expire on March 31, incentivizing Algoma to complete its emergence from two years of CCAA protection by that time.
“The applicants [Algoma] can no longer afford to delay pursuing the recapitalization transaction, which continues to represent Algoma’s best and only viable prospect to continue as a going concern enterprise for the benefit of all of Algoma’s stakeholders,” the company’s Dec. 19 motion states.
Algoma says the timing is right for emergence: steel prices are up and steel investment interest exists. The company would like to complete the recapitalization before the provincial election on June 7 to avoid any uncertainty regarding the transaction. In addition, the outcome of NAFTA renegotiation and its possible termination could result in a negative impact on the business.

Sandy Williams
Read more from Sandy WilliamsLatest in Steel Mills

Steel Summit: Burritt says USS and Nippon are fast-tracking modern steelmaking
U.S. Steel President and CEO David Burritt told audiences at SMU's Steel Summit 2025 that the iconic American steelmaker’s partnership with Nippon Steel is fast-tracking smarter steel production.

Nucor moves to stop HRC price slide with $10/ton hike
Nucor is attempting to halt the decline in hot-rolled coil prices with the announcement of a $10-per-short-ton increase in its weekly consumer spot price on Monday.

Explosion rocks ArcelorMittal’s DR plant in Mexico
ArcelorMittal reported a "strong" explosion at the direct reduction part of its massive Lazaro Cardenas mill in Mexico.

SDI to acquire remaining stake in New Process Steel
Steel Dynamics Inc. (SDI) announced that it has agreed to acquire the remaining 55% equity interest in New Process Steel.

North Star results improve despite buyer caution as tariffs drive prices higher
North Star BlueScope said it is optimistic that US tariffs will bolster selling prices and tighten the spread the Australia-based steel maker suffered in 2025.