A junior Canadian steel company is pushing a bid to bring former Hamilton steel maker Stelco back to life and put the company now owned by United States Steel Corp. back into Canadian hands.
Lakeside Steel Inc. said Wednesday it has filed for intervenor status in Federal Court hearings into alleged breaches by U.S. Steel of job and production commitments it made two years ago in getting government approval for its $1-billion takeover of Stelco.
Pittsburgh-based U.S. Steel has said the global recession left it with no choice but to shut down most of its Canadian operations, according to documents filed in court.
Lakeside already owns Stelco's steel pipe and tubular assets, which it bought in 2005, a year after Stelco filed for bankruptcy protection from creditors, and now it wants to see U.S. Steel forced to sell the former Stelco and is looking to step in as a buyer.
“The Lakeside alternative being proposed to the court would repatriate a former Canadian icon and resume operations immediately at the Hamilton and Nanticoke facilities,” Lakeside chief executive officer Vic Alboini said in a statement.
“We believe this is a viable business solution to address the difficult reality at U.S. Steel Canada.”
Lakeside, based in Welland, Ont., makes steel pipe and tubing for the oil and gas, mining, automotive and commercial and industries.
The company said it believes U.S. Steel is under pressure from U.S. authorities to comply with Buy American requirements contained in economic U.S. stimulus initiatives that are intended to drive production and employment within U.S. borders.
Lakeside said that gives U.S. Steel more incentive to keep producing from its U.S.-based mills and leave its Canadian operations idle.
“It is therefore highly unlikely that U.S. Steel will meet its production and employment commitments made to the minister,” Mr. Alboini said.
“It is important for Stelco to be owned or controlled by a Canadian company, for the long-term benefit of Stelco's employees, customers and suppliers.”
As of May, the work force at U.S. Steel's Canadian operations had shrunk to only 23 per cent of the more than 3,000 workers the company promised to employ when it took over Stelco, the government said in its court filing.
It also alleges U.S. Steel repeatedly broke production promises, with the amount of steel produced by its Canadian operations representing “a small fraction” of the amount it was required to produce on an annualized basis.
According to the Federal Court application, U.S. Steel made two major promises when it acquired Stelco: that its Canadian steel production between Nov. 1, 2007, and Oct. 31, 2010, would be greater than or equal to 3.95 million tonnes a year, and that it would maintain an average employment level of 3,105 full-time workers at its Canadian operations.
Hamilton-based U.S. Steel Canada shut down most of its Canadian operations in southern Ontario this spring, affecting about 1,500 employees at mills in Hamilton and Nanticoke because of weak markets. In addition, U.S. Steel said 810 workers had retired or were planning to do so.
After the shutdowns, Industry Minister Tony Clement sent a letter to the company, asking it to comply with its 2007 commitments. The government is asking for a court order mandating U.S. Steel to meet its promises or face a $10,000 daily fine.
Since the initial mill shutdowns, the company has recalled 800 workers to its Hamilton mill.
Canada's big steel makers — the former Stelco, Dofasco, Algoma Steel and Ipsco — have all been acquired in recent years by foreign companies in a wave of consolidation in the global steel industry.
Steel output has taken a beating from the recession, which has hurt demand for everything from vehicles to household appliances. The World Steel Association said Monday global steel output plunged 21.3 per cent in the first six months of 2009 compared to a year ago.
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