One of the bidders for the assets of U.S. Steel Canada Inc. is proposing to revive the steel industry model of 19th-century tycoon Andrew Carnegie and establish a fully integrated steel maker in Canada that would also own iron ore and coal mines.
Tom Clarke, a Virginia-based environmentalist and health care executive, said he is bidding for U.S. Steel Canada and the Wabush iron mine in Labrador. The bid is being made through his ERP Compliant Fuels LLC, which already owns coal mines in West Virginia.
The Globe and Mail reported last Friday that ERP Compliant is one of the bidders for Essar Steel Algoma Inc. in Sault Ste. Marie, Ont., but Mr. Clarke said he is less interested in Essar Algoma than he is in U.S. Steel Canada.
The two companies are operating under protection of the Companies' Creditors Arrangement Act. The Wabush mine is also in CCAA protection, but has not produced any iron ore since November, 2014. The mine was sold by Stelco Inc. in 2007 before United States Steel Corp. bought the Hamilton-based steel maker.
Mr. Clarke said he believes U.S. Steel Canada has a bright future because of events that are reshaping the steel industry back to more regional markets from a global market in which prices have been affected by the boom in the Chinese economy and its impact on steel demand.
"We are a believer that the China phenomenon is cyclical," Mr. Clarke said in an interview. Instead of China flooding global markets with low-priced steel, regional markets will grow again, he said.
The growth of a strong, local market in North America should allow U.S. Steel Canada to thrive, he said.
U.S. Steel Canada is the successor company to Stelco, which U.S. Steel put into CCAA protection in 2014, then cut loose late last year as part of the court-supervised restructuring. The working assets, which now consist mainly of a steel-making and finishing mill in Nanticoke, Ont., and finishing mills in Hamilton, have been put up for sale.
ERP Compliant is one of between five and 10 bidders whose letters of intent to buy the company are being assessed by the court-appointed monitor.
Mr. Clarke is chief executive officer of Kissito Healthcare Inc. of Roanoke, Va. ERP Compliant is a subsidiary of Mr. Clarke's Virginia Conservation Legacy Fund Inc., a non-profit environmental organization.
The company is the second-largest producer of metallurgical coal in the United States, Mr. Clarke said.
"Our strategy is to have a low-cost product," he said, describing steel as a basic service vital to a national economy.
He noted that Tata Steel has decided to halt production in Britain and said he fears what could happen if the market keeps deteriorating to the point where no more steel is produced in Britain, the United States and Canada.
"I hope we don't have a war," he said.
ERP Compliant is also bidding to buy steel maker Ilva SpA in Italy, which was put up for sale by the Italian government in January. Among the rival bidders is ArcelorMittal, which owns ArcelorMittal Dofasco next to U.S. Steel Canada's cold mill, galvanizing line and idled blast furnace in Hamilton.
In the U.S. Steel Canada situation, Mr. Clarke said it's clear that the union, the Ontario government and U.S. Steel are critical to the bids.
He described ERP Compliant as pro-union, noting that the United Mine Workers union holds shares in some of the company's coal mines and shares in the profits.
The Ontario government is on the hook for about $500-million through its Pension Benefit Guarantee Fund if U.S. Steel Canada is liquidated and its pension plans wound up.