Metaljunction

A company with a track record of reviving another struggling Canadian steel company wants to take over U.S. Steel Canada's plants in Hamilton and Nanticoke, sources close to the bidding process say.

Essar Steel Holdings, of India, is vying for control of U.S. Steel Canada, now under creditor protection, and sources say it intends to bring the Hamilton plant back into production.

"Right now, it looks like the bidding is down to Essar and U.S. Steel," said one observer.

Another source with direct knowledge of the bidding process said Essar's offer is for both of the Canadian plants.

"Their play is for both of them," the source said. "They want both of the assets."

The source added the Essar bid is the only one for the entire USSC operation. Others seek pieces or the highly valuable bayfront land where the steel mill has stood for more than a century.

Sources asked for anonymity citing the confidentiality agreement with U.S. Steel. Essar's spokesperson declined to comment.

Essar, based in India, purchased Algoma Steel in Sault Ste. Marie in 2007 after it emerged from bankruptcy protection. It has invested more than $790 million and recently announced a $240- million expansion and modernization program.

The work is supported by $60 million in federal and provincial aid. The projects are expected to maintain 2,500 direct jobs at the mill.

U.S. Steel purchased Stelco in 2007 after a round of creditor protection with promises to make heavy capital investments in the plants. It also promised to meet employment and production targets during its first three years of ownership but shattered those commitments within a year of taking over.

An Essar bid that includes a commitment to revive steelmaking at the Hamilton plant would "be a dream outcome" and would have strong public support, said Coun. Sam Merulla, vice-chair of the city's steel issues subcommittee.

In an email, Mayor Fred Eisenberger said: "Any prospect of reviving this steel making plant and investing in its future could be a positive, job creating economic opportunity ‎for Hamilton."

Steel expert Peter Warrian, of the University of Toronto, said an Essar bid for the former Stelco makes sense, especially if it includes reviving steelmaking here.

"For the good of the city, that would be the best possible outcome," he said.

An industry analyst with close knowledge of Essar and its operations and also bound by the nondisclosure clause, said a bid for USSC made sense "as part of the parent company's strategy to create value in North America."

An Essar bid in the range of $400 million would be a likely target, the analyst said.

USSC slipped into creditor protection last September and since January has been in a heavily shrouded process to sell its Hamilton and Lake Erie plants.

In June, the court-appointed monitor of the restructuring process said 102 companies were offered the chance to buy the distressed mills and 39 submitted expressions of interest.

Monitor Alex Morrison described the potential bidders as "global and North American steel producers, coke producers, steel and metal industry participants, land redevelopers, and private equity and financial investors."

Firm bids were submitted July 24 and are being reviewed by USSC's monitor, chief restructuring officer and financial adviser to pick ones that will be recommended to the court.

There has been little hard public information about the process. It is known that USSC's American parent intended to submit a bid as did the Hamilton Port Authority. Persistent rumours have claimed ArcelorMittal Dofasco is interested in USSC's coke ovens.

AMD won't confirm any potential interest in the USSC assets and the port authority has not said whether it went to the second stage.

Hamilton Port Authority spokesperson Larissa Fenn said in an emailed statement "the process does not allow us to elaborate a great deal on our involvement; however, we remain interested and are following all developments closely.

"On a general level, there is a very positive opportunity for the USSC property to be the future home of a range of modern, sustainable industrial uses. If HPA has a role going forward, we would bring a solid track record of revitalizing brownfields for modern industry and manufacturing activities."

An Essar bid would also be welcome competition for a U.S. Steel bid many fear will be based on the $2.2 billion the company claims it is owed by USSC. Workers and others fear such a bid would not produce any cash to top up the badly underfunded pension plans that support 14,000 retirees,


Source: thespec.com