Essar Steel in court over supplies

INDUSTRY

Posted By DAN BELLEROSE, THE SAULT STAR

Updated 12 hours ago

Essar Steel Algoma Inc. and Cleveland-Cliffs Iron Co., an essential raw material supplier, have had their day in court.

Adrian Lang of the Stikeman Elliott law firm in Toronto, on behalf of Essar Algoma, and Paul Schavas of Blakes law firm of Toronto, on behalf of Cleveland-Cliffs, presented their arguments Monday at an injunction hearing in the Ontario Superior Court of Justice in Sault Ste. Marie.

Members of the general public, including the media, were excluded from the scheduled day-long session due to confidentiality agreements which would be discussed between Essar Algoma and its primary iron-ore supplier when their contract was opened.

Court documents pertaining to the case were sealed shortly after they were filed earlier this month.

The Sault steel maker and Cleveland Cliffs are disputing pricing and supply.

The Superior Court of Justice is expected to rule on the supply dispute, while an arbitration hearing, likely within a few months, will resolve the pricing issue.

The steel maker claims the most recent pricing statement from Cleveland-Cliffs was a "significant, unexpected price increase . . . 130 per cent over the 2009 world price of iron-ore pellets."

Cleveland-Cliffs is apparently prepared to interrupt vital iron-ore shipments into the Sault until the matter is resolved.

Essar Algoma has canvassed other North American suppliers to fill the void, should Cleveland-Cliffs carry through on its supply interruption, and claims to have only found 150,000 tonnes of pellets available -- a 14-day supply.

The two parties entered an exclusive 15-year supply agreement in 2002 calling for a minimum 2.5 million tonnes of iron ore annually at market prices.

The long-term agreement comes with no price guarantees, say Essar officials. Prices are adjusted annually based on the world composite index.