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Essar Steel Algoma Inc., the economic backbone of Sault Ste. Marie, Ont., for more than a century, will make its third trip through creditor protection amid a collapse in steel prices and a battle with a critical supplier.
The steel maker, which was founded in 1901 to make rails for the growing railway industry, was granted protection Monday under the Companies’ Creditors Arrangement Act, saying it does not have enough money to make $25-million in debt payments due next week or special payments on pension funds with a combined deficit topping $500-million.
“The urgency of the need for immediate cash is unquestioned,” Ontario Superior Court Justice Frank Newbould said in granting the company creditor protection.
The filing underlines the battered state of much of the steel sector in Canada and North America. Essar Algoma joins U.S. Steel Canada Inc., which was granted CCAA protection in September, 2014 – the second trip for the former Stelco Inc. through a court-supervised restructuring.
Steel makers are responding to a number of influences: a drop in demand for steel used in energy projects; low prices caused in part by producers from low-cost countries dumping in North America, and big customers such as Caterpillar Inc. scaling back orders over low commodity prices.
Essar Algoma lost $80.7-million in the three months ended June 30, show documents filed with the court Monday.
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