Dive Brief:
- Pittsburgh-based United States Steel Corp. will not be a bidder if there is another effort to sell U.S. Steel Canada Inc. under a transition agreement announced last week regarding the split of the two companies. That will likely lead to new bids for the Canadian unit, as other buyers don't have to compete against U.S. Steel's potential claim of $2 billion applied against the Canadian company that it had been planning to use as credit.
- "There are people out there who want to rebid," one source involved in discussions about the future of U.S. Steel Canada told the Globe and Mail. "Now, we have a sensible sales and restructuring process."
- The transition agreement approved by the Ontario Superior Court makes U.S. Steel Canada an independent company operating under the Companies’ Creditors Arrangement Act. The agreement provides new debtor-in-possession financing of $75 million, U.S. Steel payment of remaining 2015 pension contributions, and two more years of services by the parent company. But health benefits to 20,000 retirees and dependents were suspended, and municipal taxes were halted to Hamilton and Haldimand County, Ontario, site of a working U.S. Steel Canada mill.
Dive Insight:
The North American steel market is in a downturn caused by the collapse of the energy market and imports that have seen prices for hot-rolled coils fall from $600 metric ton earlier this year to $400, the Globe and Mail reported. Mills are running at 72% capacity, while 80% would be considered healthy, according to Andrew Lane of Morningstar Inc. in Chicago. Additionally, American Metal Market reported that Chicago- and Detroit-area steel mill buyers are paying $145 to $150 per ton for the No. 1 heavy melting steel grade, compared to the $217 average in September.
U.S. Steel Canada is also seeing the loss of its highest value contracts to U.S. Steel mills in the United States.
The parent company has laid off thousands of U.S. workers, reduced its output in Alabama and is considering idling a large steelmaking complex in Granite City, IL, Recycling Today reports.
