Essar to benefit from massive shipbuilding contract (updated, photo)

Essar Steel Algoma, and Sault Ste. Marie's economy, will directly benefit from the federal government's National Shipbuilding Procurement Strategy.

Sault MP Bryan Hayes, at Essar Steel Algoma's office Friday, announced 1,500 tonnes of steel plate from the steelmaker will be used in the construction of the first of six new Arctic Offshore Patrol Ships.

"Today in Halifax…we (the federal government) have awarded the build contract to Irving Shipbuilding for the construction of six Arctic Offshore Patrol Ships for the Royal Canadian Navy (a $2.3 billion contract)," Hayes said.

"It means that now Irving Shipbuilding can start purchasing supplies they need to build these ships and they're going to be buying many of them from companies across Canada."

"In fact Irving just recently finalized a contract with Russell Metals for 1,500 tonnes of steel plate, and the majority of the steel plate will be produced right here at the Essar Steel Algoma rolling mill in Sault Ste. Marie," Hayes said. 

Kalyan Ghosh, Essar Steel Algoma president and CEO, said "Algoma has been a supplier to shipbuilders in the past, and we are well-positioned to compete in this market. "

"We welcome this opportunity to demonstrate our capability to manufacture advanced ship quality plate and look forward to participating in construction of the first HMCS Harry DeWolf class ship."

Meanwhile, Essar Steel Algoma will be asking Mayor Christian Provenzano and city council for a $1 million grant from the city of Sault Ste. Marie.

"The company has lost a lot of money in the past few years, we have refinanced and we are making  money now, however we have a lot of plans not only in growth but also in investment capital into the company, so that is the reason we are looking for a grant from the city," said Ghosh, speaking to SooToday.

Essar Steel Algoma, after having completed recapitalization and refinancing, is optimistic the steel plant's 2,800 jobs will be sustained and hopes to start up its Number 6 blast furnace by November 2015, depending on the market. 

The company hopes to add 200 jobs in April, partly for starting up Number 6 blast furnace, partly for other projects, Ghosh said.

The company would like those 200 new people trained and ready to assume their roles in time for the hoped-for November 2015 blast furnace startup.

Those jobs, Essar Steel hopes, will lead to 750 spinoff jobs in the Sault and area. 

"As soon as the market is better we would like to start the blast furnace, when the market will be better I can't really predict, but we will make preparations so that when the market is better we can start in three or four months time," Ghosh said.

A federal government press release follows.

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This contract, valued at $2.3 billion, marks the start of the construction phase under the National Shipbuilding Procurement Strategy (NSPS).

Bryan Hayes, Member of Parliament for Sault Ste. Marie, was in Sault Ste. Marie highlighting that this shipbuilding contract will support jobs in his community.

Irving Shipbuilding recently finalized a contract with Russel Metals for 1,500 tonnes of steel plate, to be used in the construction of the first ship. 

The steel plate will be produced at the Essar Steel Algoma plate mill in Sault Ste. Marie, Ontario.

The AOPS build contract will sustain approximately 1,000 jobs at Irving Shipbuilding as well as many jobs at suppliers across Canada.

To date, 197 companies in Canada have already benefited from NSPS work.

Construction of an initial block is scheduled for the summer, while full production will commence in September 2015. Delivery of the first HMCS Harry DeWolf class ship is expected in 2018.

Quick Facts

• Industry analysts have estimated that government shipbuilding projects would create, both directly and indirectly, 15,000 jobs and generate $2 billion annually through the NSPS.
• Irving Shipbuilding has issued contracts totaling $310 million to companies in Canada.
• The $3.5 billion budget for the AOPS includes acquisition costs (for vessel design and build), project office operations, a provision for infrastructure costs (e.g. for jetties), as well as initial spares and support.

The build contract, valued at $2.3 billion, is a cost reimbursable incentive fee-based contract that provides incentives for Irving Shipbuilding to deliver six ships to the Royal Canadian Navy within a pre‑determined and not-to-exceed ceiling price.

Quotes

“Our Government’s National Shipbuilding Procurement Strategy is creating and supporting jobs throughout Canada and right here in our community. I am proud to be part of the government that made the historic decision to build ships right here in Canada.”

- Bryan Hayes, Member of Parliament for Sault Saint Marie

“I am pleased to be here to mark the award of this important contract. It will sustain an estimated 1,000 jobs right here in Halifax and many more at suppliers across Canada. This is further proof that our shipbuilding strategy is bringing jobs and prosperity to communities on our coastlines and across the country.”

- The Honourable Diane Finley, Minister of Public Works and Government Services

"This is a proud opportunity for our employees to participate in this historic national program and demonstrate our capability to manufacture advanced grades of ship quality plate.  By using Canadian steel in Canadian ships this contract ensures Canadians reap the economic benefits from this investment.”

- Kalyan Ghosh, Essar Steel Algoma Chief Executive Officer

Associated Links

National Shipbuilding Procurement Strategy

Additional blast furnace to come back online, Essar tells city

(PHOTO: MP Bryan Hayes and Essar Steel Algoma CEO and President Kalyan Ghosh shake hands at an announcement on January 23, 2015. Kenneth Armstrong/SooToday)