Best news for the steel plant in decades (4 photos)

It's the best news for Sault Ste. Marie's steel mill in decades.

A $30 million loan from the federal government, a $30 million grant from the province, and investment from Essar Steel Algoma will combine for a $240 million modernization of the steelmaker's facilities.

The massive investment will upgrade the plant's Direct Strip Production Complex, improve product quality, the speed of production, provide new automation technology, reduce energy consumption, allow for production of a wider range of steel products, increase production and protect 2,500 jobs and, it is hoped, create 200 more.

Essar Steel Algoma is the second largest integrated steel producer in Canada.

The joint funding announcement was made at Essar Steel Algoma Friday by a host of politicians and corporate figures.

Included among those gathered were Gary Goodyear, Minister of State for the Federal Economic Development Agency for Southern Ontario (FedDev Ontario), Sault MP Bryan Hayes, Michael Gravelle, Ontario Minister of Northern Development and Mines, Sault MPP David Orazietti and Kalyan Ghosh, Essar Steel Algoma president and CEO.

"The modernization program begins today," Ghosh told SooToday.

"This will increase our ability to make higher quality steel, more than we can make today."

The modernization program will be carried out over the next seven years.

"Employment in the manufacturing sector has stabilized in the last five years and manufacturing companies are showing great confidence because they have invested billions of dollars and created thousands of jobs…but manufacturers know full well they need to be innovative and aggressive in these markets," Goodyear said.

The federal funding for Essar Steel Algoma announced Friday comes from FedDev Ontario through the Advanced Manufacturing Fund (AMF), and is both the largest funding announcement in FedDev's history and the first for the AMF in Northern Ontario, Goodyear said.

Why a loan instead of a grant?

"We fully believe we can get the same impact in the community and get the taxpayers money back over a period of time…there is competition around the world to give money away and that competition is getting heavier, but if we can still get the same result and get the taxpayers dollars back we feel that's a win-win, and that's our priority at the Conservative federal level," Goodyear told reporters.  

The federal loan funding is not tied to performance, Goodyear told SooToday.

"They (the steelmaker) said they would do certain things within the plant that would improve productivity to certain levels, as well as job creation, job protection, conditions which have to be met, but it's not based on performance."

"Through the funding being announced today the company will be able to produce a wider range of steel grades, increase steel quality and increase production levels to meet Canadian demand, which is now largely dependent on imports," Hayes said.

"The upgrades will enable the company to produce advanced grades of heat-treated steel plate which, without this project, would not be produced in Canada." 

"The company anticipates more than 200 jobs will be created while supporting the maintenance of about 2,500 employees," said Hayes, who recalled his first job in Sault Ste. Marie, upon moving to the community 35 years ago, was as an Agoma Steel employee.

The $30 million provincial grant comes from the Northern Ontario Heritage Fund Corporation (NOHFC).

"We know Essar is very much the fabric of this community…we have every intention of continuing to work with Northern municipalities and businesses such as Essar to help them take advantage of emerging opportunities," Gravelle said.

"This significant investment…will ensure Essar remains competitive for years to come while producing a broader range of products as well as allowing for an increase in total steel output," Orazietti said.

Despite fiscally challenging times for the provincial government, Orazietti told SooToday the $30 million grant for Essar Steel Algoma was crucial.  

"We need to make these types of investments…if we're not competitive and if we don't have the best equipment, technology and modern mills, then we're not going to have these jobs here." 

"This has been the largest investment since the Second World War, by any government, in this mill…we want to make sure we keep our economy strong here in Sault Ste. Marie," Orazietti said.

A news release issued by Essar Steel Algoma follows:

Bolstered by up to $60 million from the governments of Canada and Ontario, the investment will support technological and product innovation that will enable Essar Steel Algoma to meet the growing global demand for advanced grades of steel and support growth in related industries like shipbuilding, mining and manufacturing.  

"We are going to introduce the best available technology to Essar Steel Algoma, which will put us in a much stronger competitive position," says Kalyan Ghosh, chief executive officer of Essar Steel Algoma. "We'll have better access to capital, a much broader range of products, better quality, more advanced grades of steel, and a renewed emphasis on sustainability."

The modernization and expansion program will include the construction of the No. 2 ladle metallurgy furnace, an upgrade and expansion of the Direct Strip Production Complex — the only facility in Canada that converts liquid steel directly into steel coils, and the automation of North America's only combination plate and strip mill.

The project is supported by a $30 million repayable contribution from the Government of Canada by the Federal Economic Development Agency of Ontario through the Advanced Manufacturing Fund, and a $30 million grant from the Government of Ontario delivered by the Ministry of Northern Development and Mines and the Northern Ontario Heritage Fund Corporation.

Engineering and design work is already under way, and construction will begin on several components of the project immediately.

While some of the projects will be completed within 18 months, the entire optimization and renewal program will be complete by 2022.

The construction is expected to support more than 200 additional jobs over the course of the project while maintaining 2,500 direct jobs at the facility and supporting more than 5,000 indirect jobs.

"With today's announcement, we are making Essar Steel Algoma more competitive in evolving markets that are demanding advanced grades of steel," says Mr. Ghosh. "This investment will increase the productivity rate at the plant, improve our ship-on-time performance, bolster the quality and reliability of the steel coming from Sault Ste. Marie and better enable us to meet the Canadian demand for steel." 

Since its acquisition of Essar Steel Algoma Inc. in 2007, Essar Global Fund Ltd. has invested more than $790 million into the Sault Ste. Marie operation, ensuring its long-term viability and continued growth in the competitive global steel industry.

For more information, please visit www.essarsteelalgoma.com or follow Essar Algoma on Twitter @EssarAlgoma.  

About Essar Steel Algoma Inc.

Essar Steel Algoma Inc. is based in Sault Ste. Marie, Ontario.

As a fully integrated steel producer, the company derives its revenues primarily from the manufacture and sale of hot and cold rolled steel products including sheet and plate.

Founded in 1901 as Algoma Steel, the company was acquired in June 2007 by Essar Steel Holdings Limited.

Its products are sold to customers in the automotive, light manufacturing, construction, shipbuilding, energy, mining and steel distribution industries. 

SOURCE Essar Steel Algoma Inc.

*************************

(PHOTO: Product at Essar Steel Algoma, July 24, 2015. Darren Taylor/SooToday)