Algoma Steel strikes deal with Tenaris sister company

Buried deep in today's fourth-quarter announcement from Algoma Steel is an interesting tidbit that could have significant impact on the steel mill's viability and, some company-watchers believe, even its eventual ownership.

ASI disclosed that it's started a three-year arrangement with an Argentina-based company called Exiros "to identify and implement cost savings through improved purchasing and operating practices."

Exiros was created four years ago to centralize the purchasing activities of the more than 100 firms that comprise the Techint Group of companies.

Using sophistiacated "E-procurement" technology, Exiros takes the purchasing process online, conducting more than 250 bids each week for Techint firms.

Would-be suppliers must pay a fee for the right to bid on Techint business, and to date more than 5,000 companies have done so.

Today's announcement by Algoma Steel doesn't mention that Techint is the parent company of Tenaris S.A., which recently bought the Algoma Tubes plant (shown) from ASI.

Tenaris rumoured to be potential ASI suitor

At last year's annual meeting at the downtown Holiday Inn, ASI President and Chief Executive Office Denis Turcotte disclosed that his company is looking for opportunities to sell off assets or to merge with larger companies.

Techint, a $9 billion global giant in the seamless and welded steel pipe business, has been often mentioned in speculation about potential suitors in future ASI mergers or sell-offs.

On Monday, Tenaris S.A. announced that it had completed a $12.5 million purchase of the Sault Ste. Marie land and manufacturing plant that until now had been leased from ASI for its Algoma Tubes subsidiary.

Argentina's largest fully integrated producer

"Tenaris has strengthened its commitment to the Canadian market," Tenaris said in a written statement.

"Tenaris plans to continue investing in the mill, which has an annual production capacity of 250,000 tons, and make it the primary source of high quality pipes for the Canadian oil and gas industry."

For all intents and purposes, Algoma Tubes Inc. is Tenaris's national operating subsidiary in Canada.

Parent company Techint owns Siderar, the largest fully integrated steel producer in Argentina, which produces more than 2 million tons a year of hot- and cold-rolled sheets and coils, as well as coated steel products.

Can No. 7 blast furnace go six years without a reline?

In another announcement with major implications on ASI's bottom line, the company revealed that the $120 million reline of its No. 7 blast furnace, originally scheduled for next year, may be delayed for five years.

"The board of directors has approved a revised capital management program for the No. 7 Blast Furnace which is designed to avoid a planned outage in April and further defer the reline until 2010," ASI said in a news release.

"Total spending between 2004 and 2010 is estimated at $52 million with a portion of this outlay expected to reduce the reline cost in 2010."

Last July, company officials announced that they'd been advised that the reline could safely be put off to 2008, resulting in cost savings of as much as $90 million.

More coverage: Algoma Steel stops the bleeding