A major maintenance project is expected to adversely affect Essar Steel Algoma for several months starting in July.
Described as a "stove reline" in a just-released report from the court-appointed monitor overseeing Essar Algoma's restructuring, the job "is expected to result in unfavourable cash-flow impacts for July and the following few months, due to reduced production and shipments as well as resulting changes in inventory levels."
"No. 7 blast furnace has four stoves attached to it that provide the hot air blast for the furnace," company spokesperson Brenda Stenta tells SooToday.
"One of the four stoves is scheduled for a rebuild this year. The furnace will continue to operate while the stove is down although some impact to production levels is expected," Stenta said.
The monitor's report, prepared by Brian Denega of the Toronto office of Ernst and Young Inc., contains other news of local interest:
- after rebounding since October 2016, steel prices have showed signs of softening in recent weeks. CRU Group's benchmark U.S. Midwest Hot Rolled Coil Index dropped to US$629 per net ton this week, down from a 52-week high of US$660 on April 3.
- shipments from Essar Steel Algoma were about 229,000 net tons in March. That's 7,377 net tons a day, compared to 6,928 in February.
- production totaled 223,000 net tons in March. The monitor commented that this "represents strong production levels especially considering that the company also undertook planned shutdown maintenance of its steel operation in that month."
- earnings before interest, tax, depreciation, amortization and restructuring costs reached $40 million in March, Essar Algoma's best monthly performance since it filed for protection from its creditors in November 2015.
- this cash flow was used to pay down $35.2 million of Algoma's debtor-in-possession (DIP) financing, as well $6.1 million in restructuring costs, $2.8 million in interest and fees on its DIP facility, and $4.9 million in capital expenditures.
"Based on Algoma's existing order book and contracts, management remains optimistic that financial performance for April and May, 2017 will be stable," the monitor said.
"During this period, as part of its seasonal inventory management cycle, Algoma will continue to restore raw materials inventory to normal levels through shipping on the Great Lakes, which represents a significant use of cash."
"With respect to recent market uncertainty, if steel prices continue to weaken, the impact on financial performance will gradually develop in June and thereafter due to the time-lag effect," Denega wrote.
As SooToday reported earlier today, the company's insolvency protection and its DIP financing both expire Sunday. And a Virginia 'billionaire' has been named successful bidder for a sister project abandoned by Essar Global: the Essar Steel Minnesota taconite project.