Essar Steel Algoma moves to re-open union negotiations

Stalled contract talks between Essar Steel Algoma Inc. and its strongest unions could soon be drop-kicked back to the bargaining table if the steelmaker gets its way.

Algoma's application to re-open collective bargaining with two United Steelworkers locals representing 95 per cent of its workforce is expected to be heard by Ontario's Superior Court of Justice on Thursday, Jan. 25.

Thirteen autumn meetings with United Steelworkers Local 2251 and nine sessions with USW Local 2724, followed by additional talks the second week of December, failed to achieve material progress.

Algoma has now served notice that talks need to resume under Ontario's Labour Relations Act as quickly as possible, with distinguished jurist Warren Winkler continuing in his current role as mediator.

Brian Denega, the court-appointed monitor who's overseen the Sault steelmaker's restructuring since November 2015, says the term lenders who intend to recapitalize Algoma are close to striking deals with the Ontario and federal governments for needed concessions.

But final agreement on those concessions, which relate to pension and environmental obligations, are conditional on resolving labour relations issues at the steel mill.

With a provincial election just five months away, the pressure is on to get Algoma, the term lenders and the unions back to the bargaining table.

"Reaching an agreement on collective bargaining arrangements represents the most significant outstanding condition to a successful restructuring of the applicants," Denega says in his most-recent monitor's report.

Essar Steel Algoma's lawyers are citing the following reasons for bringing the steel mill out of insolvency protection as quickly as possible:

• Algoma’s main competitor (Stelco) has emerged from its own restructuring and recently completed a successful initial public offering
• external conditions are conducive to a successful restructuring of Algoma in the near term
• the price of steel has rebounded since November 2015 and is currently near its 52-week high
• debt markets are robust right now and there's demonstrated interest in steel investments
• a recapitalization transaction will provide Algoma with necessary liquidity to properly finance the business, including the next winter build
• the U.S. government has threatened to terminate the North American Free Trade Agreement (NAFTA) and has opened negotiations with Canada. The outcome of those negotiations, including potential termination of NAFTA, and their impact on Algoma’s business are unknown, but could be materially negative
• a provincial election will take place on June 7 and the inability to complete the recapitalization transaction prior to the election will introduce significant timing uncertainty for completing the transaction

The steel mill's future owners have informed union locals that they're ready to resume bargaining as soon as the Steelworkers are willing to talk about the full range of issues, including monetary.

"Notwithstanding several accommodations to the unions to permit the consideration of alternative restructuring proposals, no other viable proposals have materialized. [Algoma] can no longer afford to delay pursuing the recapitalization transaction, which continues to represent Algoma's best and only viable prospect to continue as a going concern enterprise for the benefit of all of Algoma's stakeholders," the company's notice of motion states.

"Algoma cannot restructure without negotiating new collective agreements with the unions, including necessary amendments with respect to pension funding. In order to implement any agreement between the [term lenders], the unions and the retirees with respect to Algoma's pension plans, Algoma will need special regulations under the Pension Benefits Act (Ontario)."

That's expected to involve numerous steps, including:

• gaining the approval and support of the provincial government
• ratification of the agreement by union locals
• a process to establish support of the company's affected retirees
• drafting the regulation
• approval of the pension agreements by the provincial Superintendent of Pensions
• support from the finance minister and other members of provincial cabinet
• signing of the regulation by the lieutenant governor
• publication of the regulation

"This process is expected to take eight to 12 weeks," Essar Steel Algoma says in a court filing.

To avoid a suspension of dealings in the event of a change of government, Algoma is arguing that final approval of the provincial pension regulations must be obtained no later than Mar. 21.

The company's protection from creditors expires on Mar. 31.