Lakeside Steel Aims to Rescue US Steel Canada

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Researched by Industrial Info Resources (Sugar Land, Texas)--Lakeside Steel Incorporated (CVE:LS) (Welland, Ontario), a steel pipe and tube manufacturer, along with subsidiary Lakeside Steel Corporation, has prepared a motion for intervener status in The Ministry of Industry vs. US Steel Corporation for non-compliance. Lakeside has formally expressed interest in acquiring US Steel Canada (Hamilton, Ontario) operations, which include the Nanticoke Ontario Lake Erie Steel Mill and Hamilton Hilton Ontario Steel Works. US Steel Canada is a wholly owned subsidiary of United States Steel Corporation (NYSE:X) (Pittsburgh, Pennsylvania).

The Minster of Industry, Ontario has filed a compliance order with a request for a monetary penalty. The order calls for the plants to be reopened and for US Steel to meet the commitment it made upon the purchase of the facilities. Despite these measures, US Steel feels they are more compelled to act in accordance with the "Buy American" requirements that are integral to the U.S. stimulus bill. It now appears unlikely that US Steel will meet its production and employment commitments made to Canada.

Lakeside Steel's rebuttal to US Steel's position is that the former Stelco facilities should be owned or controlled by a Canadian company. Hamilton Hilton Steel Works was originally owned by Stelco Incorporated before its complete acquisition by US Steel Canada.

Lakeside's motion to the Court asks that US Steel Corporation sell US Steel Canada to them. They have indicated they would reopen the plants and act in accordance with the production and employment commitments made by US Steel to the Minister of Industry, Ontario. Lakeside remains the only publicly held steel manufacturer that is Canadian-owned. This acquisition would increase the global footprint of their company by more than 4 million tons of steel produced per year. As a Canadian company, they believe they understand the issues and concerns that these facilities face. The original application was filed on behalf of the Minister of Industry under the Investment Canada Act against United States Steel Corporation and U.S. Steel Canada, stating failure-to-comply issues.

Lakeside Steel is confident that a purchase of US Steel Canada is the most logical solution available to the Ontario Federal Court under the Investment Canada Act. The company supports the initiative taken by the Minister and wants to emphasize to the Court how a shutdown of US Steel Canada's operations would affect the Canadian steel industry.

Lakeside Steel Corporation began operations in 1909 as Page-Hersey Iron Tube & Lead Company. In 1965, Stelco Incorporated purchased Page-Hersey. In 1985, Stelco Page-Hersey Works became Stelpipe Limited. In November 2005, Lakeside Steel Corporation purchased Stelpipe's pipe mill facilities, which have a maximum production rate of 200,000 tons per year.

US Steel Canada has cancelled or put on hold all capital projects and reduced the expenditures for maintenance shutdowns. These projects not only included the multi-million dollar maintenance shutdowns but a three-phase cogen addition that was expected to cost roughly $50 million. The Canadian economy could use the boost that these projects would bring. No price for the purchase of the plants has been bantered around, as no formal reply has been given to Lakeside Steel. If the Minister of Industry and Ontario government can find a way to make this offer work, Ontario could soon see a restart of plants that employed more than 3,000 people.

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