At the mercy of the mill.

• Author: Ross, Ian
• Position: NEWS - Sault Ste. Marie Construction Association loses and its report - Financial report

It's shaping up to be a bleak winter for hundreds of Sault Ste. Marie industrial service companies and businesses owed anywhere between a few thousand and a few million dollars by bankrupt Essar Steel Algoma.

The head of the Sault Ste. Marie Construction Association expects casualties among his 150 members who are collectively owed more than $250 million by the cash-strapped steel company.

The magnitude of the losses, the impact on local suppliers and the Sault's economy over the next six to 12 months as Essar restructures has yet to be determined, said Adam Pinder.

"I'm sure some of these companies won't survive. They just can't stomach a loss of that size, they can't absorb that," said Pinder.

Essar's ongoing struggles in a weak steel market were well known, but the Mumbai-owned producer was still forging ahead with maintenance work and more than $200 million in mill upgrades.

No one foresaw the steel producers entering CCAA (Companies' Creditors Arrangement Act) and Chapter 15 creditor protection in the U.S., said Pinder. The steel company owes $163.5 million to vendors, large and small, across Northern Ontario and North America.

Pinder said his members, who are unsecured creditors, are in shock, not sure of what the eventual repercussions will be. "Most of them are assuming all of that the money owed to them is pretty much gone.

Who ultimately gets paid and who doesn't is in the hands of the court-appointed monitor, Ernst & Young, under the terms and conditions of the CCAA process.

Since Essar entered creditor protection, some contractors have pulled their workers from the site, while others have no recourse but to soldier on with hopes of being paid.

"Unfortunately, in those circumstances, without strong legislation that backs them, they're at the mercy of that mill, especially when it's the prime employer. It's the one place in the Sault that's consistent and steady in needing that type of workforce.

Getting paid in a timely fashion from Essar (formerly Algoma Steel) has always been a chronic issue.

Pinder said payment from Essar can vary from 60 days--which is the best-case scenario --to as long as a year.

Pinder is awaiting the outcome of the provincial Lien Act review, which will address the issue of late payment, a rampant problem in the construction sector. The final report is expected in the spring.

His association supports a 30-day must-pay stipulation for contractor work completed.

"The payment one is the big thing that...