Essar, Cliffs square off.

• Author: Ross, Ian
• Position: NEWS

Essar Steel Algoma has secured an alternate iron ore supply after Cliffs Natural Resources broke off its taconite pellet agreement with the Sault steelmaker on Oct. 6.

Essar did not identify its new supplier.

"We are focusing on the things we can control," Essar Steel Al goma CEO Kalyan Gosh said in a release. "We were able to source iron ore and we have taken these steps to assure our customers of continued supply. We will address the matter of Cliffs' breach of contract in due course."

The decision by the Cleveland-based iron ore miner to terminate its pellet contract with Essar is "very rare, historically," said Peter Warrian, the senior research fellow at the University of Toronto's Munk School of Global Affairs, but not shocking given the calamitous state of affairs in the mutually dependent industries.

Cliffs cited the steel company for "multiple and material breaches" under a pellet sale and purchase agreement for its decision.

Cliffs, most noted in the North for an ill-fated attempt to develop a James Bay chromite mine, is the main supplier of taconite pellets to Essar. But the 168-year-old mining company is in full survival mode with iron ore prices at historic lows.

Essar immediately responded by filing a temporary restraining order against Cliffs in the United States District Court of Northern District of Ohio, a move supported by United Steelworkers Local 2251.

No comment was forthcoming from Cliffs, but Essar spokeswoman Brenda Stenta said in an email there had been "no immediate impact to operations."

Essar withdrew its motion for a restraining order 10 days later.

In a news release, Essar said it would "pursue resolution through the courts on the matter of breach of contract."

"Broad-brush, the steel industry has entered into a restructuring crisis," said Warrian, "but the iron ore segment is in chaos," with iron prices dropping by 75 per cent since June 2014. Supply contracts "are being contested and voided all over the place."

In recent years, the two companies have endured an acrimonious and litigious relationship, with Cliffs previously accusing Essar of breach of contract. But the supply agreement remained intact until this fall.

Though not aware of the inside circumstances, Warrian said it's plausible that this latest dispute could involve Essar attempting to renegotiate the contract.

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