Sault Ste. Marie, Ontario-based flat rolled steelmaker Essar Steel Algoma announced Friday that the Ontario Government has granted the company temporary pension relief in the form of a 12 month deferral of special pension payments effective December 2012 through to November 2013. Essar Steel Algoma will continue to pay ongoing pension service costs for its defined benefit pension plans.
Historically low interest rates have led many of Ontario's defined-benefit pension plans, both public and private, to seek temporary relief measures. As a result of such low rates, Essar Steel Algoma's pension contribution requirements were more than double those made in previous years, according to the company. This combined with a decline in steel prices, increased borrowing costs in the wake of the Ontario Court of Appeal decision in Re Indalex, and one-time operational issues led Essar to seek temporary relief to address near-term liquidity needs.
Essar Steel Algoma CEO Kalyan Ghosh commented, "This temporary relief, in combination with continued cost-cutting, operational improvements, improving industry fundamentals and lower raw material costs will enable Essar Steel Algoma to manage its liquidity through this difficult cycle. In the coming months Essar will meet with its unions, pensioners and other pension stakeholders to explore a medium-term pension funding strategy."