Is Stelco's new owner laying the groundwork for a return to steelmaking at the former Hilton Works?

Six years after U.S. Steel Canada shut down the blast furnace on the bay, and only six months after emerging from bankruptcy protection, the plant is abuzz in anticipation of a steel manufacturing renaissance and the return of hundreds of new jobs.

A new report — from the authority that has been keeping track of developments relating to Stelco's court-supervised creditor protection — says Stelco has decided to stabilize rather than demolish some key components of its steelmaking infrastructure: three basic oxygen furnaces (BOF) that were idled along with the blast furnace.

In 2010, the blast furnace was hot-idled by then owner U.S. Steel Canada, with a lockout of 900 workers in a pension dispute. A few years later, the company took the further critical step of cooling down the furnace, a process that causes enormous damage and would lead to tens of millions of dollars in startup costs to bring it back on stream.

The elimination of the blast furnace and BOF facilities left the company in Hamilton as basically a coke-making, cold mill and finishing operation. Actual steelmaking was left to the company's Lake Erie works.

Stelco's new owners Bedrock Industries will not discuss their plans. For one thing, as a company that has publicly-traded shares, Stelco has limitations on public disclosure.

But the report from the Ernst and Young "Monitor" — that chronicles developments with the company — says the BOF stacks were slated for demolition because they were a safety hazard.

Stelco officials asked to take a closer look at the facilities, outside property currently leased by Stelco, and asked permission of the court to stabilize the facilities instead. That request was granted and is significant because the facilities would be of no use other than making steel.

In a July interview with The Spectator before Stelco had its Initial Public Offering, the chair of Bedrock, Alan Kestenbaum said his venture capital firm plans to invest more than $250 million over the next five years.

"We expect to invest heavily in Stelco because the returns are there," he said, although he did not specifically name steelmaking in Hamilton as a priority.

But University of Toronto steel expert Peter Warrian said, "If they are looking at the BOF operation, that is really interesting.

"The BOFs have to be fed from a blast furnace. So what are the blast furnace plans?"

The Monitor report doesn't say.

BOFs process hot metal from a blast furnace — made from coke and iron ore — and the resulting steel is of a higher grade than steel made from recycled steel in electric arc furnaces, he said.

Warrian notes the company wants to win back lost contracts in the auto sector and it needs higher grade steel to do that.

Hamilton East-Stoney Creek MPP Paul Miller, who worked at the Stelco plant for 32 years before going to Queen's Park in 2007, says, "At this point it sounds positive. If they are talking about restarting steelmaking operations in Hamilton, that would lead to hundreds of jobs.

"I'm hearing the blast furnace is not in as bad shape as they thought. They actually ran electricity to it a few weeks ago and they had a positive response. I don't think it will cost as much as they projected to start it up again."

However, McMaster University business professor Marvin Ryder says people should not make too much of the decision by Stelco to stabilize its basic oxygen furnaces.

"Stabilizing the stacks buys them some time ... if it costs them a million dollars to keep an option open, it is not really all that much money in the scheme of things.

"To spend a relatively small amount of money to buy you some time while you decide on what direction to go, is a good gamble."

United Steelworkers Local 1005 president Gary Howe would not discuss the company's steelmaking aspirations but he did acknowledge the announcement about stabilizing the BOF facilities is being interpreted by workers as a hopeful sign of future job growth at the plant.

A resumption of steelmaking could also lead to higher municipal taxes, a subject of great controversy after the Municipal Property Assessment Corp. recently revalued 375 acres of vacant Stelco land from $108,000 to $100 an acre — leaving the city short $2 million in expected tax revenue and homeowners facing a 2018 tax hike.

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