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Essar Steel Algoma to Vacate Arbitration Decision with Cliffs
12/20/2010 - An Arbitration Panel has decided in favor of Cliffs Mining Co. regarding an iron ore pricing dispute between Essar Steel Algoma and Cleveland Cliffs. Essar Steel Algoma intends to file a court application to vacate the award on the basis that the Arbitration Panel exceeded its jurisdiction.
Essar Steel Algoma Inc. announced the decision of an Arbitration Panel in favor of Cliffs Mining Co. regarding an iron ore pricing dispute between Essar Steel Algoma and Cleveland Cliffs. Essar Steel Algoma intends to file a court application to vacate the award on the basis that the Arbitration Panel exceeded its jurisdiction.
Under the award, the company's "true-up payment," representing the difference between amounts invoiced in 2010 to date and estimated amounts due under the award, would be approximately US $120 million. The company had previously reported in its second quarter report that the true-up payment to September 30, 2010, could be as much as US $175 million.
Essar Steel Algoma does not expect to make any true-up payments until the completion of its application to vacate the award.
In the binding decision by the American Arbitration Association, an arbitration panel redefined world prices for blast furnace pellets, a factor used in determining annual price increases or decreases under Cliffs' supply agreement with Essar Steel Algoma. This redefinition currently entitles Cliffs to use an increase in excess of 95% over 2009 prices for seaborne blast furnace pellets in the supply agreement's pricing formula.
With the final award, Cliffs anticipates collecting a cash payment in the near term from Essar Steel Algoma for the portion of revenue from 2010 pellet sales that were disputed in the arbitration.
