Seamless tube mill back in business: Algoma Tubes plans next step to maintain viability in market. (Sault Ste. Marie).

For 10 years Algoma Steel Inc.'s (ASI) seamless tube mill was labelled a white elephant, a money-losing victim of the boom and bust cycle of the oil and gas exploration industry.

After being mothballed for two years due to a lack of pipe orders, a new operator has breathed fresh life into the Sault Ste. Marie facility under the banner of Algoma Tubes.

As the only seamless tube mill in Canada and one of the few in North America, it is a vital component of the Tenaris Group, a global alliance of pipe and steel producers.

The plant resumed production in November, 2000 after Siderca S.A., an Argentine pipe producer, signed a 20-year lease with ASI.

The Tenaris Group, which Siderca belongs, is a grouping of seamless tube producers, including Damine of Italy, Tamsa of Mexico, Tavsa of Venezuela and NKK Tubes of Japan. Collectively they have an annual manufacturing capacity of 2.5 million tonnes. The Tenaris Group is a global leader and supplier of seamless steel pipe and associated services. About 34 per cent of total worldwide sales of seamless pipe for Oil Country Tubular Goods is by Tenaris.

With 147 employees on the payroll, Algoma Tubes' managing director Jorge Mitre is preaching more flexibility among its workforce while importing the Tenaris Group's collective know-how in pipe-producing to achieve greater efficiencies.

"The steel industry has to be revamped and re-engineered to survive," says Mitre, a native of Campana, Argentina. And that means developing a more profitable market with a greater array of pipe products, addressing trade issues and adding value for customers by way of better service.

Mitre says the mill is gradually meeting his expectations, but Algoma still has a "long way to go" in comparison with a major pipe producer like Siderca, his former employer, which has seen continuous upgrades since the early 1950s.

"I feel comfortable where we are already, but I think we need to do more work," says Mitre, particularly in addressing some inheritant disadvantages to operating in Canada including the cost of energy, gas and labour compared to other countries.

"We need to compensate for that with a more flexible operation to reduce labour costs," Mitre says. They have already made some strides with a three-year collective agreement with the United Steelworkers of America whom he describes as being "very receptive" to their needs. But for pipe producers like Algoma to survive, unionized workers must be moved into different jobs when demand for their product is slow.

Mitre also says Algoma further needs to diversify, expand and customize its specialized product line by moving into high-value goods.

"More than being able to deliver products in the peak of the market, you need to be able to survive the down times. I'm more worried about the next year than this year. That's why I'm trying to develop alternatives and different products...to face the downtimes and survive."

One of Tenaris' affiliates, NKK Tubes in Japan, began trials late last month on 13 Chrome, a high-alloy stainless steel designed for rugged and "sour" conditions in the East Coast offshore exploration. The trials will finetune the process and determine if Algoma Tubes can produce some of it. They would also like to establish a foothold in the auto industry by producing mechanical pipe.

The mill, with production capacity of more than 250,000 tonnes annually, can roll pipe up to seven inches in diametre. The tube rounds are shipped in from Argentina. Whether Algoma Tubes will eventually install their own tube round caster is still under discussion.

But to justify any future investment they are prepared to make in Northern Ontario, Mitre says stringent Canadian trade regulations have to ensure a level playing field in the domestic market given the vast amount of pipe arriving at dump prices from China and Romania.

"It's very difficult to imagine a future where we can compete against these kinds of mills," says Mitre. Almost all of the 87,000 tonnes of pipe Algoma is expected to produce this year heads to Western Canada, 40 per cent share of the domestic market.

"We need to understand there's going to be a fair market and we'll be doing our part to supply the Canadian market."