Steelmaker's woes slow economy. (Sault Ste. Marie).

For the second time in a decade, Algoma Steel Inc., the Sault's largest employer is under court-appointed receivership.

As the company's top executives sweated out the details last month in finalizing a restructuring plan to keep the mills rolling, the city's business owners and community leaders were painting an optimistic picture on the debt-laden steelmaker's future, while collectively holding their breath.

"Everybody's employing extreme caution about doing anything as to investing, building or developing or expanding their business, just because of the time it's taken since April to come up with a solution," admits Gary Dumanshi, the Sault's chamber of commerce president. "But no doubt it's slowed down the economic development pace in this city."

Though national and local media have played up the doomsday scenario of what might happen should the restructuring deal fall through and the steelmaker fold, Dumanski has confidence in Algoma's long-term sustainability that something positive will emerge. But as to what a downsized plant will look like is anybody's guess, he says.

Dumanski says Algoma was more vulnerable during its last restructuring crisis of the early 1990s, but this time their ace-in-the-hole lies in their state-of-the-art Direct Strip Production Complex (DSPC) rolling mill.

"Let's face it, they've got one of the most modern continuous rolling mills in North America. They spent $750 million building it, and it's running at full capacity. They're selling all the steel they can make even in the current economy, and if it weren't for the debt load and doing some of the asset improvement they would like, it's a viable mill.

"They've got an asset there that is the envy of the steel industry, and that's what's keeping all the players positive, and is what will make it work."

Published reports last month suggested 800 jobs at Algoma may be eliminated from the plant's 3,900 workforce through early retirement as part of a cost-cutting package, or the restructuring could fail. Like bad medicine, it is doubtful anyone outside of the creditors will like the restructuring plan, but it may deliver some new opportunities.

"It may be a smaller Algoma (Steel), but the outsourcing requirements may be higher," says Bruce Strapp, president and CEO of the city's economic development corporation (EDC). "That's where you might see a multitude of new businesses being set up by steelworkers or other joint venture opportunities to support Algoma Steel."

After meeting with ASI salespeople for their input into the EDC's industrial marketing strategy, Strapp says Algoma is receptive to new products, realizing they may not be able to sell steel to their traditional marketplaces anymore. A big opportunity may be in value-added steel such as galvanized products and the city is beating the bushes to find complimentary firms to possibly partner with Algoma.

"If the restructuring is successful, ASI will be the third lowest steel producer in North America and people will have confidence in the marketplace for business to invest in the Sault," Strapp says. "Once this is put to bed hopefully we'll have an Algoma Steel that will be here for a long time."

Some local contractors and suppliers like Soo Foundry and Machine Ltd., a machine and fabrication shop reliant on the plant for many years, have cut back their workforce and repositioned themselves to look elsewhere for work.

"We've had to look outside of Algoma a bit more and have been somewhat successful," says owner Robert Cohen, whose 30-employee firm, cut back by 15 per cent, performs work Canada-wide and in the U.S. for the steel, wood fibre and hydroelectricity sectors.

"But Algoma's problem is shared by everybody," Cohen says. "The economy as a rule is flat, and Algoma is just one company within the whole industry that's having problems."

Cohen says that was illustrated in mid-October when the Pennsylvania-based Bethlehem Steel Corp. became the latest victim of cheap imports, skyrocketing costs and a depressed economy by filing for Chapter 11 bankruptcy protection, the 26th steel company to do so since 1998.

Very few steel producers are making money, and still fewer have re-invested in new capital projects within the last decade as Algoma has, says Cohen. Cohen's company took part in the DSPC mill's construction in the late 1990s and does general repair work for them.

"Algoma has done a lot of re-investing, but part of their problem is they just were caught up in this terrible market," says Cohen, who also owns Trader's Metal Recycling, a steel warehousing operating and hydraulics shop.

Once the restructuring deal comes out, Cohen says "it will give people the confidence to go out and buy equipment and expand their facilities,"

But like every other business in town, "we're watching our plans very closely."

If local consumers are reigning in their spending, it has yet to filter down to Robyn Thompson, owner of Life's A Stitch, a Queen Street business that sells sewing machines and sportswear fabrics.

"Initially it was really bad," says Thompson, referring to last April when news of the Algoma heading into receivership first broke and ASI pensioners were on edge. "I knew people who were well off, but were afraid to spend. Now things have gotten back to normal."

Generally, she says, it has not been a bad year. "The summer is usually slow for sewing, but this year I had an amazing July which I still don't understand why. Very strange."

Thompson says once the initial shock wore off, the prevailing attitude around town was that the mill has been counted out many times before in its 100-year history, but always seems to rebound. She does not expect Christmas sales will, drop off even after Algorna's restructuring plan is made public, since most customers do not appear to be postponing buying any big-ticket items.

"You know, I've got a sewing machine here that sells for $6,300, and when they first came out three years ago I thought I wouldn't sell one in the Sault. I have sold so many of these you wouldn't believe, and I have people on a waiting list to get them."

Sault Mayor John Rowswell says the hard lessons repeatedly taught about the cyclical nature of the steel industry over the years only underscores the city's need to pursue their aggressive economic diversification plans.

The city pulled together a group of community stakeholders and leaders earlier in the year to form a growth mandate steering community and complete an industrial land study.

"We didn't think Algoma would slide the way it has towards restructuring, but now we're ahead of the-game and we have to prepare ourselves for growth."

The city is also awaiting approval of the last bit of a three-year, $1-mil4ion international industrial marketing strategy. The money is earmarked to hire a project manager and sector specialists in targeting about 1,200 North American companies.

"This is not just a go-spend-money (initiative) and advertise the city," says Rowswell, who is intent on assembling a team of "hound dogs" to court and chase down business in the areas of value-added steel and forestry with the intention of matching up local companies with out-of-town opportunities.