Steel mill expects big insurance payout from January pipe collapse

Algoma Steel Group Inc. said Wednesday it expects to receive an initial insurance payment of $25 million by Sept. 30 for property damage sustained in January's piping collapse.

"We continue to work closely with our insurance providers and adjusters as they complete their assessments," Rajat Marwah, the steelmaker's chief financial officer and chief risk officer, said during a conference call with institutional investors.

"While claims of this nature require a detailed adjudication process, we've made progress on the property damage component and expect to receive an advance payment of $25 million in the current quarter as we work through the balance of both the business interruption and property damage claim," Marwah said.

The company has previously said its hot metal production was reduced by about 150,000 tons after the Jan. 20 structural collapse at its coke-making facility and an unplanned three-week blast furnace outage that ensued.

In June, it estimated the combined impact of lower revenues and higher costs would be in the range of C$120 million to C$130 million, driven largely by lost shipment volume restricted by lower blast furnace production.

The $25-million advance payment Algoma expects to receive will be four times larger than the $6.1 million in first-quarter net income reported by the company yesterday.