The origins of Kestenbaum's grand gamble on the Great Lakes trace back to an unsavory dispute over 40 cents.
While he was still at Globe Specialty Metals, that company acquired a ferro-silicon facility in Bridgeport, Ala., from a New York hedge fund. When Kestenbaum looked into the situation, he was appalled at the way the workers had been treated.
"All around this facility I saw probably the poorest neighborhood I've ever seen in my life. These are $5,000 homes and kids walking around without shoes," he recalls. "And I remember sitting with this hedge fund manager at the plant and he was bragging to me how he knocked 40 cents an hour off the workers, $3.20 a day, for a savings of $100,000 a year."
When the deal closed, the first thing Kestenbaum did was to give workers back the 40 cents an hour.
That move came to the attention of Leo Gerard, international president of the United Steelworkers union, who asked to meet him. "I thought that was pretty unique," Gerard said by phone from Pittsburgh.
A few years later, Gerard suggested Kestenbaum take a look at a Canadian steelmaker languishing in bankruptcy protection. Kestenbaum's interest was piqued. "This is part of the payback for the lousy $100,000 I gave to those workers in Alabama," he says.
A productive labor relationship would be a sea change for Stelco. When it was a subsidiary of Pittsburgh-based U.S. Steel, the company locked out workers three separate times, was sued by the Canadian government for breaking employment promises after the financial crisis and finally shut the Hamilton blast furnace in 2013.
"Hamilton was an Academy Award performance on both sides of how you do bad labor relations," said Peter Warrian, a senior fellow at the University of Toronto's Munk School of Global Affairs who is a former USW research director. "They both heavily invested in rewarding the wrong behavior."
The Kestenbaum era looks like it's off to a better start. He has already secured a five-year agreement with the remaining 1,650 hourly workers, and he's made symbolic changes, such as allowing the union to fly its flag at the plants and inviting workers to a bell-ringing ceremony at the Toronto Stock Exchange.
Forces beyond Kestenbaum's control have also been moving in Stelco's favor. Steel prices have been rising as China, the world's biggest producer, takes steps to reduce output to cut pollution and close illegal and inefficient plants, while prices for key inputs iron ore and metallurgical coal have declined in the past year.
The near-term picture, though, looks less rosy. The unpredictability of the North American Free Trade Agreement talks is a risk for Stelco and its ability to win U.S. contracts. If Stelco gets through that unscathed, the Trump administration may still follow through on threats to slap tariffs on steel imports, or otherwise ramp up Buy American provisions limiting the use of foreign steel.
The company is hinging a good part of its growth on winning contracts in the auto industry, which used to be an important part of its business before U.S. Steel migrated many of those contracts to its U.S. plants. This is where a collapse of NAFTA, which favors North American automakers, could really pose a "unique threat" to Stelco, Warrian said.
U.S. Steel doesn't comment on its commercial relationships or labor relations of other companies, spokeswoman Meghan Cox said in an email.
Stelco will have to offer lower prices to compete with its former parent company and other major players, and that won't be easy without scale, said James May, managing director of Toronto-based price forecaster Steel-Insight. "They're screwed in a downturn," when smaller companies will have to discount their price in order to generate sales, May said.
Kestenbaum says his new company is ready for the worst. On the threat of reduced access to the U.S., he points out he's also looking to boost sales to Mexico and Europe, taking advantage of the company's location on the Great Lakes. And he says he'll be more careful than previous owners in preserving a clean balance sheet.
"You don't take on debt that can only be repaid in optimal market conditions," he says.
Back on the Lake Erie dock, the CEO will soon begin ramping up exports from a port that was primarily built for imports, with a goal of eventually exporting 500,000 to 1 million tons of steel a year to customers around the world.
"We look at ourselves as a global player," Kestenbaum says.