EDC to Prime Minister: Steel Industry in Crisis

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All stakeholders have a role to play in enabling Canada’s steel industry to be sustainable and globally competitive. The Federal Government is no exception. That’s the message of a letter sent yesterday to Prime Minister Justin Trudeau from the Sault Ste. Marie Economic Development Corporation (SSMEDC). The letter supports the recent recommendations of Canada’s steelmakers and highlights three areas that the government should consider to help the industry rebound:

  • Implement a pro-manufacturing agenda;
  • Establish “Buy Canadian” procurement policies; and
  • Modify Canada’s trade remedy process.

“We’re at a critical stage right now. The coming months will determine the future of the Canadian steel industry,” said SSMEDC President Don Mitchell, who authored the letter. “The steel sector directly employs roughly 20,000 people across the country, along with tens of thousands more indirectly, and contributes between $12 billion and $14 billion to the national GDP annually. At this time, senior levels of government need to ask themselves: Do they want Canada to continue to have – and benefit from – a sustainable and globally-competitive steel industry?”

“Our priority and focus is a reinvigorated, integrated steel producer in Sault Ste. Marie – one that can fairly and freely compete on a global basis,” added Mitchell. “In this regard, we support the request from Essar Steel Algoma to the Federal Government to make changes in policies, programs and regulations that will help the country attract and keep investment in Canada, thereby strengthening the national steel industry and helping secure the economic sustainability of Sault Ste. Marie.”

Regarding a pro-manufacturing agenda, the SSMEDC endorses Canada’s Advanced Manufacturing Fund and encourages the government’s continued support for capital-intensive projects in large and mid-sized manufacturing businesses, thereby enabling them to be competitive. The SSMEDC also supports incentives for process improvements and environmental controls to help make the case for investment in Canada in relation to other jurisdictions.

For government procurement policies, the SSMEDC is encouraging Ottawa to use its $125 billion in infrastructure spending to support the nation’s steel industry by promoting a “Buy Canadian” strategy. Canadian steelmakers face competition from imports for government procurement projects while, at the same time, encounter restrictions when they look to participate in projects in other jurisdictions.

Under its third recommendation to the Government of Canada, the SSMEDC is calling for a trade remedy modernization plan that supports free – but fair – trade. The overall goal is to help ensure a level playing field between Canadian and foreign steelmakers.

Sault Ste. Marie is home to Essar Steel Algoma, Canada’s second-largest steelmaker. With an annual production of 2.5 million tons, the company is ranked among the top quartile of low-cost steel producers in North America. It directly employs 2,700 people and supports 6,400 pensioners. The firm, which has been in operation for well over 100 years, has an estimated annual payroll of more than $360 million, contributes $1.236 billion to the country’s gross domestic product and is a significant contributor of tax revenue to all levels of government.

“Essar Steel Algoma is one of the lowest-cost integrated steel producers in North America, yet it cannot reasonably compete with international competitors who are not constrained by the same labour and environmental costs,” said Mitchell. “According to industry analysts, the production of foreign steel has an average carbon footprint more than six times greater than Canadian-produced steel. In many cases, these firms are state-owned or publically subsidized. The reforms detailed in the trade remedy modernization proposals put forth by the Canadian Steel Producers Association enable Canada to more quickly and effectively respond to these situations and are fully supported by the United Steelworkers union.”

In November 2015, Essar Steel Algoma sought protection under the Companies’ Creditors Arrangement Act. A similar restructuring is taking place at U.S. Steel Canada in Hamilton. Sault Ste. Marie is also home to Tenaris Algoma Tubes, which manufactures seamless steel pipe for the oil and gas, energy, and mechanical industries. Employing some 700 workers in 2015, the company underwent mass layoffs and is currently running with a small crew of maintenance staff.

“Time is of the essence in dealing effectively with this crisis,” said Mitchell. “The future of Sault Ste. Marie, and the general well-being of the Canadian economy, is at stake. We all have a role to play. Immediate support and action by Ottawa is necessary at this critical stage. As such, we anticipate a supportive response from the Federal Government and look forward to working together to strengthen the economy of Canada and Sault Ste. Marie for many years to come.”

The SSMEDC’s letter to Prime Minister Justin Trudeau is available online on the organization’s website at www.sault-canada.com.