Finance Committee on June 12th, 2019

[Kim Rudd, Liberal, Northumberland—Peterborough South, ON]

Great. Thank you for your patience—I know it's not easy to be outside the room and listening to this without being able to see us all.

I'm going to ask you a question around SMEs' options—or optionality, maybe—to apply for exceptions and relief, within tariffs imposed over this past period of time. I know that in my riding of Northumberland—Peterborough South, I had one particular SME whose only product used in manufacturing was available only in the United States. He was able to go through that process and obtain that relief.

Can you talk a bit about whether or not you think that's an important tool within this process, especially for SMEs?

[Chad Bunch]

Yes. I guess from our perspective we're a small player in that scheme. Processes like that are unfortunately cost prohibitive. We would have to hire somebody to go through that process. We're kind of a smaller player. To be able to get an exemption, you would have to basically go about reading the laws, reading the process and then putting somebody forward to actually to do it, just to even be aware of it. I don't know that this processes would work for smaller players like ourselves. They might work for some of the mid-sized and up—you know, the bigger players type of thing.

It's certainly welcome to see that there is some relief out there. If there were a quick way of being able to get relief, we would certainly take it.

I know there was a comment earlier about the uncertainty. From our perspective, the biggest thing is the volatility. If we knew what it cost and could be certain about the cost, that would help a lot in planning because at least we could price it in and know that it's certain.

[Kim Rudd, Liberal, Northumberland—Peterborough South, ON]

Well, if it gives you any comfort, Chad, the SME in my riding that was able to get the exemption has 17 employees.

[Chad Bunch]

That does help.

[Kim Rudd, Liberal, Northumberland—Peterborough South, ON]

The process, in fact, was streamlined to respond to exactly your comment. You've just highlighted for us that we need to do a better job of letting SMEs and other folks who rightly.... I can certainly see how the assumption is that it's an intimidating process. I'm not saying it's a walk in the park, but it is accessible, so thank you for that. That's good information to have.

I want to talk about the jobs, the 23,000 direct jobs and 100,000 indirect jobs that are related to the steel producers.

We talked about the breadth of the country and where those jobs are. I guess it's also about the opportunity for those companies and those jobs to grow. We talk about numbers as they are static right now, but this is a global opportunity in terms of market, and our ability to access that global market has the potential to grow those businesses. Do you have a sense of what the industry is feeling about how Bill C-101 is impacting their plans or thought processes, not just about being able to hold on but actually being able to access more international markets?

[Ken Neumann]

I can answer that.

On the jobs situation, as I said earlier, I think that a lot of the employers were very concerned in regards to what was coming down the pipe. You know, the deal finally came together fairly quickly. It was kind of a thing where all of a sudden we got up, and within hours we got the thing to come together. As I said earlier, there are companies here that also have to have some assurances that the industry is going to be protected if they are going to invest and expand.

From the labour side, where we represent workers and their various communities, I always say that at one time we had the luxury of decisions of investment or training, whatever the circumstances were, whether they were made in the Soo, made in Regina or made in Quebec.

In the decisions for investment money today, we're competing with some big multinational corporations that are stationed around the world, so to us it's prevalent. The fact is that we want to assure, working with our partners, that they are going to have a fair system that's going to give them opportunity to operate. That's why it's very important that we have a government that says it has our backs.

One of the things that may not have been said here is that if you look at the production of Canadian steel in 2012, we were at 16.6 million tonnes. I think the figure in 2016 or 2017 is down to 13.3 tonnes, so we have lost over three million tonnes of capacity.

You heard me say earlier that you have the new Stelco that is prepared to come back online. If you recall, we had the fiasco with United States Steel coming and not being good neighbours or good employers and basically creating a lot of difficulty.

There should be that opportunity to bring it back, but we're now dealing with foreign ownership. The fact is that if you don't give them any assurances that they can operate without having the things that just recently passed, it's going to be much tougher for us and the communities.

[Catherine Cobden]

I would love to add to that. Thank you very much.

It's very nice to see you again, as well.

The first point I wanted to make was—maybe officially, because I've been doing this almost every day since 232 was resolved and lifted...but perhaps I should do that here at this committee—to express, on behalf of the Canadian Steel Producers, our gratitude and sense of relief of the 232 being lifted.

Why that's relevant to the question is, of course, because it gives us access again, without tariff, to our largest trading partner. There's a first big step.

To put it into context, we have two really important markets. About half of what we produce goes to the U.S. and half is for Canada. We've not solved—because we know there's lots of work to be done around the 232 agreement too—but we got some free trade back with the U.S.

In the Canadian market sense, that's what Bill C-101 addresses. It gives you the tool to act if that domestic market becomes destabilized by foreign imports pouring in. It's sort of a simple...we've done some great stuff together here, but we cannot forget here because it's 50% of our market. To add to Ken's point, there are certainly capacity and growth opportunities. We have substantial available capacity. I'll refer to my earlier comment on the growth in B.C. as an example. That was really facilitated by the safeguard.... In most of that period, the provisional safeguard was in place.

[The Chair, Liberal, Wayne Easter]

Okay. I thank you all.

We'll go to Mr. Allison. We are on five-minute rounds.

[Dean Allison, Conservative, Niagara West, ON]

Thank you very much, Mr. Chair.

Mr. Bunch, I know you talked about uncertainty and flexibility and all those great words. Given the fact that you're a fabricator out there in western Canada, are you concerned about safeguards? Those have been, I think, some of the issues that we heard. I did round tables last summer and I was out west. I talked to over 150 individuals. This includes small businesses, stakeholders and chambers of commerce. We were talking about steel and aluminum tariffs in general. I wasn't talking about safeguards then.

What's your thought process on safeguards and any concerns that you may have?

[Chad Bunch]

I'm strongly in favour of supporting Canadian industry and Canadian business wherever possible. I agree with everyone on that front.

On the other fronts, we want to make sure we have price certainty wherever possible. Given the talk of tariffs, it seems to have an upward pressure on price. If somebody mentions a 25% tariff, it seems that—instantly—the price goes up 25% regardless. That's just trade and things like that. From my perspective, when I hear the word “tariff”, it does scare me a lot. It seems that the minute it's mentioned, the price goes up. We always worry about trying to find ways to keep our prices a little bit more consistent, and that's kind of what we looked at. When I say “volatility”.... It's not so much the uncertainty, it's the volatility. The price goes up, the price goes down. From a small business perspective, it would be nice to have something more consistent that you could hang your hat on.

[Dean Allison, Conservative, Niagara West, ON]

That was the one thing I heard everywhere I went. It was that piece. How do you give a price for 30 or 60 days when the price of steel was changing almost daily?

Where do you get your steel from? Does it come from the western U.S.?

[Chad Bunch]

Typically we would go to the distributor and they would source the steel wherever they could find it. Of course, they're probably going to go to Canadian suppliers. They're also going to source it overseas. I think that, anecdotally, quite a bit of it is coming from Korea and those sorts of places. We do get some from the U.S. A good portion of it comes from Canada, wherever possible.

[Dean Allison, Conservative, Niagara West, ON]

Okay. Have you seen—I'm assuming but I don't want to put words in your mouth—some price stability since tariffs were lifted from the U.S.?

[Chad Bunch]

Yes. It's certainly improved since that announcement was made. I think our prices have stabilized this year. Of course, a year ago, that's where they saw quite a significant jump. The other thing is that the availability seems to be back. Back in the fall, we were having a hard time sourcing things like wide flange beams. We'd get an order and all of a sudden we'd need to start tomorrow. We'd pick up the phone and they would not have it. You needed to somehow figure out how you're going to start a job. We were delayed by a month on a job that they wanted to get going tomorrow, just because it took us a little bit of time to source that material.

[Dean Allison, Conservative, Niagara West, ON]

As I talked, even, to manufacturers in my area of southwestern Ontario—in the Hamilton area, for example—that was always their concern as well. They were just trying to figure out and source....This was a huge period of uncertainty, the last year.

Now that things have stabilized—you mentioned we did lose some colleagues or some businesses as a result of what happened with tariffs—do you see that you've got some more predictability as you move forward? What I heard was that people couldn't plan. Forget about a year out or two years out, they couldn't plan for six months.

[Chad Bunch]

Yes.

From our perspective, we've made sure that the minute they start talking tariffs.... We go through every contract to make sure that's covered through the contract, so we would just flow that through, whenever possible. That de-risks it at this point. Then that would flow through, of course, to our end-users, so they would have to take that into consideration.

With regard to the price volatility, now that the price is where it is, there doesn't seem to be a huge swing for the type of stuff we're doing.

[Dean Allison, Conservative, Niagara West, ON]

That's really good to hear.

Wayne, I have a minute, but I'll do it in the next round.

[The Chair, Liberal, Wayne Easter]

Mr. McLeod.

[Michael McLeod, Liberal, Northwest Territories, NT]

Thank you, Mr. Chair.

Thank you to the presenters here today.

I don't have any steel producers in my riding, so the issue of steel and the production of steel is really something I'm quickly learning about. I'm glad that we're all on the same page on this bill, because it makes it easier for me.

My questions are probably going to be fairly basic for you. As you were doing your presentations, I had a million questions in my head. As you will see, on certain things I will ask why, or what does that mean?

This is for anyone here who wants to talk about it. A couple of people talked about overcapacity and mentioned that it was a real threat, and somebody said there was a “global overcapacity”. What does that mean? Can you tell me, in terms that I can understand, what that really means and why it is such a threat?

[Catherine Cobden]

It means that there are 540 million—which is a very large number when you think that we're a 13-million-tonne market in Canada— tonnes of steel more than the market. So that's overcapacity, or that has the ability to produce overcapacity. That's 36 times our market size.

[Michael McLeod, Liberal, Northwest Territories, NT]

Where is all that ending up?

[Catherine Cobden]

That's the point. It used to be distributed, and it used to be flowing in, at reasonable levels, to different places all over the world, but as other countries—I described a number of them, but there's a much longer list—have taken measures to manage imports coming into their country, that has put more pressure on countries, such as Canada, that haven't. That's where the threat comes in.

[Michael McLeod, Liberal, Northwest Territories, NT]

Could you tell me whether the problem is that the demand for steel has gone down or that the production has gone up so significantly?

[Catherine Cobden]

It's China.

[Michael McLeod, Liberal, Northwest Territories, NT]

Why isn't there a balance of supply and demand?