Industry Committee on Nov. 2nd, 2006

[The Chair, Conservative, James Rajotte]

That's all right.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

Thank you.

Mr. Watkins, did I understand you well when you said that the free trade agreement with South Korea would have no effect on the Canadian steel industry?

[Ron Watkins]

Because we basically don't export into Korea at the steel producer level, I'm saying there obviously wouldn't be a direct impact that way. The indirect consequence would be in, first of all, whether it would improve the trade access for our customers going into Korea. The negative version of that, of course, would be if it made it easier for steel-containing goods from Korea to come into Canada. That would affect our customers, which would indirectly affect our market.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

I think South Korea is a big producer of steel.

[Ron Watkins]

It's a major steel producer, yes.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

Were you consulted in any way by the Canadian government negotiators about their dealings with South Korea at this time?

[Ron Watkins]

It was before my time, but there were discussions several months ago. I wasn't involved in them personally, so I couldn't speak to you as to the nature or extent of those discussions.

[Stephen Sampson]

It would be fair to say, Monsieur Arthur, that we've been kept aware of the status of the negotiations.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

And just as a quick question, in what area of steel production is Canada the absolute best in the world?

[Ron Watkins]

If you spoke to our companies, they'd say many, but I'll certainly give you a couple of primary examples. One is certainly automotive steels. Dofasco and Stelco in particular are very strong.

Secondly, another good example comes with respect to what are called old country tubular goods, which is steel industry jargon for products that are made for the oil and gas exploration and development industries. You have a company like Regina-based IPSCO, for example, which is very strong in this area. In fact, they've developed some new pipeline technologies in that world as well.

But across the board we have a number of other areas of competence. We could send you, for example, a list of the products that are made by each of the steel producers.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

My question was about the absolute best in the world.

[Ron Watkins]

I think I've identified two that I would put there, but our companies are very good at what they do.

[André Arthur, Independent, Portneuf—Jacques-Cartier, QC]

I was not expecting a catalogue as an answer.

Thank you very much, sir.

[The Chair, Conservative, James Rajotte]

Mr. Van Kesteren, you have two minutes.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Thank you for coming, gentlemen.

I want to follow up on that issue of the best in the world. Are you telling us that you're developing niche markets? Is that what's happening in the steel industry?

[Ron Watkins]

I'm not sure I'd call them niche markets in the sense that a lot of industries would. It has more to do with specialized steel product. For example, one of the big developments in the steel industry over the last decade was the development of what is called the ultra-light steel automotive body, the ULSAB project.

Of course, in volume terms, it's not a niche at all. It's a very substantial business, but it's a top-of-the-line kind of product for the automotive industry. There will be other sorts of niches and so on, but actually, generally speaking, you want to be in a high-volume business if you're a capital-intensive industry like steel.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

That seems to be the way the world's going.

[Ron Watkins]

And I think we'll continue to see that specialization.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

Can you see a bright light there? Is this something we can compete in and that we can really...?

[Ron Watkins]

Again, we're firmly convinced that we can compete on a fair basis because of our production systems.

[Dave Van Kesteren, Conservative, Chatham-Kent—Essex, ON]

I'm a little confused. You need coal and you need the ore, and you tell us that the labour really doesn't make that much difference. Why are we having so much trouble competing with the Chinese and the Koreans—more specifically the Chinese—if it's not a labour issue?

[Ron Watkins]

I was reading an interesting article today in which people were talking, and one of the comments from an observer from McKinsey was that China seems to be the only country in the world where their export prices are cheaper than their domestic prices.

There are lots of complications in the system. But clearly if there are these big subsidies, cheap financing, and protected markets, a range of factors have been documented that certainly are of a deep concern to us in that particular environment. But on a fair basis, we're prepared to compete with anybody. We just don't want to compete with governments.

[The Chair, Conservative, James Rajotte]

I'm sorry, Mr. Van Kesteren, but your time is up.

Monsieur Lussier.

[Marcel Lussier, Bloc, Brossard—La Prairie, QC]

You've referred to China but you've also mentioned India and I don't see its level of production in your document. Do you have any figures about the steel production of India? What is the rank of India in the list of major steel producers? Is Bangladesh between the 6th and 15th countries which are not mentioned in the table of your first page?

[Ron Watkins]

If you'll give me half a minute, I will see if I can quickly find it. I have the publication here, with a lot of the data, and I hope I can very quickly find it for you.

On the top steel-producing countries, you were asking about India, which was number seven in 2005.