Thank you very much.
Good morning, and thank you for the opportunity to appear before you to discuss the impacts of tariffs on Canadian businesses, companies and workers, in particular Canada's steel and aluminium industry.
Let me begin by speaking to the responsibilities of my department.
Innovation, Science and Economic Development Canada is the lead department responsible for analysis and policy development regarding Canada's manufacturing industries, including the steel and aluminum sectors. This includes focusing on innovation and competitiveness.
Let me speak for a moment to the significance of the steel and aluminium sectors in Canada. Combined, the steel and aluminium industries employ approximately 33,000 Canadians, while contributing almost $9 billion to Canada's GDP in 2017. There are 10 steel-making firms in Canada operating 16 mills in five provinces. There are three large aluminium producers operating smelters in Quebec and British Columbia.
Canada is currently the 17th-largest crude steel producer in the world, and the third-largest primary aluminium producer. In 2017, Canada produced an estimated 13.7 million tonnes of crude steel and 3.2 million tonnes of primary aluminium.
Steel and aluminum are major inputs for industries such as energy and construction. They are also vital for many manufacturing sectors, including automotive, aerospace, metal fabrication, and machinery and equipment.
What this means is that the impact of the current North American trade climate on steel and aluminum goes well beyond the companies and the workers in this industry.
The imposition of the section 232 tariffs on Canadian steel and aluminium from June 1 has had a number of impacts. There has been a significant increase in steel and aluminium prices globally, but also in North America.
The benchmark monthly steel price in North America has reached heights not seen previously since 2008. Since the beginning of the year, the benchmark price for U.S. Midwest hot-rolled coil has increased from $729 U.S. per tonne in January to a peak of over $1,000 U.S. per tonne in July. From that high, the benchmark has fallen to $956 U.S. per tonne. This is in contrast to 2017 and 2016, when the average monthly price was $680 U.S. and $571 U.S. per tonne, respectively.
In aggregate, from 2018, the average annual monthly price is $927 U.S. per tonne.
On aluminium, the pricing trend is similar to steel. The global price of aluminium has increased from roughly $2,000 per tonne in January 2018 to $2,718 per tonne in the middle of April 2017, but we are now beginning to experience a decline.
In the months following the imposition of U.S. tariffs, the all-in price of aluminium has surged by more than 40%. There is no doubt that the price increases are a result of the ongoing trade action. To a certain extent, high steel prices and aluminium prices have helped mitigate the impact for primary producers.
The complete story, however, is that these firms are also incurring significant costs in certain circumstances as a result of the tariffs. For instance, electricity, a key input for steel producers, has seen price increases that further weaken cost competitiveness.
Innovation, Science and Economic Development Canada is cognizant of the pressure that increased prices could place on supply chains and downstream users of steel and aluminum, and the department is closely monitoring the impact. Higher steel and aluminum prices increase costs for many users, but there are many factors to consider, including supply contracts, volume consumed and the contribution to the overall cost of a product.
To this end, we have been in regular contact with automotive, aerospace and other manufacturing stakeholders regarding the U.S. deal on aluminium tariffs. ISED has been active as have other departments in advising companies of programs in place to assist industry.
One of our primary focuses has been informing what was needed to support steel and aluminium. The government's package announced in late June included $2 billion for the steel and aluminium sectors delivered by the departments and agencies appearing before the committee today, and at the next meeting. This includes $800 million from the BDC, $900 million from Export Development Canada, $250 million from our strategic innovation fund managed at ISED, $50 million for the Global Affairs' export diversification program, and $75 million from Employment and Social Development Canada.
Since the announcement of the package, we have worked with firms to help them understand who qualifies for what stream of support with an eye to helping them improve their operations and competitive positions.
With regard to the strategic innovation fund, to date we have received more than $1 billion of submissions that have come into ISED that aim to improve the cost and environmental efficiency of production, as well as improve product offerings where they see a demand today and into the future. We're also mindful that any investments help our producers better serve the domestic market.
Negotiations are going well with companies, and the first announcement is imminent, with others soon to follow. The tariffs are also impacting our efforts to resolve the overcapacity problem globally.
As a member of the G20 global forum for steel excess capacity, Canada is collaborating with other countries to focus attention on the countries that subsidize steel and ship it to destinations around the world in a way that disrupts those economies whose producers operate on market-based principles. These negotiations have not gotten any easier since the unilateral actions of the United States.
Since its inception Canada has consistently advocated for governments to be transparent in their provision of support for steel capacity, and Canada is a voice for measures that will alleviate this problem. We have to be absolutely transparent in our information as a means to our advocating that others do as we do. It was two weeks ago that Canada participated in a ministerial meeting of the global forum on steel excess capacity, held in Paris, where all of member countries agreed to take further measures to address steel capacity. Canada remains committed to demonstrating leadership in this important multilateral effort to address an issue that is detrimental to the financial health and stability of Canada's steel sector.
Finally, the government has thoroughly engaged with the steel and aluminum industry and other impacted stakeholders throughout this ordeal, and has initiated a number of responses measured to alleviate any negative impacts. Early in the year the government introduced regulatory changes to Canada's trade remedy regime to address transshipment and circumvention. For example, the Canada Border Service Agency has been provided with greater flexibility in addressing price distortions and an injection of new funding for new investigators, and it is now able to engage with a new type of investigation to address suspected circumventions of duties.
Such regulatory amendments have aimed to strengthen our ability to address unfairly traded imports that enter the Canadian marketplace. On top of this, the Department of Finance has initiated a safeguards consultation in August, and any measures that arise from this would stabilize markets in response to import surges. The government has also been closely monitoring trade patterns through regular trade monitoring committees on steel and aluminum, with the steel trades surveillance committee having met this week—and it has been meeting very regularly since the tariffs were put in place, with full industry participation.
We will continue to work with the steel and aluminium industry on the impacts of U.S. trade measures and in delivering the support they need.
We look forward to your questions.
Thank you.