Good morning.
Our thanks to the committee for giving us the opportunity to express our views on these issues, which are crucial for our company.
Since 1942, the Groupe LAR has specialized in the design, manufacture and installation of very large-scale welded fabrications. Our main clients are in the hydroelectric, aluminum and mining sectors. The Groupe LAR serves all Canadian provinces and occasionally does work abroad. We have three plants in Quebec and one in British Columbia. Our head office, where more than 250 people are employed, is located in Métabetchouan, in Saguenay—Lac Saint-Jean, Quebec. We buy most of our steel in Canada and that steel is the raw material in the manufacture of our products. The steel is normally bought in the form of plate.
The price of steel has held between $0.40 and $0.60 per pound for a long time, both in Canada and abroad. Now, the price in Canada is over $1, whereas it is about $0.60-$0.70 on the world market. The Canadian market is therefore out of balance with the world market.
After the American president’s announcement of a 25% surtax on Canadian steel, American clients began to buy as much Canadian steel as possible before the surtax came into effect. At the same time, Canadian steel suppliers rushed to increase the price of their steel, and, because of the rare circumstances caused by the massive purchases by American clients and various other reasons, the price now hovers around $1.
As of now, it is very difficult to obtain steel from Canadian suppliers because their stocks are low and because of the per-pound price which is now moving past $1. In addition, for the majority of our clients, clauses adjusting the price of steel are not allowed.
Groupe LAR needs steel in order to fulfill our contracts, but there are insufficient stocks in Canada. In our recent tendering process, all Canadian steel mills, except one, replied that they had run out of inventory and they did not even bid. The only one to do so asked for a price above $1, with delivery in at least seven months, where normally it’s a few weeks.
The financial risks for companies in the industrial sector will increase greatly if the price of steel becomes more volatile. Financial products to cover this kind of risk—options and futures contracts—are underdeveloped in this sector. The market does not willingly accept price adjustment clauses. Both could become major concerns in the future.
If the price of Canadian steel remains out of line and if our government imposes tariffs in order to protect it, Canadian manufacturers will have to pay so much that it will be very difficult for them to remain competitive globally, wherever the steel comes from. It is important to keep in mind that large companies do business with the lowest bidder, whether from China, America, Canada or anywhere else. So some Canadian suppliers could end up considering moving their production to other countries in order to remain competitive.
All this raises two questions. First, will finished steel products coming into Canada from our foreign competitors also be taxed to take into account the new tariffs that protect the price of Canadian steel?
Second, will refund programs be flexible enough to allow Canadian suppliers to remain competitive on the world market?
In summary, we believe that imposing tariffs on imports would be appropriate if the price of Canadian steel were competitive, but that is not the case. As Canadian suppliers, we are harmed by the situation and forced to pay too much for our raw material, which means that we can no longer be competitive.
I am now ready to answer your questions.