Evidence of meeting #122 for International Trade in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was cost.
A recording is available from Parliament.
12:30 p.m.
Conservative
Randy Hoback Conservative Prince Albert, SK
This is starting to look like the softwood lumber situation where this could go on and on and on. What does your business look like a year from now if nothing changes?
12:30 p.m.
Executive Vice-President and Chief Operating Officer, Welded Tube of Canada Corp.
It's going to be very poor. Fortunately, in the first five months before the tariffs were invoked, this was actually a very good year for our company. As soon as the tariffs went in, basically we saw a 25% and 38% reduction. Our profitability has been impacted since the tariffs have gone in.
12:30 p.m.
Director, Global Sourcing, Boart Longyear
Compared to our competitors, our product is a premium product. We try to differentiate ourselves based on the technology and the capability of our products. But the level of raw material increases and tariff impacts that we've tried to pass on to our customers has not been accepted. We've seen our sales drop by 50% since tariffs were imposed. That's not sustainable for us in the long term.
12:35 p.m.
Conservative
12:35 p.m.
Director, Global Sourcing, Boart Longyear
We've already adjusted production. We went from three shifts to two shifts, and we're moving down to one shift and scheduling idle weeks.
12:35 p.m.
Vice-President and General Counsel, Boart Longyear
Sir, I would just mention that we don't have other locations that manufacture these same products, so we don't have a choice to move this elsewhere to deal with the impact of the tariffs.
12:35 p.m.
President, ASW Steel Inc.
In 2017, ASW sold 90% of its products into the United States, so our cost has gone up 25%. Since the tariffs came into play—actually in January of this year—we saw some activity and we were concerned, so we started to move towards a product line that we could sell in Canada, which helped mitigate some of this problem. The reality is that come June 1, our business dropped by two-thirds, on that day. Anything we shipped into the United States we've attempted to get the customer to pay for. In some cases they had to pay and suffer the same pains that our colleagues here are suffering. The reality is that it's not sustainable. A year from now this situation will be such that the American investment company we're dealing with will probably not be that interested in the business.
12:35 p.m.
Liberal
The Chair Liberal Mark Eyking
We're going to move over to the Liberals.
Welcome, Mr. Badawey, the member from Niagara Centre. Go ahead, sir. You have four minutes.
12:35 p.m.
Liberal
Vance Badawey Liberal Niagara Centre, ON
Thank you, Mr. Chairman. I appreciate the attendance of the witnesses today.
I have a quick question for Mr. Clutterbuck with respect to where you've been—Atlas Steel was once a prominent plant in Welland, employing a lot of people, hundreds of people if not thousands—and how you then evolved into ASW.
The second point is about recognizing the stresses now being placed on the employees of the area, some being former Atlas workers, and what position they're finding themselves in now. Of course, moving forward, what is your strategy?
Third, you mentioned this earlier, but could you delve a bit deeper into the regional economic conditions? Niagara has taken a hit quite dramatically throughout the last decade. How are you trying to, for lack of a better word, make a return to a better economic environment throughout the region?
Finally, how is ASW somewhat of an anomaly when it comes to the overall steel and aluminum sector?
12:35 p.m.
President, ASW Steel Inc.
I will try to remember all that. Thank you for the questions.
To start, my history with the company—the business, the facility we're at right now—dates back to 1980. I started there as a graduate, and it was a company that employed 1,600 people at the time. It was making steel products for the whole world. As a matter of fact, it made products for Boart Longyear. It was an important part of our product mix.
The evolution of the business was to foreign ownership, and eventually in 2003, under the ownership of a Canadian company, Slater Steel, it went out of business. I left in 2000 when Slater acquired the business. In 2010 I returned to a business that had basically only a melt facility. Those 1,600 people had dwindled to 700 by the time it was shuttered in 2003. When I returned, it was under private equity interest in an effort to restart this business. There were 33 employees and their sole purpose was to maintain some skill set to possibly, some day, restart this business and to keep it from blowing up in the meantime. Old steel mills don't settle well.
In the course of 2010 through 2012, we proved that it was viable and capable of restarting. In 2012, in the first quarter, we hired 70 people to come back and actually operate the facility. We grew from zero dollars in sales and zero tonnes and no market share to $100 million in 2017. In the course of it, it was on the backs of people. There weren't a bunch of manuals out there for us to figure out how to make this stuff work again. We had to get back into stainless steel, pouring ingots, making the caster work that had been totally dismantled. It was the people of Welland and the employees' entrepreneurial spirit, as much as anything, that made it successful. Their skills we underestimated. Some of these people hadn't finished high school, but they could write a thesis on melting stainless steel.
The reality is that people are everything to this business. They're the ones being hurt most by these actions. It's unfortunate. As a matter of fact, this week we're down. We had run fairly steady from 2014 through 2018 Q1. In the second quarter and the latter part of Q1, we basically went down to part-time. Last week we worked three days. This week we're down totally. We've been down a week each of the last three months. It if were not for a project for Bruce Power, we likely would have been on even shorter time.
It's been a challenge. As we look to that situation, we say, “People are suffering. What are we going to do?” We've taken a very proactive approach to finding Canadian solutions. We've talked to everybody, I think, who will listen to me here in Ottawa as well as in Toronto—the ministries of transportation and the like. We're looking for alternatives to try to make a better business, and make a business in Canada.
What I see is—and it will be good for everybody, I suppose, if the tariffs go away.... I say “I suppose” because what replaces the tariffs could be quotas. What concerns me about quotas is that for businesses like ours, which have grown from nothing to something, tariffs are done over years of history. Their history is not a relevant representation of our supply into the United States, so therefore tariffs will be limiting to our growth. If they limit the growth of new companies, who's going to invest in Canada? I struggle with the concept of who will invest in Canada. I think we're hearing the same thing from our colleagues on the panel today. Who is going to invest in this country if we have trouble getting materials back and forth across the border?
I suggested to you in the notes that I provided electronically that if there's a way we can settle this so that all of North America can continue to have investment in all the countries—Canada, Mexico, and the United States.... If you're an entity—and all three of these gentlemen represent entities that are North American—why can't we trade fairly? There's nothing unfair about the prices I provide in the United States.
In the last 12 months, I've been the vice-president of operations for five facilities in the United States while being the president of ASW Steel. During the course of that, our competitor in the United States—Union Electric Steel in Pittsburgh, Pennsylvania—has been offering us steel at exactly the same price I'm providing it for down there. There's nothing dumped about Canadian steel. There are lots of things dumped about imported steel from around the world. The safeguard measures are very appropriate, I think. However, they do not positively impact ASW at all. The reason is that there are seven product codes. We don't fit into those seven product codes. There are some people who will benefit, but you know, we've seen, again, very mature businesses, very mature supply chains. These safeguard measures are based on quotas, above which there are tariffs.
Those quotas have been established with years of supply and very mature supply chains, which means that they are going to have very high thresholds, and the period was taken right up until September of 2018. Unfortunately, that means that the strongest period in the steel cycle over the last seven years will be two-thirds of the period studied for the quotas set under the safeguard measures.
All of that together suggests to me that we still have a little bit of a challenge for people to do business. I don't see the price of steel in Canada rising as greatly as perhaps some say it might. I don't believe that the Canadian steel market will greatly benefit from a number of things, but I do have great comfort that the government is listening, and every time I have come here and I have talked to ISED about how they are dealing with these tariffs, quotas and remission orders, they have been very receptive to protecting Canadian companies, so I'm happy with that.
12:40 p.m.
Liberal
The Chair Liberal Mark Eyking
You are way over time but, Mr. Clutterbuck, your comments are very important, and I think we had to listen to them.
We'll go to the NDP, Ms. Ramsay, for four minutes.
12:40 p.m.
NDP
Tracey Ramsey NDP Essex, ON
I appreciate your comments, Mr. Clutterbuck. In my life before being an MP, I worked in a steel and aluminum foundry, so I know how well-skilled those workers are.
You have given us a lot to think about today. I think at the core of it are the jobs that you're working hard to protect. I've heard you, Mr. Young, and I think it's really important that we care about the impact on both sides of the border, because we know how highly integrated this sector is. The thought that there is no impact on the U.S. is false, and we know that, so it's good to hear the perspective that Americans are losing jobs too because of the imposition of these tariffs.
With the situation we currently find ourselves in, many of you have talked about employees and the situations you've had to use, basically having down weeks and reducing employees. I want to ask you specifically about the programs that are being offered by ESDC, whether you have accessed those at all, and what those look like to you as employers.
12:40 p.m.
Director, Global Sourcing, Boart Longyear
For Boart Longyear, we understand that the benefit is for employees who are displaced, so it's not a benefit that flows through our company. It's a service provided to those employees once they are displaced. That's how we understand it, and if we let people go, we communicate that to them.
12:45 p.m.
NDP
Tracey Ramsey NDP Essex, ON
So during those down weeks, there is no support given to them other than receiving EI?
12:45 p.m.
President, ASW Steel Inc.
Before the down weeks for us, we give notice that allows them to apply for EI. Unfortunately, most of these people make too much money to have a real benefit from the program. At the end, it will be clawed back.
12:45 p.m.
NDP
Tracey Ramsey NDP Essex, ON
The other thing we know is that, unfortunately, the tariffs that are being collected are being kept with all of our general revenues. They are not being kept in a separate pool of money.
Early in October we had a report that $11,000 is all that has been paid out to businesses to support them on the ground right now. We heard from several of you that you are in process of applying for these funds and, potentially, that you will receive them.
What we're trying to understand, too, is how that is working on the ground, if you can describe that process to us, how long it's taking and where you are at in those processes. Ultimately, what is the impact of that uncertainty regarding whether or not you will be approved?
12:45 p.m.
Vice-President and General Counsel, Boart Longyear
I can talk to the impact. The mining industry is coming out of one of the longest downturns we've had in a while. Boart Longyear, in particular, has had some financial difficulties as a result of this downturn. Every dollar that we have to spend elsewhere is a dollar that we can't reinvest in our business to help make our business healthier, so this is having a dramatic impact on us. We saw that the market was starting to improve at the start of the year. It was looking as though we were finally starting to make our way back, but as soon as those tariffs hit, we were right back to where we were in 2016 numbers, which was not a very good year for us. It has had a dramatic impact on our business as a whole.
12:45 p.m.
Executive Vice-President and Chief Operating Officer, Welded Tube of Canada Corp.
Well, we are working basically with a three-stage process. Number one is the duty relief. That was first, to stop paying duty to the Canadian government. Number two is then get the money back from the Canadian government. The U.S. government money is gone. We're not getting that back; we know that.
In terms of the programs, I've heard the $11,000 as well. It's mostly for what I understand is to be training, which really doesn't provide us any value at all.
12:45 p.m.
NDP
Tracey Ramsey NDP Essex, ON
Are you in the middle of that process now of applying for the duty drawback or applying for the relief? What does that look like? How much time is it from the time you file to someone coming to you along that path? That's what we're trying to determine, the effectiveness of those programs.