Thank you for the invitation to speak to this committee.
Ocean Steel and Construction Ltd. is a structural steel fabricator with its head office in Saint John, New Brunswick. We have fabrication plants in Saint John and Fredericton, New Brunswick. We employ a total of about 200 employees: 70 staff composed of engineers, detailers, estimators and project managers, and 130 hourly tradespeople, such as machine operators, welders, fitters, painters and maintenance personnel.
Ocean Steel started in 1955 and is the oldest member of the Canadian Institute of Steel Construction. We have provided structural steel for projects from Newfoundland to Alberta, and as far south as Texas. We have done projects in the U.S. since the 1960s. The percentage of U.S. work we do in a year can range from zero to 100%.
Fabrication of structural steel involves designing connections for individual components and creating manufacturing drawings using 3-D software to create a virtual building model. This model is then used to generate digital files to operate our CNC equipment—saws, drills, anglemasters, plate burning machines, etc., in our shop. Substantial investment is required for the latest computer-driven equipment available in our industry. For example, the latest plate processor machine we recently installed cost close to $1 million.
Historically, we have sourced the raw material from mills in the United States and Canada. Because of our concerns about quality and delivery of long and flat-rolled steel shapes, we have avoided buying steel from low-cost suppliers such as China, Russia and India.
The Canadian surtaxes on material from the United States are causing us difficulties in a couple of areas.
One area is hollow structural shapes. Some of the larger sections are not available from Canadian mills. Any sizes that have two adjacent sides adding up to 24 inches or more, for example, HSS 14 x 14 or HSS 18 x 6, are not produced by Canadian mills. We need to buy these sizes from the U.S. and therefore pay the Canadian surtax. Paying this surtax is raising the price for our customers and making us less competitive against offshore fabricators.
Another area is plate. There is only one plate mill in Canada: Algoma steel. Because of limitations on plate thickness, grade of steel, weight and size that they have been able to produce, we have sourced the thicker, heavier and longer plate from U.S. mills such as SSAB, Nucor and ArcelorMittal. In the past, Algoma had restrictions of no greater than two and three-quarter inches in thickness and 26,000 pounds in weight for A572 grade 50 plate, and 50W, which is the most popular grade of plate used in our industry.
We often require thicker and heavier plate of this grade for the fabrication of plate girders used for heavy industrial and bridge projects. We understand that Algoma is trying to increase their capacity to produce thicker sizes, more grades and generally higher volumes of production, but to date we do not believe they have achieved this goal.
Before implementation of the 25% tariff, about 60% of the needs of Canadian structural steel fabricators were supplied by rolling mills from the United States. Presently, it is our experience that Algoma is getting more requests for steel plate than they can deliver. As an example, in June of this year, we placed an order with Algoma for delivery in mid-August or sooner. As late as October 2018, our order is still not yet fulfilled. In fact, to meet our committed job schedules, we have been forced to buy replacement plates from other sources as a substitute for our Algoma order, at a considerable price premium considering the surtaxes or surcharges.
Until sufficient capacity is available from Algoma in Canada, as a temporary measure, we would suggest that a quota be established for plate that could be imported from the U.S. without application of any surtaxes. This quota could be adjusted as Algoma increases their production, size and grade capabilities.
For larger commercial and industrial projects in Canada, we sometimes compete against offshore fabricators. Some of these fabricators are dumping fabricated steel into Canada, putting Canadian fabricators such as ourselves at a disadvantage. Now, with the surtaxes, we need to pay on material that we cannot source in Canada, and we are being made even less competitive than we were before.
We were involved in the trade action launched in 2017 and coordinated through the CISC against fabricated steel for industrial projects that were being dumped into Canada. The Canada Border Services Agency and the Canadian International Trade Tribunal found that fabricators from China, South Korea and Spain were dumping fabricated steel, and that the Chinese fabricators were also being subsidized. Anti-dumping and countervailing duties were applied to certain fabricators from those countries.
We agree with and support Canadian countermeasures in principle to protect jobs at Canadian steel mills; however, protecting jobs from unfair trade practices for employees of structural steel fabricators is equally important. For this reason, we were disappointed to learn that the Canadian government has decided to waive the anti-dumping and countervailing duties for China, South Korea and Spain on fabricated steel for the LNG project in B.C. This decision will likely mean the loss of a substantial amount of work for Canadian steel fabricators.
From our industry's perspective, it appears that the government is concerned about protecting the workers at steel mills but not the employees of Canadian fabricators who transform Canadian steel mill products into fabricated components. Without a strong steel-fabricating industry based in Canada, there will be no domestic customers for the Canadian steel mills.
Thank you for this opportunity to raise our concerns at your committee.