International Trade Committee on Nov. 3rd, 2016

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Okay. Thank you.

In your opinion, where does dumping happen, how does it happen, and from which countries? Is it because raw materials have run out in Canada or because products have already been processed? Where do those products mostly come from? How and by which route do they get into the country?

[Michèle Govier]

They are generally primary products, like flat-rolled steel sheets, steel strips, as we call them. These are primary products that are then transformed into other products. That is what happens most of the time. We have measures in place for those products. They come from a number of countries. We have a lot of measures in place with China, of course, but also with other countries like Japan and Korea. Those are the countries that are most often subject to those measures.

I think that there is a list of our imports. I do not know whether there is a list of imports that are considered dumping. That is a little different.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

So it is often about primary material that is not processed. I have heard that we are sent door handles that are then processed into something else. Is that true?

[Michèle Govier]

Processing door handles?

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

We are sent already-processed ones and we process them again.

You have not heard of that?

[Patrick Hum]

That is really a global value chain issue. More and more, the trend is to manufactured products. We certainly have companies that process and use steel products.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

But I have heard that these handles, which have already been processed overseas, are processed again here. Basically, it is a way of getting around dumping duty. We are being sent steel in a different form. It is not the primary material; they have already been processed and we process them again here. So there are people in Canada trying to cheat the system.

[Michèle Govier]

Yes.

I think that goes back a little to your colleague’s question, about how people get around customs tariffs. I am not familiar with the example you used, but it does happen that products undergo minimal processing in some countries so that they can come here without customs duties. We recognize the problem. As I said, I do not know whether it happens very often, but we have had examples in the past.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

I have another question.

In the big picture of climate change and reducing greenhouse gases, can we put regulations in place that would ensure that we are using less polluting steel? Is there something that we can do?

[Patrick Hum]

Certainly, we have had conversations with different departments about different policies that can be put in place or are possible. I believe the department for procurement services, PSPC, is looking into those issues as well as infrastructure.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Do you think that it could be done quite quickly and easily?

[Patrick Hum]

These are difficult questions that I know the two departments are looking at very closely.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

It affects a lot of jobs. Seventeen thousand jobs, actually.

[Paul Halucha]

I'll just add to that. In the case of—

[The Vice-Chair, Conservative, Randy Hoback]

Very quickly, please. She's already over her five minutes.

[Paul Halucha]

In the case of procurement, most of the procurement decisions are on infrastructure. The decisions around procurement are made often at the provincial level, so that's where those kinds of decisions would need to get made.

[Linda Lapointe, Liberal, Rivière-des-Mille-Îles, QC]

Thank you very much.

[The Vice-Chair, Conservative, Randy Hoback]

Let's try this again, Mr. Diotte.

Kerry, you have the floor for five minutes.

[Kerry Diotte, Conservative, Edmonton Griesbach, AB]

Yes, as I was saying, I grew up in Sault Ste. Marie, so I'm fairly familiar with the industry. My father was a steelworker for 35 years, and I worked there for a summer at Algoma, as it was called then.

Right off the top, the huge elephant in the room is that both major manufacturers are bankrupt. What is going to happen to them? A lot of these arguments might be rather academic. I think the Soo has been bailed out six or seven times now. Overall, is there a future for Canadian steel?

[Paul Halucha]

In terms of the two bankruptcy situations, we've been following them very carefully. I think the positive signs in each instance are that there is an investor who is looking at structuring a deal to restructure the business and have a viable business at the other end of the CCAA process. I think that's an extremely positive sign.

We've talked a lot about the dumping issue today, and the other challenge the industry has been facing is the fact that a lot of it was buoyed by high energy prices for a number of years. It's obviously an extremely important market for them, and that market has been impacted. Also, of course, in 2008-09, we all saw what happened to automobile sales, and that was another really important marketplace for steel.

The demand for cars now is actually as strong as it's been in a very long time. We've all seen the very good news that's been happening in Canada around investments from automobile companies. I find myself saying that if the price of oil were to go up a bit more, that would be very positive as well for that industry in allowing some of the exploration that draws very heavily on steel to take root as well. I think there are many positive signs on the horizon for the industry.

I would note as well that while we obviously have two major players that have been facing difficulties around financial restructuring, there's a third large player in Hamilton, in ArcelorMittal. They're all actually quite good mills, and they have very strong assets. I had the opportunity to tour the Stelco assets in Hamilton about two weeks ago. You walk through those lines, and they aren't the steel mills that we see on television, as you well know, or the ones that we grew up with. I also grew up in the Soo, so I remember what the steel mills looked like in the 1980s. These are highly advanced manufacturing processes. A lot of investments have been made. There are a lot of good assets there that will serve the industry very well as there is improvement.

I think ArcelorMittal has done an absolutely tremendous job by diversifying in the marketplace in a way that's allowed them to produce high-quality steel that's very targeted at certain markets. They've managed to do extremely well throughout this period, partly because they are so diversified in the types of products they're producing.

[Kerry Diotte, Conservative, Edmonton Griesbach, AB]

We all know that electrical costs in Ontario are going through the roof. How much has that hurt the two steel mills, the major players anyway, in Ontario? Do we have any percentages? Is that really crippling them?

[Patrick Hum]

Steel mills definitely use electricity. The question is really where the source is and how much they pay. There are some business confidentiality issues around talking about it, so I don't think we can get into too many details, but certainly, the price of electricity is an important factor. The industry has mentioned that a number of times as one of the key issues facing their competitiveness.

[Kerry Diotte, Conservative, Edmonton Griesbach, AB]

Is there any suggested solution? They're obviously probably having as many challenges as individual householders are, probably more so, just in looking at percentages. How would that allow them to compete with Chinese steel? Those energy costs are obviously much cheaper.

[Patrick Hum]

I don't want to overstate the role of electricity prices. Obviously, it's important to them, but it's probably not the key factor that's going to make them more competitive or super-competitive versus other countries. Again, the arrangement they have is also quite unique. Different mills have different arrangements. Some have cogeneration capacity, for instance, which does make a huge difference, does affect their costs, and can add to their competitiveness.

[The Vice-Chair, Conservative, Randy Hoback]

Thank you, Mr. Diotte.

We're going to move on to the Liberal Party.

Ms. Ludwig, you have five minutes.