Good afternoon.
I want to thank the committee for inviting Essar Steel Algoma to appear before you to discuss an important aspect of our industry and the company.
We are a fully integrated, advanced steel manufacturer. We manufacture steel from start to finish at our steelworks in Sault Ste. Marie, Ontario. We make a significant contribution to the Canadian economy. We can and do compete on the global stage every day. The Canadian government can help Algoma and the broader steel industry remain successful and competitive by ensuring a free and fair domestic market.
Algoma adds value through production of sheet and plate products. We have proven capability in over 400 different grades of steel, many of which were not available as recently as 10 or 20 years ago. Our steel is used in countless sectors; our sheet and plate product is used in the energy sector to make casing, line pipe, and pressure vessels; our plates help railcar manufacturers meet new requirements for the safe transport of oil and gas; and our high-strength sheet is used in structural and safety automotive applications.
We employ about 2,800 skilled workers and support a further 10,000 indirect jobs. The average annual compensation for an Algoma employee is $108,000. These are very good, middle-class jobs. We further support over 6,000 pensioners, most of whom live in and around the city of Soo. Our annual payroll sits at around $300 million, and we spend a further $1.2 billion annually on goods and services, of which $120 million is spent with over 600 local suppliers. We are a significant contributor to Canadian GDP and an important part of the supply chain for industrial clusters such as automotive, oil and gas, mining, and renewable energy.
Algoma is competitive and supports customers across North America. We thrive in a free and fair market. On this basis, we can compete with any steel manufacturer in the world. Algoma ranks in the top quartile in North America as one of the lowest-cost integrated steel producers. Our capacity utilization rate approaches over 90%, well above the industry average, which is currently at 70% to 75%. We have the widest plate mill in North America and the only heat-treated plate facility in Canada, which differentiates us in the market and enables us to produce specialty steels such as armour plate, wind tower, and shipbuilding grade steels. Algoma is competitive while being environmentally responsible. We have achieved a 17% reduction in greenhouse gases since 1993 while increasing production by over 20% over that same period. This equates to over a 55% drop in CO2 intensity. Our carbon footprint is one of the lowest in the industry, in part thanks to the clean energy supplied by the Ontario grid in combination with our cogeneration facility that recycles by-product gas into steam and power.
You can help.
There are, however, impediments to Algoma’s success. Overcapacity is a pervasive problem in the global steel industry. Global excess capacity is now virtually over 700 million tonnes, with China representing over 60% to 70% of the surplus. This problem has been raised at different forums including the OECD as the leading economic problem facing the steel industry.
The steel industry in China does not operate on the basis of profit optimization but rather on employment maximization. In other words Chinese steel is government subsidized, produced at artificially low prices, and sold abroad, often below true cost, to support Chinese jobs. When it arrives in Canada it is at the expense of Canadian jobs.
Low-priced foreign steel displaces domestic steel production in countries like Canada and drives down prices below market value. Massive capacity rationalization is necessary to address this problem. However, we recognize the Canadian government can’t force the capacity rationalization that is needed in China. It can, however, stop Canada from being a steel dumping ground.
The Canadian government can continue to treat China as a non-market economy, which appropriately reflects the way Chinese steelmakers do business.
The Canadian government can strengthen Canada's trade laws by implementing the proposal put forward by the Canadian Steel Producers Association.
Finally, the Canadian government can ensure that trade rules are strictly and proactively enforced.