Algoma CEO says Canada not doing enough to support steel sector during trade war

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Algoma Steel Group Inc. ASTL-T chief executive Rajat Marwah says Canada needs to do more to help the steel sector survive a trade war that has decimated its legacy U.S.-dependent business model.

U.S. President Donald Trump early last year imposed 25-per-cent tariffs on U.S. imports of Canadian steel, and then he doubled the levy to 50 per cent by mid-year. That essentially closed off the U.S. market for steelmakers such as Algoma which previously relied on the U.S. for about 60 per cent of its revenue.

Speaking at The Globe and Mail’s Intersect conference in Toronto on Wednesday, Mr. Marwah said while governments have been “quite active in listening and responding,” more is needed.

Last year, the federal and provincial governments rolled out multiple initiatives to help the steel industry, including providing hundreds of millions in direct funding, cracking down on the dumping of foreign steel into Canada, and mandating that publicly funded projects use Canadian steel wherever possible.

“That’s not enough as we see it right now,” Mr. Marwah said. “More action needs to be taken, ensuring that ‘Buy Canada’ really sticks, and the policies are really implemented, stopping steel coming from offshore which is unfairly traded.”

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Last September, Sault Ste. Marie, Ont.-based Algoma secured $500-million in low-interest federal and provincial loans with the aim to provide it with substantial liquidity to weather a prolonged trade war. Despite the aid, its losses have continued to balloon. The company reported a loss of $364.7-million in the fourth quarter of last year.

Algoma has been trying to win more business in Canada, particularly in the plate market where it has a big advantage because it is the only domestic plate producer in the country.

While Algoma is competing to win more public contracts, particularly in the defence sector, Mr. Marwah said he has concerns that Canada is not moving fast enough to award those contracts.

“How quickly are we making decisions on procurement, and can we do that sooner to allow the companies who are coming up with ideas to see it into fruition?” he said. “Or it goes into the bureaucracy, the circle where it takes months and months and years.”

Speaking at the same conference, Eliot Pence, founder and CEO of defence startup Dominion Dynamics, echoed those comments, saying that while Prime Minister Mark Carney has shown leadership in his efforts to bolster Canada’s military might, translating that into procurement contracts for companies hasn’t been straightforward, at least compared to the pace in countries such as Israel, Ukraine and the U.S.

“It’s question of how do you get the bureaucracy and the civil servants to push frankly at the pace of the threat,” he said. “What you see in the U.S. is an urgency that I haven’t quite seen here.”

Mr. Carney in March said that Canada over the next decade will unleash half a trillion dollars in defence investment in applications including submarines, military jets, drones, sensors and radar systems.

Canada was under pressure to increase its defence spending to meet NATO’s 2 per cent of gross domestic product benchmark, a level that this country had long failed to meet.

Algoma is in the running to supply metal for a major submarine contract to be awarded by the federal government. If South Korea’s Hanwha Ocean wins the Canadian Patrol Submarine Project, it plans to source some of its steel from Canada. Hanwha and Algoma in January signed a binding memorandum of understanding worth up to US$250-million, under which the South Korean shipbuilder said it would contribute US$200-million towards the development of a structural steel beam mill in Sault Ste. Marie, and potentially purchase as much as US$50-million in steel products from Algoma.

Both are contingent on Hanwha winning the submarine contact. Germany’s ThyssenKrupp Marine Systems is also vying for the business.