Steel workers change machine settings at Zekelman Industries' Atlas Tube steel fabrication plant in Harrow, Ont., in April, 2019MARK FELIX/The New York Times News Service
Canada’s steel industry is preparing to cushion the blow from American tariffs that may be imposed this weekend, including potentially moving up shipments into the United States.
U.S. President Donald Trump said after his inauguration that his threat of blanket 25-per-cent tariffs on Canadian goods could begin on Saturday.
Canada’s steel industry is no stranger to facing the wrath of Mr. Trump. During his first term, he imposed 25-per-cent tariffs on imports of Canadian steel and kept them in place for nearly a year.
The tariffs imposed in May, 2018, took a heavy toll on the domestic steel industry: Exports to the U.S. quickly fell by 38 per cent. A year later, the value of Canadian steel exports had fallen to its lowest level in almost a decade.
This time around, steel producers are pro-actively taking measures to minimize the pain. Francois Desmarais, vice-president, trade and industry affairs with the Canadian Steel Producers Association, said companies are moving up shipments into the U.S. in an attempt to book as much revenue as possible ahead of the potential tariffs.
Companies are also looking at pausing new investment, and taking a look at their product mixes to see if something can be adjusted to minimize the possible financial damage. Canadian steel makers produce a wide range of products including blocks, pipes, rebars, coil and billets.
“Just the threat of tariffs creates quite a lot of disruption in our industry,” Mr. Desmarais said.
The domestic steel sector is highly dependent on the U.S., with 99 per cent of Canada’s exports going there. The industry has little option to sell to other countries because a global glut caused by Chinese overproduction means no other countries will buy Canadian steel, Mr. Desmarais said.
Algoma Steel, Cleveland-Cliffs Inc., owner of Stelco, and ArcelorMittal Dofasco did not respond to requests for comment.
Zekelman Industries, the largest independent steel pipe and tube manufacturer in North America, is hoping for the best but is prepared for a hit in the event Mr. Trump moves ahead on tariffs. The privately-held company is the largest buyer of flat rolled steel in North America, with annual sales in excess of US$5-billion. Zekelman Industries has 22 plants in the U.S., but its plant in Canada is one of its biggest.
U.S. tariffs “would create a lot of chaos and service aspects to our customers. It would affect purchases of steel here, within Canada, and it would have effects on our work force,” said Barry Zekelman, the company’s chief executive.
The Globe has reported that the federal Canadian government is planning to counter U.S. tariffs with $37-billion in retaliatory tariffs. Mr. Zekelman said any money raised from those retaliatory tariffs should go right back to the industry
“The dollars can’t go in the government’s hands,” he said. “So if steel producers here and people shipping steel-related products to the US are paying duties, I would like dollar-for-dollar compensation on the duties Canada collects on steel and steel-related products coming in from the U.S.”
But Mr. Zekelman is optimistic that Mr. Trump won’t end up targeting the Canadian steel industry. That’s in large part because the U.S. already wrung significant concessions out of Canada as part of the talks that culminated in the 2019 removal of tariffs by both countries on their steel sectors.
Canada has also mostly been abiding by the terms of the United States-Mexico-Canada Agreement, which includes monitoring for disruptive surges in import volumes in the steel sector.
“Mexico is probably the bigger fish to fry,” Mr. Zekelman said.