Algoma Steel CEO says 50% tariffs threaten viability in the U.S.
An Algoma Steel worker in Sault Ste. Marie. The company’s CEO says Donald Trump’s tariffs on steel are threatening U.S. business viability.Sean Kilpatrick/The Canadian Press
Algoma Steel Group Inc. ASTL-T chief executive Michael Garcia says 50-per-cent tariffs on Canadian steel imports could make the company’s U.S. business unviable.
U.S. President Donald Trump on Friday said he intends to double tariffs on steel and aluminum to 50 per cent from 25 per cent, effective on Wednesday.
His original tariffs, which were put in place in March, were framed around the need to protect the country’s national security. Mr. Trump says the higher tariffs are now necessary to eliminate any threat of foreign steel making its way into the U.S. market. They apply to all its imports of the metals, not just those from Canada.
The existing U.S. tariff has already caused considerable damage to Algoma. The percentage of its revenue coming from the U.S. has fallen to 50 per cent from as high as 65 per cent. A doubling of the tariff may ground its U.S. business to a halt entirely, Mr. Garcia said in an interview on Monday.
“Unless the price of steel rises to the 2020-2021 levels, paying a 50-per-cent tariff would be commercially unviable,” he said.
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The price of U.S. Midwest domestic hot-rolled coil steel futures traded around US$900 a tonne on Monday. Mr. Garcia says a doubling of the steel price will be necessary to keep it in business in the U.S., if Mr. Trump forges ahead with his 50-per-cent tariff. The steel price hit almost US$2,000 a tonne in September, 2021.
“Our focus and our job is to get through the current environment for as long as we need to, and preserve liquidity,” Mr. Garcia added.
Algoma, based in Sault Ste. Marie, Ont., is Canada’s only independent steelmaker. In the Northern Ontario border city, Algoma employs around 2,750 people. Among the liquidity-saving measures the company has already rolled out are job cuts.
Bill Slater, president of United Steelworkers Local 2724, said the company recently informed the union that 35 job cuts are coming. Nineteen of those will be longer-term layoffs (greater than eight weeks), and they will take effect on July 21. The rest will be a mix of retirements and short-term contract workers whose contracts are ending early.
Mr. Slater said that while the 25-per-cent tariffs are clearly making Algoma less competitive in the U.S., market dynamics at home are even tougher. That’s because foreign steelmakers are making deep inroads into Canada since they are being increasingly shut out of the U.S.
“All these other countries are dumping steel into Canada and that has reduced prices in Canada too much,” Mr. Slater said.
“We’re even losing more money in Canada than we are in the States.”
U.S. steel and aluminum prices spiked on Monday while shares of foreign steelmakers slumped after U.S. President Donald Trump said he would double tariffs on imports of the two metals to 50 per cent.
Reuters
Investigations into allegations of dumping in the steel industry are carried out by Canada Border Services Agency. If dumping has occurred, the Canadian International Trade Tribunal determines whether it has caused material injury to the industry, or threatens to do so. CBSA can then ultimately impose anti-dumping duties against offenders.
Canada has already taken action against China owing to its long record of dumping steel into the domestic market.
Ottawa late last year imposed 25-per-cent tariffs against China, after a similar crackdown made by then-U.S. president Joe Biden. But Algoma’s CEO has been clear that dumping into Canada goes far beyond Chinese steel mills. Earlier this year, he told The Globe and Mail that producers from South Korea, Malaysia, India, Vietnam, the Middle East and Turkey are also selling into the Canadian market at cutthroat levels.
Despite the massive uncertainty caused by the tariff dislocation in both the U.S. and Canadian steel markets, Mr. Garcia is hopeful that talks between Canada and the U.S. will lead to a breakthrough in trade and an eventual resetting of the relationship.
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He even expressed optimism the steel producer over the longer term can emerge in a stronger position because of the increased focus on buying Canadian, the push to diversify Canada’s trade beyond the U.S. and the rollout of its new electric arc furnace technology, which should drive its costs down.
Federal Industry Minister Mélanie Joly said on Sunday that the government is committed to using Canadian steel and aluminum in major infrastructure projects, particularly in the defence sector.
“Whether it’s infrastructure or energy projects or defence projects, I think the market potential for the domestic steel industry is actually pretty bright for Canada,” Mr. Garcia said. “Algoma has the wherewithal to make it through.”
Shares in Algoma fell by 6.9 per cent on Monday on the Toronto Stock Exchange to close at $6.76 apiece.