Algoma Steel Inc. getting help from governments as tariff squeeze continues

Federal and provincial ministers announced financing assistance for new investments at Algoma Steel Inc. in Sault Ste. Marie, Ont., on Thursday, as it emergedfrom three years of bankruptcy protection.

The restructuring of the company Canada's second-largest steel producer took placeunder challenging and uncertain circumstances.

There's no sign of U.S. steel tariffs ending soon, for example, despite what some expected following the signing of the revised North American trade agreement on Nov. 30.

And the Canadian International Trade Tribunal began hearings Mondayin Ottawa to reviewthe case for and against continuing the 'safeguards' additionaltariffs Finance Minister Bill Morneau imposed on seven categories of foreign steel imports,includingsteel plate and hot-rolled steelthat displaces what Algoma manufactures in Northern Ontario.

This latestfunding a total of $90 million from the federal government and $60 millionfrom the Ontario government, all in the form of repayable loans represents a significant share ofthe$300 million capital investment planned to both improve and expand Algoma's operations.

An earlier plan for $60 million in funding from both levels of governmentwasshelved when the company was put under theprotection of the Companies' Creditors Arrangement Act (CCAA) in 2015. That protectionended asdetails of its restructuring wereannounced on Nov. 30.

Only $30 million of the new federal money will comeout of the nearly $2 billion in assistanceannounced for the domestic steel industry last summer, in the face of the Trump administration's 25 per cent tariffs on Canadian imports. The other $60 millioncomes from FedDev Ontario, an agency that normally supports innovation and economic growth in southern Ontario.

More announcements on how the $2 billion in federal funding is beingdistributed across Canada's steel industry are expected.

In October, the federal government announced$49.9 million for ArcelorMittal Canada Inc., fundingseven projects atDofasco'sfacilities in Hamilton and Montreal to help them modernizethrough new equipment and training. That funding, plus$30 million announced Thursdayfor Algoma, adds up to about a third of the $250 million made available fromthe Strategic Innovation Fund that's part ofthe overall federal assistance package for steelmakers.

Algoma 'commercially viable'

Federal Innovation, Science and Economic Development Minister Navdeep Bainsand provincial Energy, Northern Development and Mines and Indigenous Affairs Minister Greg Rickford will make Thursday'sannouncement, alongside Sault Ste. Marie's MP, Terry Sheehan, and the area MPP, Ross Romano.

"There's a belief by our government that Algoma Steel is and will continue to be commercially viable, and in fact, it's commercially viableeven with the tariffs," Rickford said in an interview with CBC News beforethe announcement. "As a commodity we remain concerned that if the price point for steel drops, that will increase the risk."

Government financing, like Algoma'slatestrepayable loans, helps managerisks beyond what private sector financing would tolerate.

But Rickford said the federal government could be doing more to help the industry in the face of U.S. tariffs.

"They've let (tariffs)go on for far too long," the Ontario Progressive Conservative minister said. "In the absence of that tariff, our steel industry would be robust, given the currentdemand and the (high) market price" both of which helped Algoma get out of bankruptcy and made it look like a safe bet again.

New costs imposed by the federal government, like thefederal carbon tax applied after the government of Ontario Premier Doug Ford ended its cap-and-trade scheme for reducing carbon emissions last year, also has a big impact on the competitiveness of a steel mill, Rickfordsaid.

The provincial minister said he'll be pointing this out to Bainswhen he sees him, adding that a carbon tax can berelatively more expensive in Northern Ontariodue to longer transportation distances and greater heating needs.

Algoma continues to be vulnerable: union

"There's a whole lot of improvements that need to be made (at Algoma)," said Mark Rowlinson of the United Steelworkers, which has two union locals at theSault Ste. Marie plant.

"They continue to be vulnerable as a producer, and they sold a lot of products to the United States, so they're quite adversely affected by the tariffs. They're definitely a producer that needs support and needs investment."

Negotiating renewed collective agreements was difficult during Algoma's restructuring, the union representative said, as labour leaders tried to avoid concessionary bargaining.

Rowlinsonsaid he wishesthe federal government had imposed its tariffs on foreign steel faster;Morneaubegan consulting in the summer, but didn't apply Canada's surtaxes on foreign steel until October.

Testimony at the CITT hearings Wednesday saidforeign steel imports rose in the third-quarter of 2018, suggestingforeign steel was displaced from the newly-tariffedU.S. market into Canada before Canada'stariff shield was in place.

Rowlinsonalso said hethinks the federal strategy of lobbying American governors and legislators is yielding few results.

"The only language that a bully (Trump) understands is drawing a line in the sand,"Rowlinsonsaid, adding Canada should have refused to sign the new NAFTA until the tariffs were lifted.

The Steelworkers union is participatingin this week's trade remedy hearings thanks to regulatory changes made by the federalLiberal government last spring part of the government's progressive trade agenda.

Previously, tribunal hearingswere dominated by business perspectives, as opposed to the domestic worker and community concerns the USW articulates. Canada's large steel producers are all foreign-owned, so their interests may not always line up with the national interest, Rowlinsonsaid.

A Steelworkers contingent hasbeen present at the Canadian International Trade Tribunalhearings for the presentation of evidence on steel plate and hot-rolled steel this week, as were representatives from foreign embassies representing the places producing the tariffed foreign steel, such as South Korea.

"There's noindustry more exposed to trade, and unfair trade in particular, than the steel industry," Rowlinson said.While the U.S. continues to skirt establishedinternational trade practices by claiming "national security" as a justification for its steel tariffs, for example"you're going to need to keep those safeguards in place ... for much longer than the 200 day interim period," he said.