SSM EDC Writes Prime Minister Trudeau

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All stakeholders have a role to play in enabling Canada’s steel industry to be sustainable and globally competitive. The Federal Government is no exception. That’s the message of a letter sent to Prime Minister Justin Trudeau from the Sault Ste. Marie Economic Development Corporation (SSMEDC). The letter supports the recent recommendations of Canada’s steelmakers and highlights three areas that the government should consider to help the industry rebound:

  • Implement a pro-manufacturing agenda;
  • Establish “Buy Canadian” procurement policies; and
  • Modify Canada’s trade remedy process.

“We’re at a critical stage right now. The coming months will determine the future of the Canadian steel industry,” said SSMEDC President Don Mitchell, who authored the letter. “The steel sector directly employs roughly 20,000 people across the country, along with tens of thousands more indirectly, and contributes between $12 billion and $14 billion to the national GDP annually. At this time, senior levels of government need to ask themselves: Do they want Canada to continue to have – and benefit from – a sustainable and globally-competitive steel industry?”   “Our priority and focus is a reinvigorated, integrated steel producer in Sault Ste. Marie – one that can fairly and freely compete on a global basis,” added Mitchell. “In this regard, we support the request from Essar Steel Algoma to the Federal Government to make changes in policies, programs and regulations that will help the country attract and keep investment in Canada, thereby strengthening the national steel industry and helping secure the economic sustainability of Sault Ste. Marie.”   Regarding a pro-manufacturing agenda, the SSMEDC endorses Canada’s Advanced Manufacturing Fund and encourages the government’s continued support for capital-intensive projects in large and mid-sized manufacturing businesses, thereby enabling them to be competitive. The SSMEDC also supports incentives for process improvements and environmental controls to help make the case for investment in Canada in relation to other jurisdictions.   [dropshadowbox align=”right” effect=”lifted-both” width=”280px” height=”” background_color=”#ffffff” border_width=”1″ border_color=”#dddddd” ]Sault EDC explains ‘Buy Canadian’ – In recent correspondence and communication to various parties and the media regarding the Canadian steel industry, Essar Steel Algoma Inc. and the community’s future, the SSMEDC made reference to promoting a “Buy Canadian” strategy and to establishing “Buy Canadian” procurement policies. For the purposes of clarity, “Buy Canadian” practices in this circumstance means:

  • Ensuring that the federal $125 billion infrastructure programs maximize the benefits to Canadians, Canadian businesses that provide goods and services, and ultimately, the nation’s economy through appropriate gov’t funding agreement terms and conditions, program criteria and related guidelines, while supporting free and fair trade;
  • Recognizing that Canada faces open competition from imports for government procurement projects, Canadian businesses face outright barriers or restrictions when they look to participate in projects in the US and elsewhere. Where reciprocity does not exist and cannot be negotiated, the government is encouraged to exercise their rights in trade agreements to establish Canadian preference policies.

The objective of promoting these practices, policies and strategies, is to insure that Canadians, Canadian businesses and the country’s economy realize the best return on the Federal Government investment in infrastructure. The corporation does not advocate protectionist trade practices. We seek free and fair trade. Creating appropriate opportunities to make the most of Canadian goods and services as part of our national infrastructure program is one way to maximize the federal ROI.[/dropshadowbox] For government procurement policies, the SSMEDC is encouraging Ottawa to use its $125 billion in infrastructure spending to support the nation’s steel industry by promoting a “Buy Canadian” strategy. Canadian steelmakers face competition from imports for government procurement projects while, at the same time, encounter restrictions when they look to participate in projects in other jurisdictions.   Under its third recommendation to the Government of Canada, the SSMEDC is calling for a trade remedy modernization plan that supports free – but fair – trade. The overall goal is to help ensure a level playing field between Canadian and foreign steelmakers.   Sault Ste. Marie is home to Essar Steel Algoma, Canada’s second-largest steelmaker. With an annual production of 2.5 million tons, the company is ranked among the top quartile of low-cost steel producers in North America. It directly employs 2,700 people and supports 6,400 pensioners. The firm, which has been in operation for well over 100 years, has an estimated annual payroll of more than $360 million, contributes $1.236 billion to the country’s gross domestic product and is a significant contributor of tax revenue to all levels of government.   “Essar Steel Algoma is one of the lowest-cost integrated steel producers in North America, yet it cannot reasonably compete with international competitors who are not constrained by the same labour and environmental costs,” said Mitchell. “According to industry analysts, the production of foreign steel has an average carbon footprint more than six times greater than Canadian-produced steel. In many cases, these firms are state-owned or publically subsidized. The reforms detailed in the trade remedy modernization proposals put forth by the Canadian Steel Producers Association enable Canada to more quickly and effectively respond to these situations and are fully supported by the United Steelworkers union.”   In November 2015, Essar Steel Algoma sought protection under the Companies’ Creditors Arrangement Act. A similar restructuring is taking place at U.S. Steel Canada in Hamilton. Sault Ste. Marie is also home to Tenaris Algoma Tubes, which manufactures seamless steel pipe for the oil and gas, energy, and mechanical industries. Employing some 700 workers in 2015, the company underwent mass layoffs and is currently running with a small crew of maintenance staff.   “Time is of the essence in dealing effectively with this crisis,” said Mitchell. “The future of Sault Ste. Marie, and the general well-being of the Canadian economy, is at stake. We all have a role to play. Immediate support and action by Ottawa is necessary at this critical stage. As such, we anticipate a supportive response from the Federal Government and look forward to working together to strengthen the economy of Canada and Sault Ste. Marie for many years to come.” – Read the SSMEDC Letter to Prime Minister Justin Trudeau – View Attachment A: Essar Steel Algoma 2016 Pre-Budget Submission – View Attachment B: Canadian Steel Producers Association Trade Remedy Modernization [divider]

The Right Honourable Justin Trudeau, PC, MP, Prime Minister of Canada Dear Prime Minister, I write to you today, as President and Chair of the Sault Ste. Marie Economic Development Corporation in support of a resolution passed by our Board of Directors. We are a non-profit organization, funded by public and private partners, whose goal is to be the community’s leader in supporting and promoting an environment that generates sustainable employment in a healthy, growing and diversified economy. Our Board consists of volunteer representatives of local businesses and organizations operating in the City. Crisis in the Canadian Steel Industry The crisis in the Canadian steel industry is having serious ramifications for everyone in Sault Ste. Marie and area, as well as having significant strategic and economic implications for Canada. Locally, this crisis only exacerbates the current, extraordinarily poor employment situation in the community – by all measures the worst in 20 years. This industrial crisis extends to communities across the country where approximately 20,000 people are directly employed in the manufacturing of steel. It further extends to communities that are home to value-added manufacturers of products that rely on North American, and in particular, Canadian, steel production. Three quarters of all manufactured goods in North America contain steel. It is a fundamental part of the supply chain for key industrial sectors in the Canadian economy such as automotive, energy, construction and light manufacturing. Two of Canada’s largest steelmakers, including Sault Ste. Marie’s Essar Steel Algoma, are currently operating under the Companies’ Creditors Arrangement Act (CCAA). Another Sault Ste. Marie steel product manufacturer, Tenaris Algoma Tubes, has undertaken massive layoffs in response to dire market conditions. According to industry analysts, steel prices are at a 12 year low, hard-hit by the collapse of world steel demand and a sustained slump in the energy sector. This has prompted a large influx of low-priced steel imports into the Canadian market by international competitors who are not constrained by the same labour and environmental costs. In many cases, these companies are state-owned or subsidized by their governments. Sault Ste. Marie Steel: Part of the Fabric of Canada’s Industrial Manufacturing Base Sault Ste. Marie, with a population of approximately 75,000, is home to Canada’s 2nd largest steelmaker, Essar Steel Algoma Inc.: A 2,500,000 ton/yr. integrated producer of steel sheet and plate products and the only steel plate mill in Ontario;

  • An employer of 2,700 people at the steelworks in Sault Ste. Marie, an operation that has been in existence for over 100 years;
  • Second largest private sector employer in Northern Ontario with 2,700 direct jobs as well as another 4,600 indirect and induced jobs;
  • Largest private-sector employer in Sault Ste. Marie; with an estimated annual payroll of over $360M and contributes $1.236 billion to Ontario’s GDP;
  • A company that supports 6,400 pensioners and their dependents (approx. 80% live within 100 km. radius of the City);
  • A company that spends $1.2 billion annually on goods and services – $120 million of which goes to hundreds of local businesses; and,
  • A significant contributor of tax revenue to Canada, Ontario and Sault Ste. Marie.

In addition to being to one of this country’s largest steel manufacturers, Essar Steel Algoma Inc. is ranked among the top quartile of low cost steel producers in North America. The company has completed substantial improvements to its operations and cost structure over the past several years. Since 2007, Algoma has reduced its operating expenses by 30% and headcount expenses by 25%. Over the same period of time, employee productivity has increased by 21%. Furthermore, in fiscal 2015, Algoma has achieved cost savings of $12 per ton of steel produced.

Sault Ste. Marie Economic Development Corporation Board of Directors Resolution

The SSMEDC’s priority and focus is a reinvigorated, integrated steel producer in Sault Ste. Marie that can fairly and freely compete on a global basis. In this regard, we support Essar Steel Algoma Inc.’s (ESAI) request to the Canadian government to make changes in federal policies, programs and regulations that will help the country attract and keep investment in Canada, thereby strengthening the Canadian steel industry and helping secure the economic sustainability of Sault Ste. Marie.

More specifically, on Monday, February 1, 2016, our Board of Directors unanimously voted in support of the company’s appeal to the Federal Government articulated in its January 14, 2016 submission to Francois-Philippe Champange, Parliamentary Secretary, Minister of Finance, (Attachment A) as part of the federal pre-budget process. By addressing the issues and recommendations, it would benefit Canada, our manufacturing sector, our domestic steel industry, our economy and our community.

We urge you and the Federal Cabinet to seriously consider and take action in the following areas described in the attachment to support this sector and this integral part of our economy:

A Canadian Pro-Manufacturing Agenda

We commend the introduction of the Advanced Manufacturing Fund and encourage ongoing support of this nature for capital-intensive projects in large and mid-size manufacturing businesses.

  • Incentives for process improvements and environmental controls to help make the case for investment in Canada in relation to other jurisdictions; and,
  • Re-consideration of recent changes to the SR&ED program that now excludes investments in close to market innovation, particularly for larger manufacturing companies – thereby helping domestic manufacturers to stay ahead of the curve in highly competitive marketplaces.
  • A strong domestic steel industry:

– is an important partner to attract and retain industrial sectors including manufacturing;

– maintains the technical expertise and skilled workforce required to support the use of advanced steels in manufacturing and infrastructure projects here in Canada;

– directly employs over 20,000 and a further 100,000 Canadians indirectly, and contributes in the range of $12-14 billion to the national GDP annually; and,

– improves Canada’s competitive position in a wide range of industrial sectors, both within Canada and beyond.

Canadian Infrastructure Investment and Procurement Policy/Program Considerations

  • Use the $125 billion infrastructure investment as a means to support the Canadian steel industry by promoting a “Buy Canadian” Strategy as an integral part of this program.Canadian steel faces competition from imports for government procurement projects. At the same time, Canadian steel producers face barriers and restrictions when they look to participate in projects in the US and in other jurisdictions. If there is not a level of reciprocity in place or negotiated with these jurisdictions, we respectfully request Canada to exercise its rights in trade agreements to establish Canadian preference policies.
  • Recognize and take advantage of the full economic multiplier benefit of the $125 billion investment by using Canadian produced steel, goods and other Canadian materials in these infrastructure projects.
  • Recognize and promote the benefits of indigenous Canadian steel production in supporting reduced global greenhouse gas emissions. According to industry analysts, the production of foreign steel has an average carbon footprint more than six times than that of Canadian produced steel. Take into consideration the environmental impact by the transport of steel produced in these jurisdictions and shipped to North America – the carbon footprint is 10 times greater than Canadian steel.

Trade Remedy Modernization

  • Support free but fair trade;
  • Re-examine Canada’s trade remedy system with the objective of maintaining market- based trade as an explicit part of Canada’s international commerce strategy with specific attention to reforms in the areas referenced in Attachment A. These reforms are detailed in the Canadian Steel Producers Association Trade Remedy Modernization proposals in Attachment B and supported by the United Steelworkers (USW) Union

In conclusion, time is of the essence in dealing effectively with the crisis now occurring in Canada’s Steel and manufacturing sectors, plus our community’s economic future. The CCAA restructuring process is underway for two of Canada’s major integrated steel mills. Quick action will not only mitigate the crisis, it will pave the way for strong and immediate return on Canada’s invest with more robust and globally competitive steel manufacturing industry. Our community’s and our steelmaker’s economic health are interdependent. Immediate support and action by the federal government is necessary at this critical stage, both in supporting positive community outcomes from the restructuring process and with federal policies programs and regulations that support the industry. We look forward to your supportive response and working together to strengthen the economy of Canada and Sault Ste. Marie for many, many years to come. Sincerely, Don Mitchell, President and Chair Sault Ste. Marie Economic Development Corporation Cc: Hon. Chrystia Freeland, Minister of International Trade Hon. Navdeep Bains, Minister of Innovation, Science, and Economic Development Hon. Amarjeet Sohi, Minister of Infrastructure and Communities. Hon. Terry Sheehan, MP Sault Ste. Marie Hon. David Orazietti, Ontario Minister of Government Services and MPP Sault Ste. Marie His Worship, Christian Provenzano, Mayor, Sault Ste. Marie & Sault Ste. Marie City Council Monica Dale, President, Sault Ste. Marie Chamber of Commerce Jack Ostroski, Area Coordinator, N.W. Region, USW, Sault Ste. Marie Marty Warren, District 6 Director, USW, Ontario Ken Neumann, National Director, USW Canada Bob Grant, President, SOAR, Chapter 7 Don Barill, President, SOAR, Chapter 17 Prashant Ruia, Director, Essar Group Rewant Ruia, Director, Essar Group. Kalyan Ghosh, CEO, Essar Steel Algoma Inc.

Joseph Galimberti, President, Canadian Steel Producers Association Al Horsman, CAO, City of Sault Ste. Marie Malcolm White, City Clerk Sault Ste. Marie Economic Development Corporation Board of Directors and Staff

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