Quebec Aluminum Industry Seeks Federal Help Amid Disruptive Tariffs
U.S. President Donald Trump’s move last month to double import tariffs on aluminum to 50 per cent is shaking up trade patterns and causing financial pain for Canadian players as one of the country’s major commodity and manufacturing industries looks to the federal government for help.
Canada exported $14-billion worth of aluminum produced and processed in the country last year and 94 per cent of that went to the United States, according to Statistics Canada. Now, more than half the country’s output of raw aluminum is going to Europe as producers search for a more profitable outlet for their metal, according to the latest information from the Aluminum Association of Canada.
“They’re probably making a profit, but not much” selling into Europe, the trade group’s president, Jean Simard, said in an interview this week. “The margins are very, very tight. … The question on everybody’s mind is, how long is this going to last?”
Six months after Mr. Trump took office and pushed ahead with a wave of protectionist trade policies and tariffs, makers of primary aluminum and aluminum products are putting capital spending plans on hold and closely managing their cash flows. Some smaller businesses are cutting output and staff.
Industry representatives are turning to Ottawa for help, conscious that a tentative Aug. 1 negotiation deadline for a new economic and security deal with the U.S. might not deliver the resolution they’re seeking. Beyond trade, they’re concerned about having enough skilled labour and want Ottawa to rethink its changes to the temporary foreign worker program.
On Wednesday, Ontario-based Algoma Steel said it is in talks with the federal government and hopes to secure between $400-million and $600-million in loans to help keep it afloat over the medium term.
Remac is one of the companies getting pinched. The maker of aluminum telecom towers, docks and other structural products based in Chicoutimi, Que., has stopped selling into the U.S. completely, throwing into limbo a significant network of contacts built up over several years.
“If I’m competing against galvanized steel made in the U.S. and I’m coming in with Canadian aluminum, I’m still in the game with a 25-per-cent levy but not at 50 per cent,” said Remac founder and chief executive officer André Poulin, adding that this is the biggest crisis he’s faced in 39 years of business. “The problem here is we have no visibility on what’s coming next.”
Canada is the world’s fourth-biggest aluminum producer, generating an annual output of 3.3 million tons of primary aluminum and supporting 9,500 direct jobs. Mining giants Alcoa Corp., Rio Tinto, and Aluminerie Alouette operate 9 plants in Canada, 8 of them in Quebec.
There are also thousands of companies shaping aluminum intocomponents or finished products in Canada, including 1,700 in Quebec alone. They’re cranking out a myriad of things with the malleable metal, from ambulance doors to highway sign structures.
Alcoa’s CEO told The Globe and Mail this week that he’s trying to convince the Trump administration to give Canada a carve-out exemption on aluminum import tariffs, stressing that the United States and Canada are highly interconnected on supply of the metal. The multinational company is considering pulling back on investment in Canada as the profitability of its plants has declined, he said.
Mr. Simard said talks between his trade group and federal officials are continuing and that they centre on monetary assistance for investment projects above all.
Spokespeople for Rio Tinto and Alouette declined to comment.
Producers of raw aluminum do not typically shut down their smelters, even during financial storms, because restarting them is a lengthy and costly process. Instead, they keep churning out metal and send it to market, sometimes at a loss.
But aluminum products manufacturers face more conventional pressures and several of them in Quebec have already been forced to curtail production and reduce their factory employees’ work hours as their wares become less competitive. They’re looking for government to provide liquidity support through flexible loans or other mechanisms – a request Ottawa has pledged to meet.
“If this tariff situation doesn’t change, it’s really by the end of the year that we’ll see more companies make cuts to their work force,” said Charlotte Laramée, president of AluQuébec, a lobby group representing aluminum product makers. “They’re gasping for air right now.”
Ms. Laramée’s group is working with other partners to bolster the prospects of those manufacturers by fine-tuning their capabilities and expanding their traditional markets beyond the United States to places like Canada’s other provinces. “The problem is that everyone is now doing that,” she said. “And our market isn’t that big.”
Companies also face challenges that aren’t tariff-related.
Several aluminum product manufacturers in the Montreal area use temporary foreign workers to reinforce their labour. Ottawa’s sharp tightening of the temporary foreign worker program last fall has irked the leaders of those businesses and others.
Ottawa announced last August that companies could no longer employ more than 10 per cent of its work force through the program. Under the changes, which took effect at the end of September, companies in high-unemployment areas can no longer hire low-wage temporary foreign workers at all, except in certain high-priority sectors such as construction and health care.
“We’re holding our own in the new tariff environment,” said Gabriel Borduas, president of Beloeil, Que.-based Cyrell AMP, a maker of architectural panels for building exteriors, whose projects include Toronto’s Pinnacle One Yonge. “But that is actually my biggest worry if we lose those workers.”
Mr. Simard said Canada’s primary aluminum producers are doing their utmost to preserve their ties to the U.S. market and their American customers.
“This is a multi-decades old relationship that took a lot of investment on both sides of the border,” he said. “You don’t let that go.”
This article was first reported by The Globe and Mail
