Stelco: Canada’s biggest steel producer

Stelco traces its origins back to 1910 when entrepreneur Max Aitken, later Lord Beaverbrook, oversaw the merger of five companies - all involved in steel or iron production – into one large steel company. The Steel Company of Canada Ltd, as it was then known, did well during the First World War and during the 1930s, when tariffs blocked imports. By the early 1970s the company had become the country’s biggest steel maker – operating facilities in Ontario, Quebec and Alberta, and producing about 35% of all Canadian steel. At its peak it employed tens of thousands of workers. It adopted the name Stelco in 1980.

As North America’s steel industry went into decline, Stelco too began to suffer financial losses, reducing its workforce and closing some of its operations. In 1992 Stelco was among several big Ontario employers given government permission to reduce contributions to employee pension funds, part of a provincial policy to cushion companies during the recession of the early 1990s. Entering the 2000s, the company faced growing competition from imported steel. In 2004 it was granted bankruptcy protection and laid off yet another wave of workers, reducing employee benefit plans as well as pension payments for about 13,000 retirees.

Canada vs. US Steel

US Steel buys Stelco: In August 2007, the Pittsburgh-based company U.S. Steel acquired Stelco, paying about $1.1 billion and assuming an additional $800 million in debt. As part of the deal, the American company made 31 undertakings under the Investments Canada Act, including promises to maintain production levels at Canadian facilities and to keep Canadian employment at an average of 3,105 full-time workers.

Recession hits: In the first half of 2009, the World Steel Association reported a 21.3% drop in global output. In March 2009, US Steel cited the recession when it cut back on its Canadian operations, asking concessions of its workforce and putting about 1,500 out of work.

Canada takes US Steel to court: In July 2009 the federal government, represented by Industry minister Tony Clement, took the unprecedented step of launching legal proceedings against US Steel, alleging that the American company had failed to meet commitments made under the ICA. In documents submitted to the court, the Canadian government alleged that only 23% of the Canadian workforce that US Steel has promised to maintain were actively employed, and that the company was transferring raw materials from Canadian operations to its US facilities.

Lakeside makes bid: In August Lakeside, a small Canadian pipemaking company, successfully
sought intervener status in the lawsuit with the stated hope of eventually buying US Steel’s Canadian assets if the court forced the American company to sell.

Union support: Lakeside’s move was supported by the United Steelworkers Union, which represents workers at facilities in Hamilton and Nanticoke. The union accuses US Steel of favouring its American operations, as it responds to the “buy American” provisions of the Obama administration’s economic stimulus package.

US Steel retaliates: US Steel responded to the Canadian lawsuit with a legal challenge of its own - challenging the Investment Canada Act as unconstitutional and a violation of the Charter of Rights and Freedoms, and asking the court to dismiss Canada’s lawsuit.

Out-of-work Steelworkers: As of October, 2009, the case is still before the court. About 900
steelworkers resumed work at the Hamilton operation in July, but are facing possible lay-off once again in November. As of October, about 900 workers are still locked out at the Nanticoke facility after contract talks failed.

Sources:
Reuters, Aug 27, 2009
Report on Business, Oct 10, 2009
Toronto Star, Aug 5, 2009
Monday Business Briefing, Aug 6, 2009
Globe and Mail, Jan 30, 2004
Hamilton Spectator, Nov 11, 2008