Stelco’s exit from galvanized steel leaves big Canadian buyer baffled and in the lurch

Jim Ritchie, owner of British Columbia-based steel distribution company Cascadia Metals Ltd., got a big shock in July. Stelco, his top Canadian supplier of galvanized steel, told him it was shutting down for maintenance, and advised him that if he could find an alternative source for his steel, he should jump ship.

“They just went dark, and we’re like, ‘Guys, you can’t just disappear like this,’” Mr. Ritchie said.

Cascadia recently invested $30-million in a plant expansion in Brandon that was specifically set up to buy domestic steel. Stelco was the company’s preferred supplier, with Cascadia buying about 50,000 tonnes of galvanized steel from the company this year.

Canadian galvanized steel prices have been climbing higher all year, Mr. Ritchie said, in part because of the stringent tariff rate quotas Ottawa imposed to drive cheap imports out of the market.

Stelco’s decision to pull back from the market baffled Mr. Ritchie. Eventually, he said, a member of Cascadia’s team told their Stelco contact to “cut the crap” and explain what was actually going on.

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The Cascadia rep was informed that Stelco had started exporting steel slab manufactured at Lake Erie Works in Nanticoke, Ont., to the United States. That in turn had crippled Stelco’s galvanized business, because its Hamilton plant had no inputs to make coated steel.

Stelco’s parent company, Cleveland-Cliffs Inc., had apparently made a business decision to prioritize its U.S. slab customers over its Canadian galvanized clientele, a huge slap in the face for Canada.

But Cliffs chief executive officer Lourenco Goncalves said in an interview that the situation wasn’t that simple. Stelco indeed a few months ago started exporting 60,000 tons of slab a month to the U.S. from Canada, he said. The strategy was expensive because of the 50-per-cent tariff that U.S. President Donald Trump set last year on Canadian steel exports. It was an effort to maintain production levels at Stelco, Mr. Goncalves said, to try to “make ends meet.”

At the time, Mr. Goncalves was hopeful that Canada and the U.S. would soon reach a “Fortress North America” trade deal. When it became clear that wasn’t happening, the slab export strategy was no longer viable. Stelco has since drastically reduced its slab shipments to the U.S. and soon plans to end them altogether, he said.

Cliffs maintains that Stelco can’t make money from its Canadian galvanized business. The tariffs have closed off its access to its U.S. customers, and Ottawa hasn’t done enough to keep out cheap imports, Mr. Goncalves said.

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In fact, the situation is so bleak that Cliffs last week said it plans to lay off up to 500 workers in Canada.

“I’m making Stelco viable by doing that,” Mr. Goncalves said. “I’m saving the company.”

But Mr. Ritchie doesn’t buy that reasoning.

“Cleveland-Cliffs comes out and says it’s not economical to make galvanized steel in Canada. What a joke. It’s selling for a buck a pound. It’s doubled in price,” he said.

“It’s never been a better time to make galvanized steel in Canada.”

Last week, Prime Minister Mark Carney said that Cliffs had “betrayed” laid-off Stelco workers. He also said it has legal obligations around employment, and the government intends to use all its powers and “pursue them to the fullest extent of the law.”

In 2024, Cliffs signed a legally binding agreement with Ottawa to maintain for at least five years the same number of unionized employees in Canada and the vast majority of non-unionized workers.

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Industry Minister Mélanie Joly on Monday issued Cliffs a five-business-day ultimatum to comply with its employment guarantees under the Investment Canada Act. Non-compliance could result in “an application to the superior court for orders that may include directing compliance, divestiture or monetary penalties,” she said.

Mr. Goncalves said that if the government sues, Cliffs will defend itself. One of its core arguments is that the trade war is an event beyond its control.

“I’m very upset that the Prime Minister said that I betrayed my people, betrayed the workers,” he said. “That’s absurd because I have been a big proponent, on both sides of the border, for Fortress North America to happen.”

As for Mr. Ritchie, owing to Stelco’s withdrawal from the galvanized market, he can’t find what he needs domestically. ArcelorMittal Dofasco, the other big Hamilton supplier, put him on “allocation,” meaning he would receive only a small fraction of what he requires. He will have to source the rest from outside Canada, paying a 50-per-cent tariff for the privilege.

When told that Stelco’s exit from the galvanized steel market had left a big Canadian customer in a bind, Mr. Goncalves replied, “That’s his problem.”