Floundering Canadian steelmakers search for answers
Plummeting steel prices and a deluge of imports from China has made 2005 very difficult for the Canadian steel industry. And there seems to be little hope in sight; at least in the near future. Companies are desperately trying to relieve themselves of burgeoning inventories and a strong Canadian dollar is further cutting into profit margins. Recently, several bellwethers of the Great White North have skated onto thin ice. In the case of Dofasco Inc., its shares soared to new heights in 2003 and 2004. But so far in 2005, their value has plunged over 23%. Over at Algoma Steel, Inc. the turnaround is even more jarring. At its peak, Algomas shares enjoyed 3600% inflation but have dropped 25% in just a little over a month. Don't look to Stelco Inc. for salvation. Eighteen-plus months into its bankruptcy restructuring, the Toronto company is still trying to sort out the mess and recently agreed to allow a court-appointed mediator to attempt to find some common ground. Since March, its shares have fallen over 67%. In better times, with a better economy, Canadian steel would look south to the Big Three North American automakers for help. Except in the US it is pretty much the same story. Flagging sales and soaring fuel prices have put a huge dent GM and Fords bottom lines and they have recently announced large production cuts. At this point, it will only be after the second quarter earnings are announced that we will understand the full impact of the drop in steel prices. Until then all eyes are squarely focused on China where a third of the worlds steel originates. Late last year, China shifted from mainly importing steel to exporting and the entire world is only beginning to feel the after-effects of that decision.