Canadian metals-industry issues, such as labor shortages and supply chain challenges, largely mirror those of the United States.
The metals industry in Canada shares its southern neighbor’s challenges and perspectives. “I’ve always believed the saying that ‘when the U.S. sneezes we both have a cold,’” says Jason Clark, president of Canrack Storage Systems Inc., Toronto, Ontario. “Our economies are very interconnected on both supply and consumer sides.”
So agrees Alex Carrick, chief economist of U.S.-based ConstructConnect in Cincinnati: “What’s going on in Canada is comparable to what’s going on in the U.S. Their economies are still very much linked.”
Indeed, when it comes to manufacturing and their economies – or even recovery from COVID-19 – the two countries are very much in sync.
Kevin O’Connor, technical sales and new customer development for PCP Aluminium, a mill in Saguenay, Quebec, says that Canadian manufacturers are doing well overall. “The Canadian manufacturing economy is strong,” he says, adding that while there are semiconductor shortages for automotive use, the company’s tooling activity is doing well. “We saw a pickup – a recovery if you will – in the summer of 2020 that has not subsided.” PCP Aluminium produces aluminum cast tooling plate, called Alka 5, and aluminum mold block, named Max 5.
Marmon/Keystone Canada Inc., Burlington, Ontario, has recovered nicely from the pandemic. According to Lou Germano, sector senior vice president, business has been “explosive this year.” He adds that when COVID-19 reared its ugly head in 2020, it was difficult for many executives to forecast 2021. However, they were pleasantly surprised by this year’s growth. “Right now, I think many of us are saying that the pent-up demand for finished goods in almost all markets has skyrocketed,” he says.
Despite this optimism, Canadian businesses also have their share of challenges. And, as is the case in the U.S., finding new talent is one of them. “As long as the [government] subsidies are being paid, [employees] are holding back from coming back to their jobs, whether they’re office jobs or warehouse jobs,” says Germano. “Trying to hire is very difficult because employees are just not there. It truly becomes an awful snowball effect.”
He adds this is not just a Canadian, or even North American issue. It’s a global one.
“We continue to struggle to bring on employees, and honestly, it’s getting more expensive to bring them on because the market is looking for so many individuals to get into manufacturing, that there are more jobs than individuals to fulfill those jobs,” he says. “A lot of us are having to pay a little extra – whether it’s a hiring bonus or whether it’s a higher wage to get them on board.”
Alex Eryuzlu, vice president of Scan Tube in Mississauga, Ontario, agrees that workers are scarce, partly because many would-be employees are pursuing a college education. “Our pool of skilled workers has been smaller and smaller over the past decade or so, as people choose other post-secondary careers,” he says.
His colleague, Scan Tube President Aydin Eryuzlu, agrees it is difficult to secure skilled employees. “The challenge is finding people to work. Finding skilled workers is a challenge now. People got used to working from home or staying away and getting help from the government.”
“A lot of older workers retired over the past year or so, and so wages are increasing faster than they have been before,” he says, adding that, to some extent, deglobalization has been the catalyst to a shift in the balance of power between management and labor, with the power shifting to the latter,” Carrick says.
“As a worker, you knew that if you complained about your job, you were likely to find out that your job was outsourced to someplace else around the world,” he explains. “[With deglobalization,] labor started to understand that it has more power.” He adds that during the pandemic some employers were expected to pay more to laborers working under riskier health conditions.
There’s no easy solution for a dwindled workforce. However, automation can play a key role in a manufacturing economy. Experts believe the robotics drive is stronger in the U.S. than in Canada. “I don’t think Canada is taking advantage of large numbers of robotics,” says Aydin Eryuzlu. “More robotics are in the United States because of the size of the United States compared to Canada. A warehouse in the U.S. can be 200,000 to 300,000 square feet,” he says.
Germano agrees to some extent. “I think [robotics] are greater in the U.S. because there’s a larger base of OEMs in the United States. A lot of Canadian manufacturing is truly based as a Tier 1 supplier to many of the U.S.-based organizations,” he says. “That being said, robotics is still being introduced to Canadian manufacturing as part of our economy – not only in manufacturing but in many other facets of business. In Canada we have robotics being used in ways that production machines are pumping out more and more parts quicker.”
Besides the lack of labor, the Canadian metals industry is also plagued by the lack of steel inventory. Germano says Canadian companies have struggled to secure steel. He points out this is not just a North American issue, but a global one. “You have pent-up demand going through the roof, and you have COVID, where you can’t get employees to help relieve you of the pressure of pent-up demand,” he says, “and on top of that, you’ve got the lack of steel availability. So it’s certainly been that perfect storm.”
The Canadian supply chain is indeed challenged – from raw materials to integrated parts to electronics. “Chips in the computer world and the automotive world are a big problem. So the metal supply chain is truly facing some dynamics that it hasn’t seen for years,” says Germano. He estimates that this problem will probably lessen in the second half of 2022 because he expects that the mills will start producing more steel. “In our business, the bottleneck of flat-roll steel is no longer a problem, but processing that flat-roll – whether you’re slitting, forming or heat treating – is bottlenecked,” he says.
He indicates this problem will take a good while to overcome because it requires more hours by workers who aren’t even available.
And lead time problems dominate the thoughts of Canadian manufacturing professionals. Clark describes the lead times with one word: “horrible.” He adds, “Across all components and disciplines, when you find a product, it’s either very expensive or has extended delivery times. It has had a real effect on manufacturing, especially when you sell equipment at a specific price point and find out you are 20 percent over budget before you even start – if you want to try to stay on time for delivery.” He emphasizes, however, that despite this price hike, customers are still interested in machinery and equipment.
“Metals pricing has been both a blessing and a challenge with the rapid and large increases in prices seen since 2020,” he continues. “Our core customers are the metals distributors so they are making more money, under the assumption they actually have inventory on their floor.”
O’Connor, however, has no supply chain issues because they do not depend on overseas products. “Our aluminum ingot is from primary smelted aluminum. We’re not dependent on recyclable aluminum, so we’ve been able to keep our distributors supplied with plate and block.”
Conversely, those who do depend on items from abroad have shipping issues. “Right now there’s been a problem with shipping from overseas, and a problem with finding containers to put products in,” says Aydin Eryuzlu. “We do bring in products from Europe as well as from Asia, and we do ship products to Asia as well. There are problems finding the right container.”
Carrick says two huge trends in the Canadian economy are the shift to electrification and a movement toward decarbonization. “I think these are going to be the two governing forces for the economy. We’ve certainly seen the electrification shift in the United States because the Biden administration wants to move towards using electricity everywhere as much as can be done.”
“With decarbonization, steel manufacturers are talking about spending a lot of money – and I know they’ve made announcements in partnership with the federal government about hundreds of millions of dollars going into reducing the amount of coal that they use that goes into making steel.
Manufacturers know that they’ve got to adjust their processes and try to cut down on carbon emissions.”
Overall, the Canadian metal industry, like its U.S. counterpart, is doing the best it can with less than ideal conditions. “The industry in Ontario, Canada, and primarily in Quebec, are really mirror images of what’s available in the United States,” says O’Connor, “and often there’s a lot of intermingling of companies between the two sides of the Caption:
Flatness for LI: PCP Aluminium has not had difficulty sourcing raw material. (Photo courtesy PCP Aluminium)