Driver shortage cited for holding Stelco back
Firm records strong first quarter amid trucking problem
Stelco’s owners say the company’s revenue increased by 25 per cent in the first three months of the year compared to the first quarter of 2017 and it would have been higher if there wasn’t a trucking shortage.
The trucking industry has been struggling to find new drivers to replace the 10,000 drivers who retire every year in Canada and it’s been having a major impact on companies that use trucks to distribute products.
Stelco CEO Alan Kestenbaum said in a conference call Thursday, “we could have shipped more with optimal shipping capability,” ... but “nevertheless we grew shipping volumes to an annual run rate of 2.5 million net tonnes from 2017 shipments of 2 million tonnes.”
Faced with the transportation problem that is expected to continue for the foreseeable future, he said, Stelco has diversified its shipping options by increasing rail capacity and using ship barges from its Lake Erie docks.
“That means the new Stelco can now ship by truck, rail, barge and ship to destinations around the globe,” he said.
The company’s revenue jumped to $482 million from $386 million over the same period last year, as volumes increased by 23 per cent and average selling prices were up by two per cent. Net income was listed at $49 million compared to $8 million last year.
McMaster University business professor Marvin Ryder said, “this is clearly a sign that they are working their way back and getting orders and it all takes time.”
But, he noted, “Revenue being up this year should be no surprise because a year ago at this time, the company was in creditor protection. Who would be buying product from a company
that in theory could be bankrupt or hitting liquidation.”
Under ownership by U.S. Steel, the company was protected from creditors under the Companies Creditor (CCAA) for nearly three years until June 2017, when the restructured Stelco emerged with American venture capital firm Bedrock Industries as its owner.
“I’m not saying it is a trivial accomplishment, but I hope it would be up,” said Ryder.
University of Toronto steel analyst Peter Warrian said, “This is good news of progress for Stelco. Steel is rising, but it is an intensely competitive environment. A concern is that most of
the increased volume was in lower end hot rolled product. The more profitable coated fell back in the product mix.”
For his part, Kestenbaum says, “Our solid first quarter result demonstrates the progress we have made in a short period of time as we focus on driving efficiency and volume increases.”
“This didn’t happen by itself. It resulted from the execution of the initiatives that we have put in place ... including expanded production capabilities, increased output and volume, and expanding our logistics options and lowering our costs.”
But Ryder says the real test will be when a full year’s results are
in. And he noted there are uncertainties with negotiations for a redrafted NAFTA agreement continuing, as well as threats by President Donald Trump to usher in tariffs on steel and aluminum imports.
As it stands now, Kestenbaum says, 80 per cent of Stelco’s sales are in Canada and would not be harmed by a tariff. But the company’s growth strategy clearly involves making greater inroads into the American market, especially when it comes to highgrade steel in the automotive industry.