Stelco's new CEO on why he's optimistic about local steel production, emission levels and tariffs
Lourenco Goncalves runs U.S. company Cleveland-Cliffs, which bought Stelco in July
The new owner of Ontario steelmaker Stelco says his company "will not disappoint the people of Hamilton and Nanticoke," where the business's major facilities are based.
Speaking to CBC Hamilton this week, CEO Lourenco Goncalves said his company, U.S. steelmaker Cleveland-Cliffs, plans to keep Stelco's headquarters in Ontario.
Cleveland-Cliffs purchased Stelco for about $3.4 billion in July. In November, the foreign acquisition received approval from the Canadian government. Minister of Innovation, Science and Industry François-Philippe Champagne said approval hinged on a five-year commitment that included maintaining Stelco's head office in Hamilton and carrying operations under the name Stelco, a Cleveland-Cliffs Company.
Cleveland-Cliffs must also employ at least the same number of unionized and most-non-unionized workers, and honour existing collective agreements and pension and benefit commitments. About 1,000 people work for Stelco in Canada.
In the U.S., Cleveland-Cliffs deals mostly in higher-end steel, whereas Stelco produces a more general commercial product, Goncalves said, adding that the Stelco acquisition doubles his business's exposure to the general market.
The company plans to produce more coke in Ontario to send stateside, Goncalves said. Coke is a fuel used for making steel that is produced by heating metallurgical coal in a blast furnace.
He added that Cleveland-Cliffs plans to invest in a new stove for the blast furnace in Nanticoke, which will reduce emissions. However, the company does not plan to install an electric arc furnace, which other steelmakers have done to lower emissions. Goncalves said doing so at Stelco would mean fewer jobs.
"Local communities don't want to see that. They want to live well. They want clean air, they want clean water and they want the ability to get employed and make a living," he said.
WATCH | Cleveland-Cliffs CEO says he won't disappoint the community
Steel is a high-emissions industry, and Stelco Lake Erie — the Nanticoke site — is one of Ontario's top industrial emitters.
In Hamilton, people who live near steel plants and the city's industrial sector have long voiced concerns about air quality and pollution. Numerous east-end residents have reported an increase in the amount of black soot they're finding on their properties, pets and children this year, and the City of Hamilton has asked residents to share concerns.
Goncalves said that relative to steelmakers in places including Japan and India, the levels of carbon dioxide emissions coming out of Stelco Lake Erie or Cleveland-Cliffs's other facilities "are very good."
Cleveland-Cliffs is used to operating near residential areas and does so in Cleveland, where Goncalves himself lives, he said.
"We want communities to understand that we also generate jobs. We generate wealth," Goncalves said. "But we are not going to do that at the expense of [the] health or air quality or water quality of the neighbourhoods that we operate in."
Goncalves said he was born in Rio de Janeiro and moved to a Brazilian steel town when he was in his early 20s. He married a steelworker, he said, and raised his family near a plant for 17 years.
Pollution was a big issue at the time, Goncalves said, and his son had allergies that were affected by it.
"This is serious to me. It's not a statistic. It's not numbers on a spreadsheet. It's reality."
Union says it's hopeful about future
Goncalves has been on a media tour in what he described as an effort to let people know Cleveland-Cliffs is not U.S. Steel Co., whose ownership of Stelco he described as a "complete disaster."
That company bought Stelco in 2007 after three years in creditor protection.
Ron Wells, the president of United Steelworkers Local 1005, which represents about 640 workers at Stelco in Hamilton, described working under U.S. Steel as "a terrible experience."
Speaking to CBC Hamilton, Wells said he's heard from unionized workers in the U.S. who are employed by Cleveland-Cliffs and had good things to say.
"I guess this is a positive sign," he said.
Stelco returned to creditor protection in 2014 before signing an agreement to be acquired by Alan Kestenbaum's Bedrock Industries in late 2016. Goncalves said Kestenbaum is a friend.
Stelco to continue partnerships with Ticats and Forge FC
Marvin Ryder, an associate professor of marketing and entrepreneurship at the DeGroote School of Business at McMaster University, said he thinks U.S. Steel gets a bad rap and notes it was dealing with the strain of the 2008 financial crisis when it owned Stelco.
He said that while Cleveland-Cliffs is promising business as usual, changes in the economy may lead to changes in operation.
Goncalves said Stelco will continue its community partnerships, including those with the Hamilton Tiger-Cats football team and Forge FC soccer club.
"If I can bring some soccer players from Brazil to the Forge, I will do my best. I'm very interested in making the Forge a powerhouse of soccer."
There are still some unanswered questions, such as what will happen to plans for Stelco to build an electric-vehicle recycling plant in Nanticoke. Goncalves said the business is still evaluating that.
Ryder said he suspects Cleveland-Cliffs was more interested in Nanticoke's operation than Hamilton's, since it's newer and more advanced.
It's also an open question as to whether U.S. tariffs will end up impacting Stelco.
U.S. president-elect Donald Trump has said he wants a 10 per cent tariff on all imports into the United States and on Tuesday, announced the person who will oversee his trade agenda, Howard Lutnick.
Goncalves called that "a great move," saying Lutnick has been vocal about protecting American jobs.
"There's no way we can talk tariffs to protect the United States without doing tariffs that will also protect Canada, not against Canada," Goncalves said.
WATCH | Goncalves discusses tariffs on Rosemary Barton Live
Ryder said he suspects being owned by an American company will work in Stelco's favour by making it easier to argue for an exemption if needed.
When asked whether he'd push back against any tariffs targeting Stelco, Goncalves said Cleveland-Cliffs would address them, but for now, he's focused on other work instead of being prepared for an "Armageddon" he doesn't think is coming.
"Hopefully he's right," Wells, of United Steelworkers Local 1005, said of Goncalves, adding tariffs would likely hurt sales at Stelco.
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With files from Aura Carreño Rosas, Nathan Fung