Market Monitor Metals and Steel Canada 2019

Market Monitor

  • Canada
  • Metals,
  • Steel

26th November 2019

The sector benefits from the lift of US import tariffs on Canadian steel and aluminium, with profit margins of steel businesses expected to improve again.

Canadian metals sector growth over the years

Performance forecast along Canadian metals and steel subsectors

In H1 of 2019 most Canadian metal and steel businesses showed positive results, with higher revenues due to higher sales prices, robust demand and the impact of protectionist measures in both Canada and the US, which disadvantage competition from overseas suppliers.

The sector benefits significantly from Washington´s decision in May 2019 to lift US import tariffs on Canadian steel and aluminium (the US market accounted for 82% of all Canadian iron and steel exports in 2018, affecting about 45% of domestic production). In June 2019 alone Canadian exports of previously tariffed steel products to the US increased 15.8% year-on-year, while exports of aluminum products rose 47.2%. Profit margins of Canadian metal and steel businesses are expected to improve over the coming 12 months.

As in 2018, payments in the Canadian metals and steel sector take 65 days on average, and payment experience has been good over the past two years. However, it cannot be ruled out that due to weaker economic growth prospects and lower demand from key buyer sectors (construction and energy) payment delays could increase in 2020. However, so far this adverse development has not yet materialised. No major insolvency increase is expected over the coming 12 months.

Our underwriting stance remains neutral for the steel segment. Many companies are foreign-owned, and for the few remaining Canadian-owned companies we seek detailed financial disclosure due to concerns about the cyclical and capital-intensive nature of the business (several companies have sought insolvency protection in the past). While the lifting of the US protectionist tariffs is positive, concerns over overcapacity remain.

For the metals segment our underwriting stance remains open, as this subsector provides more value-added products and overcapacity is less of an issue compared to the steel segment.

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Disclaimer

The statements made herein are provided solely for general informational purposes and should not be relied upon for any purpose. Please refer to the actual policy or the relevant product or services agreement for the governing terms. Nothing herein should be construed to create any right, obligation, advice or responsibility on the part of Atradius, including any obligation to conduct due diligence of buyers or on your behalf. If Atradius does conduct due diligence on any buyer it is for its own underwriting purposes and not for the benefit of the insured or any other person. Additionally, in no event shall Atradius and its related, affiliated and subsidiary companies be liable for any direct, indirect, special, incidental, or consequential damages arising out of the use of the statements made information herein.