Will a strike against Detroit’s Big 3 automakers impact Algoma Steel?

EDITOR'S NOTE: Over the weekend, Unifor autoworkers voted overwhelmingly to authorize strikes at GM, Ford, Stellantis. The article below originally appeared on SooToday on Aug. 22. It is being republished here for readers who may have missed it.

About 30 per cent of Algoma Steel's products go to the automotive sector, but so far nobody's panicking about the high probability of a long, messy strike this year at Detroit's Big 3 automakers.

Contract talks began July 12 between the United Auto Workers and the Big 3 manufacturers: Ford Motor Co., General Motors and Stellantis - owner of Chrysler, Dodge, Jeep, Ram, Fiat, Alpha Romeo, Citroën, Lancia, Maserati, Opel, Peugeot and Vauxhall.

Algoma Steel acknowledges the UAW negotiations are a prime market driver.

The UAW has a spanking-new president, Shawn Fain, who was just elected on March 25.

Fain is promising to play hardball in seeking a better deal from the automakers.

He's going after a 40 per cent pay hike for his members: 20 per cent of it immediately and five per cent in each subsequent year of the agreement.

And Fain says he's prepared to strike against all three of the auto giants simultaneously to get it.

As negotiations began last month, Fain refused to take part in a traditional handshake and photo op with company CEOs, meeting instead at factory gates with rank-and-file UAW members.

Michael Garcia, Algoma Steel chief executive officer, says so far there's been no pushback from manufacturers about taking planned steel deliveries, not in the auto sector or any other.

"We don't have any large customer sector where we're experiencing that," Garcia told investors during a conference call last week.

"We're roughly four weeks out in our order book on sheet steel and a little longer – five to six weeks – in plate."

"Year to date, the auto build rates have been tracking as expected and are positive. Obviously there's a lot of potential uncertainty with the original equipment manufacturers," Garcia said.

"Contract negotiations are taking place. The September 14 expiration date of the current contract is probably a little bit too involved to try to predict the all of the knock-on effects on our order book from a potential labour disruption, but obviously a lot of steel is going into automotive.

"So if you have an industry slowdown then that's going to have effects on the distribution side of our business. We see the majority of our customers continue to buy mostly when they have back-to-back needs of sales.

"So they're looking and they continue to manage their inventories closely. They've been doing that and that's the behaviour we've seen for a while now.

"Although we continue to fill our coil order book, you can probably tell from the way that coil pricing has moved over the last several weeks that we still see a little slowness there, although our order book is still full, but that's mostly driven by distribution.

"Our markets around infrastructure build, where we send a lot of plate continue to be pretty, pretty firm and we see that in our plate demand and in our plate order book and obviously in the plate pricing."

"We traditionally service roughly 150 customers in a calendar year and target on high percentage of contract sales. 

"Those contracts and volume commitments continue to provide stability to our order book and operations."

UAW members are currently participating in strike authorization votes, with results expected to be released late Thursday.

The ongoing negotiations between the UAW and the auto giants are important enough that U.S. President Joe Biden issued a statement last week calling on both sides to strike a fair deal.

"The UAW helped create the American middle class and as we move forward in this transition to new technologies, the UAW deserves a contract that sustains the middle class," Biden said.