October 16, 2013
Volatility concerns shift to the labour market
View from the Board | Norm Streu
Relative calm continues on global steel markets. Steel prices peaked in 2008, fell dramatically in late 2008 and 2009, and then achieved a substantial recovery in 2010 and 2011.
In 2012, the European recession and a slowdown in China dampened steel prices.
So far in 2013, demand has continued to be relatively weak, particularly in Europe where it has plunged to about 30 per cent below the 2007 peak.
China’s new government tolerance for lower growth and its actions to cool the property market have also reduced demand.
Counteracting these forces is a slow but steady improvement in the U.S. steel market, led by growth in construction and automobile manufacture demand.
China has also acted to accelerate infrastructure project approvals through the first half of 2013.
In contrast to the current equilibrium in the global steel market, the labour market in Western Canada is undergoing pressures not seen for many years.
In the construction cycle that ended in 2008, employers were able to address local labor market pressures in part through the temporary foreign worker (TFW) program.
Thousands of qualified construction workers were brought into Western Canada during these years and they played a critical role in allowing the industry to complete projects on time and on budget.
Currently, the publicity surrounding the abuse by some employers of the TFW program, together with the civil servant strike, has ground the program to a virtual standstill.
Without the assistance of this program, Western Canada simply does not have enough skilled construction labor to complete current projects.
In other words, the effect will not just be on labour costs – there are simply not enough skilled tradespeople available to complete the work.
Internally, LMS is working to counter these effects through intense local recruitment and training, a national recruitment strategy, and continuing to work with government bodies to allow responsible TFW recruitment.
In summary, for years volatility in the steel business has resided in material input cost.
Without a change to the TFW program, for the next few years that focus is likely to shift, with labour becoming a larger variable and risk.
Norm Streu is the president and chief operating officer of the LMS Reinforcing Steel Group. He is a former chair of the Vancouver Regional Construction Association and a member of the Journal of Commerce Editorial Advisory Board. Send comment or questions to email@example.com.
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