IPSCO's Engineered Steel Advantage

Regina, Saskatchewan, 2 May 2001, IPSCO (NYSE/TSE:IPS) IPSCO Inc.’s unique combination of steckel rolling mills for its primary production and temper mills at three coil processing operations makes it possible to supply engineered steels to its customers not available as imports and rarely from domestic suppliers, Roger Phillips, President and Chief Executive Officer of IPSCO Inc., told the company’s shareholders at IPSCO’s Annual Meeting in Regina. He noted that IPSCO’s low inherent cost base and its sales of engineered steels were part of the reason it had remained profitable in the first quarter of 2001, unlike most North American steel companies. “But this does not mean we are immune from price depressions caused by unfairly priced imports,” he added.

In reviewing the production process used by IPSCO which utilizes equipment that can produce both wide hot rolled coiled steel and discrete plate on the same equipment, Phillips noted that the process allows IPSCO to adjust properties without using expensive alloys or further post-production treatments. In addition, IPSCO operates temper mills that can induce further property changes in steel “IPSCO is able to use a unique combination of rolling practices, thermal-mechanical treatment, alloy constituents, and controlled cooling to virtually engineer a steel suitable for the customer’s specific application,” Phillips stated. IPSCO charges a premium for certain of its products but the net effect of the savings the customer realizes from using them, leaves them ahead economically – a win-win situation.

By following this strategy IPSCO saw sales of 47 percent more cut product from its coil processing lines in the first quarter compared to a year ago, and 20 percent more discrete plate despite overall weakness in the manufacturing sector of North America.

Imported steel producers cannot compete directly with IPSCO’s value-added engineered materials strategy because they lack the ability to adjust production and technical parameters as quickly as needed, as ocean shipping precludes this type of close coupling. But because the customer is looking for value added it often cannot pay in total more than the going price for commodity grade materials plus the value added by IPSCO’s engineering. Thus depressed market prices due to imports affect IPSCO and all other domestic producers.

“The economics of steelmaking dictates certain minimum capacity levels, even for mini-mills,” added Phillips. “Typically applications justifying added value engineered steels aren’t enough to keep a facility profitable so it has to depend on a certain volume of garden variety steels sales as well. If imports depress prices this means the regular steels don’t carry their full weight, which can render the financial returns for a facility unacceptable,” he said.

Phillips also told shareholders it was hypocritical for foreign steel producers and related associations to suggest that American steelmakers should shut down what they refer to as excess capacity. In contrast to the European Union, Japan and Korea where capacity is well in excess of their domestic requirements, Phillips pointed out that the United States’ installed capacity is adequate to produce only 85 percent of America’s needs and Canada’s capacity serves an even smaller proportion of its domestic needs.

He warned that the ramifications of these imports include repeated waves of unfairly traded imports, an inadequate future supply of steel at sky high prices and the loss of just-in-time supplies and tailor-made engineered steels, of which IPSCO is a unique producer.

Phillips concluded his remarks with a call to government to ensure the continued viability of the steel industry in the 21st century through international or domestic arrangements.

This news release contains forward looking information with respect to IPSCO's operations and beliefs. Actual results may differ from these forward looking statements due to numerous factors including potential markets and demand for the materials produced, level of potential imports, market forces, domestic pricing of steel products, and trade actions. These and other factors are outlined in IPSCO's regulatory filings with the Securities and Exchange Commission, including those on IPSCO's Annual Report for 2000, its MD&A and Form 40-F.

Company Contact:
Anne Parker
Vice President, Trade Policy and Communications
Tel. 630-810-4790
Release 01-21

Back to News