2010 sector study_report_english

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Human Resources in the Canadian Steel Sector Final Report March 2011

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www.cstec.ca

Human Resources in the Canadian Steel Sector

Final Report

March 2011

Prism Economics and Analysis

Prism Economics and Analysis Suite 404

160 Eglinton Avenue East Toronto, ON

M4P 3B5 Tel: (416)-484-6996 Fax: (416)-484-4147

website: www.prismeconomics.com

John O’Grady Partner, Prism Economics and Analysis

Direct Phone: (416)-652-0456 Direct Fax: (416)-652-3083

Email: [email protected] website: www.ogrady.on.ca

Peter Warrian Associate, Prism Economics and Analysis

Direct Phone: (416)-946-8934 Email: [email protected]

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Human Resources in the Canadian Steel Sector Final Report

Table of Contents

Executive Summary 4

Chapter One: Introduction 12

Chapter Two: Overview of the Broader Steel Sector 14

Chapter Three: Drivers of Change in the Broader Steel Sector 21

Chapter Four: Employment Projections 34

Chapter Five: Human Resources Managers Survey 47

Chapter Six: Local Union Leaders Survey 52

Chapter Seven: What We Heard 59

Chapter Eight: Primary Steel Producers 71

Chapter Nine: Foundries 92

Chapter Ten: Construction Fabricators 99

Chapter Eleven: Metals Service Centres 106

Chapter Twelve: Recommendations 115

Appendices 127

Appendix A: Steering Committee 128

Appendix B: Interviews and Focus Groups 130

Appendix C: Local Union Leader Survey 135

Appendix D: Human Resources Manager Survey 138

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Appendix E: Global Benchmarking Report 141

Part 1: ArcelorMittal Ghent and TenarisDalmine 142

Part 2: Knowledge Management and Knowledge Transfer 148

Part 3: TenarisUniversity 150

References: Human Resources Manager Survey 161

Annex: Human Resources Manager Survey 164

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Executive Summary Central Message of the Report:

• Leaders in the Steel Sector identify five long-term business and human resources goals: 1. Zero accidents, 2. Zero product defects, 3. 100% reliability for on-time delivery, 4. Ongoing productivity gains, and 5. Supporting more well-paid jobs by securing new and existing markets

based on new products and a reputation for quality and delivery.

• The central finding of this report is that achieving these objectives requires bolstering human resources planning at the sector level and building a stronger training culture in the workplace.

Strengthening Human Resources Planning at the Sector Level:

• Over the next five years, the Broader Steel Sector will need to hire between 19,000 and 29,000 workers. To meet these human resources requirements will require strategies:

(1) to train and recruit between 5,000 and 10,800 skilled tradespersons,

(2) to expand the sector’s involvement in co-op and internship programs for technicians and technologists, and

(3) to deliver career information which attracts the best and most motivated job-seekers

• While employers can meet some of these strategic needs through steps at the company level, it is imperative that industry stakeholders also develop carefully focused sector-based strategies to support company-level human resources planning.

Skilled Trades:

• The most urgent and pressing challenge facing the Steel Sector will be replacing skilled tradespersons who retire. Over the next five years the Broader Steel Sector will need to hire between 5,000 and 10,800 skilled tradespersons.

• There are at least three dimensions to this challenge that need to be taken into account:

First, the Steel Sector cannot count on meeting its future need for skilled tradespersons through ad hoc recruitment or recalling workers who were laid off during the recent

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downturn. There is a strong likelihood of a systemic shortage of skilled tradespersons in the Canadian economy. The Steel Sector will be in competition with other industries. In many cases, the wage premium which the Steel Sector offered has narrowed such that the Steel Sector’s competitive position in the labour market is not as favourable as it was in previous decades.

Second, as a consequence of the increased competition for the skilled tradespersons, the Steel Sector will need to ramp up its investment in apprenticeship. A successful sector strategy will be central to realizing this investment.

Third, the skill needs of the Steel Sector are evolving as production technology becomes more technologically sophisticated. The historic boundary between technicians/ technologists and skilled tradespersons is blurring. For the Steel Sector this means that there has been and will continue to be an increase in the technology skills required of skilled tradespersons. This implies a need for specialized training that goes beyond established skill standards for tradespersons. Again, this challenge can more effectively be tackled with a sector strategy.

• The Steel Sector, of course, is not alone in facing a growing need to replace retiring skilled tradespersons. Other industries face equally serious challenges. A Steel Sector strategy, therefore, will be far more effective if it is implemented in the context of a national strategy to address the looming shortage of skilled tradespersons.

Technicians and Technologists: Trained for the Steel Sector

• There is no systemic shortage of technicians and technologists. However, companies in the Steel Sector need technicians and technologists who have training and experience in the Steel Sector. As we move forward, there will be a shortage of technicians and technologists with industry training and industry experience that is specific to steel. Only the Steel Sector can solve that problem.

• The key to bridging the gap between college training and industry-specific training and experience is to augment the Steel Sector’s investment in co-op placements and internships. To attract the highest calibre students the Steel Sector must offer an expanded co-op placement program. This requires a sector-based strategy.

Attracting the Best and Most Motivated

• The Steel Sector will be competing with other industries, many of which have already developed sophisticated strategies to support their recruitment efforts.

• The Steel Sector urgently needs to develop a recruitment and career strategy to meet is human resources needs in a labour market that will be significantly more competitive, especially for hiring skilled tradespersons and technicians and technologists with relevant industry experience.

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• The effectiveness of company recruitment strategies will be significantly leveraged if there is a carefully designed and concurrent sector strategy to deliver career information for targeted occupations.

Strengthening Training Culture in the Workplace

• The Steel Sector needs to strengthen its training culture in the workplace. This was a recommendation from the 2005 sector study. While there has been progress, it has been limited. Changes in the industry since the 2005 study have made it more urgent to strengthen workplace training culture. This report recommends two specific measures to strengthen training culture: benchmarking and joint advisory committees.

• Benchmarking: The Primary Steel Producing industry already has a well-developed strategy for benchmarking production performance. The same strategy can contribute to strengthening training culture. It should be a high priority for CSTEC to implement a benchmarking survey which provides workplaces with the information they need on where they stand in relation to other workplaces, how much (or how little) progress they have made, and how they can strengthen their performance. This benchmarking survey should be the core of CSTEC’s efforts to strengthen its capacity to provide relevant Labour Market Information.

• Joint Advisory Committees: When there is a will to move forward, consultative committees in the workplace can lead to improved performance. In many workplaces, this has been the case for occupational health and safety where joint committees have played a key role in improving health and safety performance. Survey data indicate that consultations on training are common in the Steel Sector, though not universal and are often informal. To strengthen training culture in the Steel Sector, CSTEC should work with stakeholders to establish joint workplace advisory committees on training and development or, if appropriate, to broaden the mandate of existing consultative structures to include training and development.

Building on Human Resources Capacity:

• Knowledge Transfer: Knowledge transfer has emerged as a new challenge for the Steel Sector, primarily in the Primary Steel Producing industry. Knowledge transfer is the transmission of undocumented or tacit workplace knowledge from experienced workers to new hires. There is a significant risk that the retirement wave that is taking place in the Primary Steel Producing industry will remove experience-based knowledge before new employees are hired or fully integrated. A strategy to document and transfer tacit workplace knowledge is essential to ensure that productivity gains achieved in the last five years are not eroded.

• Essential Skills: CSTEC and the Steel Sector need to update their understanding of essential skills to better align with new and emerging workplace realities. The conventional understanding of essential skills encompasses basic reading, verbal communications, and computational skills. In light of the high proportion of the workforce that has not completed high school, essential skills, in the conventional sense, are, and will continue to be a challenge for the Steel Sector. However, new essential skills needs are emerging. These include: supporting apprentices in their classroom training

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and accelerating the integration of recent immigrants ho have strong technical training, but inadequate language skills.

• The successful implementation of continuous improvement and total productive maintenance also will require new attention to essential skills weaknesses. Gaps in essential skills will impair the sector’s ability to achieve zero accidents and zero defects.

A Call to Action:

• The Steel Sector plays a key role in the Canadian economy. The sector supports over 100,000 direct jobs in Canada and many more jobs which supply the companies that make up the Steel Sector. In many communities, the steel industry is both the lynchpin and the driver of economic development. It is in the interests of every stakeholder in the Steel Sector – companies, workers, communities, and governments – to see a strong and competitive steel industry. Human resources planning and training culture will not achieve that goal on their own. However, a strong and competitive steel industry will not be achieved without bolstering human resources planning at the sector level and a strengthening training culture in the workplace.

• The Steel Sector is changing rapidly under the pressure of globalization and the high Canadian dollar. The Sector does not have the luxury to wait for another five years to take action on human resource planning and strengthening its training culture.

• It is a matter of urgency for the primary stakeholders in the Steel Sector – companies and unions – to focus on the need to bolster their sector-level human resources planning and to concurrently strengthen their workplace training culture. This report documents the changes that make those goals important and proposes a path for achieving them.

Recommendations

Recommendation No. 1 Benchmarking Training and Development

(a) CSTEC should implement an annual benchmarking survey of employers, unions and workers

that tracks indicators of training and professional development. Individual companies should not be identifiable from the survey results. The initial Training and Development Benchmarking Survey should generate base-line data that can be used in assessing subsequent performance.

(b) The annual Training and Development Benchmarking Survey should be at the core of CSTEC’s Labour Market Information services. Survey results should be presented to stakeholders through a webinar and a written report.

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Recommendation No. 2

Workplace Advisory Committees on Training and Development

CSTEC should work with stakeholders to establish joint workplace-level, advisory committees on training and development or, if appropriate, to broaden the mandate of existing consultative structures to include training and development. In support of this initiative, CSTEC should develop support materials for the workplace parties to assist them in identifying needs and possible resources. Among the training needs that should be considered are:

• essential skills, • apprenticeship, • skilled trades upgrading, and • the skills required to successfully implement continuous improvement and

total productive maintenance.

Recommendation No. 3 Implementing a Career Information Strategy

In collaboration with other partners in the Steel Sector, including the Canadian Steel Producers Association, the Canadian Institute of Steel Construction, the Canadian Foundry Association, and the Canadian Division of the Metal Service Centre Institute, CSTEC should develop:

(a) web-based, career information targeted to students and to young workers who are considering an apprenticeable trade or a career as a technician or technologist,

(b) career information focused on non-traditional sources, including young women, technically trained recent immigrants, aboriginal Canadians and workers who are members of visible minorities.

(c) a social media strategy to reach a broader range of potential steel sector employees and to draw attention to the opportunities in the steel sector


National Skilled Trades Strategy

(a) CSTEC should continue to develop a National Skilled Trades Strategy, based in part on the success of its pilot program in Hamilton. The strategy should be expanded to include all industries in the Broader Steel Sector. In some regions, to achieve critical mass, the strategy may need to involve other manufacturing industries.

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(b) The focus of the National Skilled Trades Strategy should be to create regional consortia that will manage the regional design and implementation of the national strategy. Administrative support would be provided by CSTEC through its regional staff. The CMSO should lead the design and implementation of the strategy in Quebec.

(c) CSTEC should develop supplementary curriculum material to strengthen the training of apprentices in their understanding of metallurgy and related topics.

(d) CSTEC’s National Skilled Trades Strategy should cover the full range of skilled trades needed by the Steel Sector. Among the trades which should be included are:

• Industrial Electricians • Industrial Mechanics / Millwrights • Pipefitters • Stationary Engineers1 • Crane Operators • Welders • Other Metal-Working Trades2

(e) The Steel Sector should aim to train at least one-third of its anticipated, five-year hiring requirements for skilled tradespersons. This goal implies the following annual targets for new apprentices

2011 2012 2013 2014 2015 Total

Primary Steel Producers 61 85 122 171 171 609

Independent Pipe, Rolling & Drawing Mills 36 51 73 102 102 363

Construction Fabricators 158 221 316 442 442 1,579

Foundries 14 20 28 39 39 139

Metals Service Centres 15 20 29 41 41 145

Totals 284 397 567 794 794 2,835


National Steel Technologist Strategy

To better meet the need for steel sector technology skills, CSTEC should implement a National Steel Technologist Strategy. The elements of this strategy would be:

(a) A census of current Steel Sector participation in co-op and internship placements of technology students,

2 Metal Working Trades include: Sheet Metal Workers, Boilermakers, Structural Metal and Plate Work Fabricators,

Fitters, Ironworkers, Blacksmiths, Die Setters, and Welders

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(b) A national target to increase the number of co-op and internship placements of technology students,

(c) Development of an occupational standard for a Steel Technologist,

(d) Partnerships with colleges and CEGEPs to deliver training to meet the Steel Technologist standard.


Steel Detailers

CSTEC should support CISC in developing a national occupational standard for Steel Detailers and making Steel Detailing an apprenticeable Red Seal trade or a certifiable occupation in all provinces.

Recommendation No. 7 Knowledge Transfer

CSTEC should produce a best practices guide on how companies in the steel industry and in other industries are tackling the knowledge transfer challenge.

CSTEC also should develop a strategy to link the documentation of experience-based skills and knowledge to essential skills training.


Essential Skills

CSTEC needs to broaden its essential skills training strategy to include:

• Supporting apprentices, • Bridging the language skills gaps of recent immigrants, • Linking essential skills to the implementation of continuous improvement and total

productive maintenance, • Linking essential skills training to documenting tacit knowledge and skills and thereby

supporting knowledge transfer, • Health and safety.

Recommendation No. 9 Energy Conservation in Production and Maintenance

CSTEC should develop a training program to support companies in the steel sector that are seeking to achieve operational excellence in the use of energy through the adoption of best practices on the part of operators and maintenance workers.

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Chapter One Introduction

This report as commissioned by the Canadian Steel Trade and Employment Congress (CSTEC) with support from Human Resources and Skills Development Canada (HRSDC).

CSTEC was established by the United Steelworkers and leading employers in the steel industry. From its inception, CSTEC has served as a forum where employers and representatives of workers can identify common human resources challenges and pursue joint initiatives to address those challenges. Over its more than 25 years of operation, CSTEC has implemented a range of innovative training and labour adjustment programs. In recent years, these have included: new approaches to apprenticeship recruitment and training, essential skills training, career awareness programs, youth employment services, and the development of training courses for the steel industry.

The purpose of this report is to review trends and developments in the Broader Steel Sector and to identify the implications of these trends for human resources planning. The Broader Steel Sector comprises the Primary Steel Producers and steel-using industries that have historically had a close relationship to the Primary Steel industry. These include: Independent Pipe Mills, Rolling Mills and Drawing Mills, Foundries, Construction Fabricators and Metals Service Centres.

A previous review of trends in the Broader Steel Sector was published by CSTEC in 2005.3 Since 2005, there have been significant changes in the Broader Steel Sector. In the Primary Steel industry, there has been a complete transformation of ownership structures, a rationalization of production capacity and an acceleration of integration into the NAFTA market. These trends have also affected Independent Pipe Mills, Rolling Mills and Drawing Mills. In the Foundry industry, there has been a significant decline in employment and a re-orientation of production as low value production moved off-shore in response to the appreciation of the Canadian dollar. Construction Fabricators are experiencing major technological innovations that are changing both production processes and the design process. Metal Service Centres have taken on ‘finishing functions’ that were previously performed by Primary Steel Producers. As well, changes in the composition and nature of the metals manufacturing sector (also a consequence of the higher dollar) are changing the customer base of Service Centres. Adjusting to changing work force demographic trends is a challenge across the Broader Steel Sector. All of these trends and changes in the Steel Sector have implications for human resources.

The findings and recommendations of this study are based on

• a review of scholarly and trade literature on the Broader Steel Sector, • an analysis of statistical indicators, • a custom forecast of output and employment trends in the Broader Steel Sector by

the Conference Board,

3 CSTEC, Human Resources Study of the Broader Canadian Steel Industry: Final Report (2005). This study is

available at: www.cstec.ca/Sector_Study.asp

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• the Construction Sector Council’s forecast of trends in non-residential construction,

• interviews with senior executives in the Broader Steel Sector and with Local Union leaders,

• focus groups with workers, • a Survey of Human Resources Managers, and • a Survey of Local Union Leaders.

Chapter Two provides an overview of trends in the Broader Steel Sector.

Chapter Three examines the drivers of change that are altering human resources needs.

Chapter Four summarizes the results of forecasts of human resources needs by major occupational groups, based on alternative productivity scenarios. This chapter sets out key findings, in particular, for the Broader Steel Sector’s needs for skilled tradespersons.

Chapter Five summarizes the results of the Survey of Human Resources Managers.

Chapter Six reports the results of the Survey of Local Union Leaders. These two surveys show that training is a high priority for both employers and Local Union Leaders. However, and not surprisingly, they have different perspectives on training culture in the Steel Sector and training needs.

Chapter Seven summarizes salient comments derived from interviews with senior executives, Local Union Leaders and workers who participated in focus groups.

Chapters Eight through Eleven present detailed profiles of human resources trends in each of the industries that comprise the Broader Steel Sector. These chapters note progress that has been made and identify gaps and challenges that will be important over the next decade.

Chapter Twelve presents recommendations based on the analysis set out in the previous chapters.

The central conclusion of this report is that the skills profile of the ‘Steelworker of the Future’ will be different from the skills profile of the ‘Steelworker of Today’. This is not to say that ten years from now the Steel Sector will be unrecognizable to the current work force. However, the change in production processes and in skill needs will be significant. The overriding goal of this study is to assist stakeholders in the Broader Steel Sector to understand what the ‘Steelworker of the Future’ will look like, what skills those Steelworkers will need, and how employers, Local Unions, and CSTEC can contribute to building a strong and competitive steel industry that generates more secure and well-paid jobs.

CSTEC wishes to thank the members of the Steering Committee who provided advice and direction for this study. We also acknowledge and thank those who contributed their time through participating in interviews, focus groups and surveys. A list of Steering Committee members, interviews and focus groups can be found in the Appendices to this study. Finally, CSTEC wishes to acknowledge and thank Human Resources and Skills Development Canada for financial support for this study through the Sector Councils Program.

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Chapter Two Overview of the Broader Steel Sector

1. Defining the Broader Steel Sector 2. Employment Trends in the Broader Steel Sector 3. Steel in the Canadian Economy 4. Human Resources Challenges

1. Defining the Broader Steel Sector4

The Broader Steel Sector employs approximately 100,000 Canadians. The sector comprises the Primary Steel Producers (NAICS 3311), together with mills that produce pipe and tube or roll and draw iron and steel (NAICS 3312)5, and three industries that historically have been linked closely to Primary Steel Producers:

• Iron and Steel Foundries (NAICS 33151), • Construction Fabricators (sub-components of NAICS 3323), and • Metals Service Centres (NAICS 4162)

Primary Steel Producers manufacture the basic steel shapes: slabs, billets and blooms. Two manufacturing processes predominate in primary steel production. The first is blast furnace technology, which is also known as oxygen blown converter (OBC) technology. Producers using OBC technology convert raw materials (iron ore, coking coal, and limestone) into the basic steel shapes. These mills are often referred to as ‘integrated mills’. The second type of steel-making technology uses electric arc furnaces (EAF). Producers using EAF technology convert scrap metal into the basic steel shapes.

The basic steel shapes – slabs, billets and blooms – are further processed into semi-finished steel products. Slabs are converted into hot and cold strip steel, steel plate, and coiled sheet steel. Billets are further processed into various shapes of bars, rods and tubes. Blooms are made into structural shapes for

4 For statistical purposes, industries are classified using the North American Industry Classification System

(NAICS). Statistical classification is based on the dominant activity of an ‘establishment’, not on the dominant activity of a company. Companies that have multiple facilities may have those establishments classified differently based on the dominant activity at each site. Conversely a company that has multiple industrial activities within one establishment will be classified as being in only one industry, based on the activity that is deemed dominant.

5 Some pipe mills, rolling mills and drawing mills are owned and operated by Primary Steel Producers. Other mills

are independently operated. Mills that are operated by Primary Steel Producers are included in NAICSZ 3311. Mills that are operated independently are included in NAICS 3312. Human resources issues are the same, regardless of ownership and statistical classification.

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the construction industry and for rail. The conversion of the basic steel shapes into semi-processed steel products is usually undertaken within a Primary Steel mill.

Figure 2.1 illustrates the manufacture of the three basic steel shapes and their downstream conversion into semi-processed products for subsequent use by various industries.

Figure 2.1

Steel Manufacturing (Source: World Steel Association)

Semi-processed steel products may be further processed within the Primary Steel industry to produce products such as steel pipe. However, most semi-processed steel products are supplied to downstream manufacturers. Historically, some of these downstream manufacturers were closely linked to Primary Steel Producers, although this is no longer typically the case.

The downstream market may be supplied either directly or indirectly. Large industries, such as the auto industry, are supplied directly by the Primary Steel Producers. Re-bar for use in reinforcing concrete is also usually supplied directly to the construction industry by the Primary Steel Producers. In North

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America, companies in other industries are generally supplied through Metals Service Centres which are wholesale distributors of semi-processed steel products (and other metals). Outside of North America, Metals Service Centres are often affiliated to Primary Steel Producers and distribute mainly or exclusively the output of their parent firm.

Metals Service Centres inventory and distribute semi-processed steel products to downstream users of these products in the manufacturing and construction industries. Over the past two decades many Metals Service Centres have also taken on ‘finishing functions’ which were previously carried out by the Primary Steel Producers. Examples of ‘finishing functions’ are: sawing, shearing or cutting basic steel shapes into standard sizes, rolling basic steel shapes to produce angle products, drilling, threading, slotting, and painting. Metals Service Centres obtain steel from domestic producers, other NAFTA region producers and from off-shore sources. For many steel-using companies, their primary contact with the steel industry is through Metals Service Centres. Many Metals Service Centres also supply non-ferrous metal products.

Foundries re-melt steel, cast the molten steel into specific shapes and further finish the cast product by grinding, sanding, drilling, etc. Historically, many foundry operations were owned by Primary Steel Producers, though this is no longer the case in North America. While some foundries work solely with iron and steel, it is increasingly common for foundries to cast other metals, especially aluminium. Some foundries make their own moulds for casting, while others purchase moulds from specialized mould-making shops. Over the past decade, the majority of ferrous foundry operations in Canada have closed or moved offshore.

Construction Fabricators comprise plants that fabricate plate work and structural products by cutting, punching, bending, shaping and welding steel for use in the construction industry and in other heavy industries, notably the mining and energy sectors. Some companies that are considered Construction Fabricators also manufacture architectural iron and steel products, such as staircases. Construction fabricators are the principal channel through which structural steel products enter the construction market. As a structural product, steel’s principal competitor in the construction market is reinforced concrete.

There is an approximate, but not a precise, correspondence between the industries defined in the NAICS system and the scope of the various industry associations in the Broader Steel Sector. Figure 2.2 shows the approximate mapping of statistically defined industries into industry associations. Some companies, however, operate in more than one industry. Companies also may belong to more than one industry association.

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Figure 2.2 Relationship between Industry Associations and

the Statistical Definition of Industries in the Broader Steel Sector

NAICS Descriptor Industry Association

3311 Primary Steel Producers Canadian Steel Producers Association (CPSA)

33121 Pipe and Tube Corrugated Steel Pipe Institute (CSPI)

33122 Rolling and Drawing No specific association in Canada

33151 Iron & Steel Foundries Canadian Foundries Association (CFA)

3323 Construction Fabricators Canadian Institute of Steel Construction (CISC) Canadian Steel Sheet Building Institute (CSSBI) Steel Framing Alliance (SFA)

4162 Metals Service Centres Metals Service Center Institute (MSCI) – Canadian Section

2. Employment Trends in the Broader Steel Sector

Figure 2.3 shows employment trends in the industries that comprise the Broader Steel Sector. Figure 2.3

Employment in the Broader Steel Sector, 1991 -20106 Statistics Canada, CANSIM 281-0024

6 Data for 2010 are preliminary, based on the average monthly employment for January to October. Data for

foundries include both ferrous and non-ferrous foundries. Data for Independent Pipe & Tube, Drawing and Rolling Mills are NAICS 3312). Data for Construction Fabricators are for all ‘Architectural and Structural Metals Manufacturing’ (NAICS 3323). This includes re-bar manufacturers and manufacturers of metal doors and windows. Separate annual data are not available for Construction Fabricators. Construction Fabricators are approximately 75% of NAICS 3323.

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Industry NAICS Code

2010 Employment

Primary Steel Producers 3311 16,957 Independent Pipe, Rolling and Drawing Mills 3312 7,564 Construction Fabricators 3323 52,956 Foundries (Ferrous & Non-Ferrous) 3315 8,495 Metals Service Centres 4162 17,016 Total 102,988

Prior to the downturn at the end of 2008, the principal sources of employment growth were Construction Fabricators and Metals Service Centres. From 2000 to 2008 (i.e., prior to the downturn in 2008), employment in Construction Fabricators increased by 15%. In Metals Service Centres, employment increased by approximately 5%.

Employment in Primary Steel Producers and in Pipe, Rolling and Drawing Mills was relatively stable in the 1990s. However, in the most recent decade, employment fell by approximately 44%. Roughly three-quarters of this decline was driven by changes in business organization and technology. Over the past decade, employment in Foundries fell by roughly 55%. Almost two-thirds of this decline preceded the downturn in 2008. An important factor in this decline was the appreciation of Canadian dollar which forced domestic producers to either cease operations or relocate offshore.

3. Steel in the Canadian Economy Throughout its history, the Canadian steel industry has developed alongside Canadian manufacturing. We would not have one without the other. The economic and business histories of the steel industry and the manufacturing sector as a whole are bound up with one another. This relationship is described in a 2010 study supported by CSTEC, the Canadian Steel Producers Association, and the United Steelworkers.7 Among the findings in this study are:

• The steel sector supports over 100,000 direct jobs in Canada and many more jobs which supply the companies in the steel sector.

• The steel industry produces a versatile material that is essential to other key industries, to the quality of our life, to our transportation systems, and to our physical infrastructure.

• Steel will continue to play a key role in our energy and environmental future, including the products and technologies of a ‘greener’ economy.

• Steel generates $7 billion per year in exports.

• Steel will be one of the critical underpinnings of a sustainable manufacturing sector in the Canadian economy of the future.

7 Peter Warrian, “The Importance of Steel Manufacturing to Canada – A Research Study”, Canadian Steel Producers

Association (May 2010) www.canadiansteel.ca/media/2010/cspa-warrian-report.pdf

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Transportation costs create a natural clustering of steel producers and their customers both in the Broader Steel Sector and in manufacturing. Owing to the high cost of transporting basic steel shapes and semi-processed steel products, many steel using companies locate near the mills. A second factor which reinforces this trend is the need to draw on a common pool of skills. These include trade skills, technology and engineering skills, and industry management and marketing skills. The lesson is that the steel mill is a hub. Steel companies also generate demands from suppliers of goods and services in the local economy. These include skill-intensive, professional services. Many of the businesses and professional practices that supply these goods and services to the steel industry subsequently become regional exporters, in their own right.

Canada has developed a significant steel industry. This industry has evolved in a close relationship with both its suppliers and its customers. The steel supply chain has generated good jobs for suppliers as well as customers, as well as benefits for the communities in which the steel industry is located. If our steel industry were to contract, it is not only the steel industry and steel communities that would decline. Many other companies that make up the steel supply chain – customers, as well as suppliers – also would migrate. For example, if Canada were unable to supply the metallurgical needs of the auto industry and its parts suppliers, transportation costs would lead many of these companies to relocate closer to where that supply capacity could be found. Other links are more subtle. Steel products and steel-making inputs are the largest user of the St. Lawrence Seaway. Without the volumes represented by steel, communities from the mine to the mill to downstream manufacturers would be pushed into an inexorable decline.

4. Human Resources Challenges

In 2005, the Canadian Steel Trade and Employment Congress published the final report of the Human Resources Study of the Broader Canadian Steel Industry.8 The 2005 report identified two primary drivers of change in the broader steel sector. The first of these was rationalization of production in response to competitive pressures and a higher Canadian dollar. The report saw rationalization leading to further downsizing in the industry as well as to changing skill needs. The second driver of change was the aging of the work force, especially in the skilled trades. Even with only 50% of retiring skilled tradespersons being replaced, the 2005 report forecast serious recruitment and training challenges for the broader steel sector, and especially for the Primary Steel Producers.

The 2005 report recommended sector-based strategies to address a number of emerging human resources issues. These included:

• increasing the number of apprenticeships,

• developing sector-based recruitment strategies,

8 Available from the CSTEC web site: http://www.cstec.ca/Sector_Study.asp

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• designing a strategy to address the essential skills deficit,

• strengthening the sector’s training culture and increasing employee involvement in identifying training priorities,

• increasing the utilization of CSTEC’s skills upgrading courses,

• building stronger relationships with community colleges and CEGEPs, and

• continuing active labour adjustment programs to support workers who will be adversely affected by downsizing.

In 2011, some of the challenges identified in 2005 continue to be important. The need to ensure a supply of qualified tradespersons is as important in 2011 as it was in 2005. So also is the need to strengthen the sector’s training culture. Addressing the essential skills deficit also will continue to be a challenge for the sector. However, much has changed in the broader steel sector since 2005. The overarching challenge is to understand the impact of globalized supply chains on human resources and then to identify sector-based strategies that will support improved human resources development and human resources management at the company level. Central to globalization is a restructuring of supply chains. Labour-intensive, lower value-added processes will continue to be moved offshore. The appreciation of the Canadian dollar will accelerate this process. What remains is the more skill-intensive, higher value-added processes. There is nothing automatic about these production processes being located in Canada. Canada necessarily competes with other OECD and economies such as China, India and Brazil. In this competition for high value-added production, a key determinant of national success will be the quality of human resources. The key questions, therefore, are (1) what are the skills and practices that will be needed by the steel industry of the future? and (2) how can CSTEC promote and support the development of these skills and practices?

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Chapter Three Drivers of Change in the Broader Steel Sector

1. Globalization, 2. Demographic trends, 3. Technology and work organization, 4. Economic trends and the demand for steel 5. Energy costs and green manufacturing

Human resources needs in the Broader Steel Sector are being transformed by five over-arching trends. These are (1) globalization, (2) the aging of the work force, (3) changes in technology, including how work is organized, (4) broad macro-economic trends, especially in the NAFTA region, and (5) trends in the demand for steel and steel products. It would be a serious error, however, to interpret these drivers of change as having the same impact across Primary Steel Producers, Foundries, Fabricators, and Metals Service Centres. There is no single ‘human resources story’ in the Canadian steel sector. Rather there are four distinct narratives that overlap at some points, but diverge at others.

1. Globalization

Three phenomena are at the heart of globalization. The first is the internationalization of ownership structures. This is most evident in Primary Steel Production where, over the past several years, there has been a change of ownership in every steel producing operation. With only one exception, this change in ownership involved a shift from domestic control to international control.

A direct consequence of the transformation of ownership structures is significantly increased international flows of capital, technology, managerial norms and talent. While attention most often focuses on capital and technology, the adoption of international managerial norms and the international flows of talent may have the most far-reaching impact on human resources. These international managerial norms include productivity benchmarking, new approaches to work organization, and distinct strategies related for training and human resources development.

The second phenomenon that defines globalization is the accelerated integration of international markets. The signature development that marks this integration is a sharp increase in both exports and imports of steel products. Figure 3.1 illustrates this acceleration during the most recent decade.

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Figure 3.1 Canadian Trade (Imports + Export) in Steel Mill Products

Showing Compound Annual Growth Rate (CAGR) (Customs Basis)

1986 – 2010 Statistics Canada, Labour CANSM

Prior to 1992, Canadian trade in steel mill products (imports + exports) grew only marginally. Indeed, if price effects are taken into account, there may not have been any real growth in terms of tonnage. From 1992 to 2003, the dollar volume of trade in steel mill products increased by around 7.2% annually. After 2003, and until the onset of the recession in 2009, the compound annual growth rate (CAGR) almost doubled, averaging 15.2% over the period 2003 to 2008. As Figure 3.2 shows, during the period 2003 to 2008, trade in steel products grew at 3 times the rate of trade in manufactured products as a whole.

Figure 3.2 Canadian Trade in Steel Mill Products

Compared to Trade in All Manufactured Goods (Excluding Food Products) 1986 – 2010

Statistics Canada, Labour CANSM

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The increased trade flows shown in Figure 3.2 are predominantly a NAFTA phenomenon. Roughly two-thirds of Canadian imports are from the United States or Mexico, while over 90% of Canadian exports flow in that direction.

A significant rationalization of production underpinned the increased export orientation of the Primary Steel industry. This rationalization of capacity drove a step-function increase in productivity that reduced overall employment and is also reshaping the skill needs of the steelworker of the future. Although globalization led to a increase in the Primary Steel industry’s export orientation, it would be a serious error to discount the continuing importance of the domestic market. Even with exports taking an increased share of output, the domestic market still accounts for at least half of industry shipments. As discussed later in this chapter, the Primary Steel industry is still vulnerable to unfair trade practices, such as ‘dumping’.

The third phenomenon at the heart of globalization is a marked increase in the scope and reach of international supply chains. The logic driving the globalization of supply chains is the competitive advantage that derives from achieving an approximate symmetry between labour intensiveness and skill availability on the one hand and labour cost on the other. The migration of low-skill, labour intensive production processes to lower cost jurisdictions is not a new story. What is new is the increase in the scope and reach of international supply chains to include production processes that were much less vulnerable to offshoring prior to this decade. The change is being driven by the rapid appreciation of the Canadian dollar. This is most evident in the Foundries industry where labour accounts for approximately 34% of production costs.9 Prior to the economic downturn in 2009, the total real value of shipments from ferrous foundries had fallen by more than 30% since 1999. Most of this decline reflected the movement of commodity production to lower cost jurisdictions. By contrast, in the Primary Steel industry, labour accounts for only 15% of production costs. Consequently, the Primary Steel industry is less vulnerable to the pressure to relocate production to offshore locations. The Primary Steel industry is also more skill intensive and will become even more so in the future.

The impact of globalization has differed significantly across the four industries that comprise the Broader Steel Sector:

• In Primary Steel Production, the impact of globalization is most evident in the internationalization of ownership, the rationalization of production and the adoption of international performance benchmarking. These developments have fundamentally altered productivity conditions over the past five years and will reshape human resources requirements in the Primary Steel industry. Owing to the relatively low share of labour in total production costs (approximately 15%), the Primary Steel industry is much less vulnerable to pressure to relocate production to low-cost jurisdictions. However, the internationalization of production has increased the intensity of competition for investment and technology within global companies.

9 Statistics Canada, CANSIM, Table 301-0006

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Another critical aspect of the globalization of the steel industry is the explosive growth in world demand for steel. The principal driver in this growth is the rapid expansion of China, India, Brazil and other emerging economies. China, in particular, is a singular factor in the growth of world demand, rising from a relatively minor share of global production and consumption in 2000 to almost one half in 2010. (See Figure No. 3.5 in Chapter Three.) China’s steel-making capacity has increased faster than its domestic consumption, with the result that China’s share of world exports to all countries, including Canada, has grown significantly.

• For Construction Fabricators, the ramification of globalization is chiefly the way that the increased importance of export markets, together with the opening of the domestic market to low-cost producers, has forced the industry to supply higher value-added products and services. This ratcheting up of the industry’s value-added trajectory is driving new human resources needs and changing the profile of the industry’s work force. Important consequences of this trend are the widespread adoption of international quality certification systems, such as ISO, and the adoption of more advanced production and imaging technology. This includes high definition plasma cutting on the production side, three-dimensional imaging technologies on the design side, and Building Information Modelling (BIM) on the project management side.

• For Foundry operations, the principal impact of globalization has been to off-shore the majority of ferrous foundry operations. The foundries that remain in Canada are predominantly non-ferrous or mixed ferrous and non-ferrous. As commodity production has moved off-shore, the remaining foundries have focused on higher value-added metallurgical products. This, in turn, is increasing the strategic importance of metallurgical technology skills and the ability to cast complex and precision designs.

• In contrast with the other industries in the steel sector, Metals Service Centres are predominantly focused on the domestic market, although some Service Centres have cross-border operations. There has thus far been no significant internationalization of ownership. However, two consequences of broader globalization trends are evident. The first is that the rationalization of production in primary steel production has led the Primary Producers to withdraw from finishing functions in those lines of production which they no longer undertake. This, in turn, has resulted in those specific finishing functions (and the related skill needs) migrating to service centres. The second impact of globalization is the introduction into North America of the European and Asian business model whereby Primary Producers operate wholly owned service centres and utilize this distribution channel to disseminate technical support to downstream steel users. While this trend has not yet taken root in Canada, there may be changes in the future.

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2. Demographic Trends

The central demographic trend that is reshaping the Canadian labour market is the aging of the working population. Figure 3.3 shows the proportion of workers in the Canadian steel sector over the age of 50. As can be seen, prior to 1997, the over-50 share was essentially stable, ranging from 17% to 21%. After 1997, the share of older workers in the steel sector’s labour force increased steadily. In 2010, approximately 37% of workers in the Broader Steel Sector were over the age of 50.

Figure 3.3

Share of Employees (All Occupations) over Age 50 In the Broader Steel Sector

1987 – 2010 Statistics Canada, Labour Force Survey (Special Tabulation)

The aging of the workforce is most evident in the Primary Steel industry. The problem is especially critical in the skilled trades. For skilled trades occupations, employers are facing both a replacement challenge and a knowledge transfer challenge. The replacement challenge is made more difficult by the lengthy period of time (3-5 years) that is required to train a skilled tradesperson and the drying up of the traditional sources of immigration which historically met much of Canada’s need for skilled tradespersons. At the same time, the long-term rebound of the construction industry has slowed the natural migration of tradespersons from that industry to the manufacturing sector. The public sector has also narrowed the wage and benefit gap which historically made the steel sector the employer of choice in local labour markets. As a result of these trends, hiring tradespersons away from other industries is a strategy with declining capacity to meet the steel sector’s needs. To ensure security of skill supply, there is no realistic alternative to investing in a sector-based apprenticeship initiative. Alongside the replacement challenge, Primary Steel Producers also have an emerging knowledge transfer challenge. Tacit skills, i.e., experience-based knowledge and skill – are retiring. Companies will need to document and transfer these tacit skills to new hires when it is no longer practical to rely on informal mentoring.

For Fabricators and Foundries, the impact of demographic trends is less acute. For Fabricators, the demographic challenge is focused on the need to replace welders and detailers. Changes in technology – notably the adoption of robotics and three-dimensional imaging applications - have reduced, but not

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eliminated the replacement challenge. Metals Service Centres, on the whole, do not confront any serious demographic challenges.

3. Technology Trends and Human Resources Management

There are two broad technology trends in the broader steel sector:

(1) increased capital/labour ratios, and

(2) an increase in the use of information technologies in design and production processes.

These trends have had five consequences:

First: labour productivity gains have steadily reduced the number of production workers and materials handlers as well as their share in the Primary Steel Producers’ work force. Automation will continue to eliminate these types of jobs. In Foundries, Fabricators and Service Centres, automation will also eliminate some metal-working jobs, notably welding and machining;

Second: the need to maintain production equipment has led to an increase in the relative share, though not the absolute number, of skilled tradespersons in the steel sector. Larger establishments will generally prefer to provide their own maintenance using direct employees. Smaller establishments may prefer to contract for maintenance services;

Third: the technology intensiveness of production and design equipment – especially the application of information technologies to product and design processes – has increased both the number of technicians and technologists employed in the steel sector and their share in the sector’s work force;

Fourth: a further consequence of the increased application of information technologies to production processes has been an increased need for skilled tradespersons to have technology skills; and

Fifth: in the absence of technology breakthroughs, which are inherently unpredictable, the principal sources of productivity gains over the next five years will be (a) continued automation of labour processes, (b) the implementation of continuous improvement strategies, and (c) the adoption of total productive maintenance strategies.

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4. Economic Outlook:

Recovery:

Figure 3.4 shows monthly employment in the industries that comprise the Canadian Steel Sector.

Figure 3.4

Monthly Employment in the Canadian Steel Sector January 2006 to October 2010

Statistics Canada, CANSIM

In the third quarter of 2008, the international recession caused production in Primary Steel to fall sharply. Both production and employment continued to fall until the end of 2009. In 2010, there was a partial recovery. By the last quarter of 2010, production levels were approximately 85% of the pre-2008 level, while employment had returned to 90% of the 2008 level.

As in the primary steel industry, employment in Pipe & Tube and Drawing & Rolling mills also turned down in the third quarter of 2008 and continued to decline until the summer of 2010. In the last quarter of 2010, employment was still 30% below the 2008 level.

In 2009, employment in Foundries employment fell by approximately 24% from the average employment in 2008. Employment began to recover in the spring of 2010. By the summer of 2010, employment had returned to approximately 94% of 2008 employment levels.

Employment in Construction Fabricators was less seriously affected by the downturn, owing to the introduction of the federal stimulus program in 2009. As in other industries, employment in Construction Fabricators turned down in the autumn of 2008. From the fourth quarter of 2008 to the spring of 2009, approximately 9,400 jobs were lost. The effect of the stimulus supported turnaround in construction

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restored approximately 40% of these jobs. In the fourth quarter of 2010, employment in the industry was approximately 92% of the pre-downturn level. The challenge for the industry will be whether sufficient private investment in new construction occurs to compensate for the winding down of stimulus spending.

The downturn in Metals Service Centre employment, though severe, was not as acute as in Primary Steel and Foundries. In part, this was because construction demand offset the decline in demand from manufacturers of steel products. During 2009 and through to the beginning of 2010, employment fell by approximately 12% from 2008 levels. By the last quarter of 2010, employment had returned to 90% of 2008 levels.

The NAFTA Region:

Figure 3.5 shows the world production of steel. As can be seen, world production increased slowly from 1970 to 2000, averaging 1.2% growth per year. After 2000 and through to 2007, world production accelerated sharply, averaging approximately 5.8% per year.

Figure 3.5 World Production of Steel (Crude Steel Equivalent)

Millions of Metric Tonnes (mmt), 1970-2009 World Steel Association

Figure 3.6 shows that the main driver behind the expansion in global steel production in the past decade was the increase in output in China.

In the NAFTA region, by contrast, apparent consumption of steel was roughly the same in 2006 as it was in 2000. As can be seen in Figure 3.6, steel production in the NAFTA region was also essentially flat over the period prior to the downturn in late 2008. Canadian steel production, in fact, declined from 16,595 mmt in 2000 to 15,522 mmt in 2007 and then 14,845 mmt in 2008. Most of this decline preceded the current economic downturn.

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Figure 3.6 Production of Steel in the NAFTA Region (Crude Steel Equivalent)

Millions of Metric Tonnes (mmt), 1970-2009 World Steel Association

Recent projections by the World Steel Association indicate that international demand will increase in 2011. For the most part, the areas of rapid growth n steel demand (China, India and Brazil) are not supplied by Canadian producers. The demand outlook for Canadian producers is shaped largely by conditions in the NAFTA region. The OECD anticipates that the NAFTA region will share in the international recovery of demand. However, at this time, most forecasters anticipate three to five years of comparatively modest growth in which unemployment will remain stubbornly high. This outlook clearly has implications for steel. Steel is chiefly an input into capital goods or consumer durables. In the NAFTA region, slower growth will constrain the demand for both capital goods and consumer durables. Hence, the outlook in the NAFTA region, though positive, is also cautious.

The Canadian Dollar as a ‘Petro-Dollar’:

In addition to uncertain demand in the NAFTA region, Canadian producers face the additional challenge of a currency re-alignment. The Canadian dollar has become, to a considerable degree, a ‘petro-dollar’. As long as oil prices remain above $70, it is unlikely that the Canadian dollar will fall significantly below parity with the US dollar. That defines the new competitive reality for Canadian companies. The ‘parity dollar’ has four broad implications. The significance of these implications varies across the industries that comprise the Broader Steel Sector:

First: there will be increased pressure for commodity production, i.e., production of low-value added products in high volume, to take place in off-shore locations. This has already happened in the Foundry industry where labour costs account for around a third of production costs. Primary Steel Producers, however, are less subject to this pressure, since labour costs in that industry are only around 15% of total production costs and shipping costs offset some of the labour cost advantage of off-shore producers.

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Second: higher value-added production will continue to be viable in Canada. However, this continued viability will require increases in productivity, i.e., increases in value-added per worker. There are three principal ways these increases in value added per employee can be achieved: (1) more efficient operations that reduce or eliminate down-time and defects, (2) investment in new technology that automates labour processes, and (3) investment which enables Canadian operations to supply more sophisticated alloys, advanced coatings, and complex designs. The imperative to increases value-added per worker clearly has implications for skill requirements and human resources planning. The new investments in technology that will be required may be beyond the reach of some small companies, notably in the foundry, construction fabricator, and service centre segments of the Broader Steel Sector. Rationalization has already taken place in the primary producer industry. The rationalization trend will spread to foundries, fabricators and service centres. This rationalization will be associated with an increase in average establishment size;

Third: the high dollar will accelerate rationalization and the move to off-shore locations among manufacturers of some fabricated steel products (i.e., the customer base). This may reduce domestic demand for steel or slow the growth of demand; and

Fourth: the shift to higher value-added production will drive a change in both skill requirements and in the occupational composition of the work force in the steel sector.

5. The Potential for Growth10

The growth potential of the Broader Steel Sector differs across the industries that comprise the sector.

• Primary Steel Producers can look to four markets to drive a growth in output and consequent growth in employment. The first of these is the auto industry which is projected to recover from its cyclical downturn and capacity restructuring. The pace of this recovery may be slower that previous upturns, owing to the general trend of households to reduce their debt burden. However, in virtually every scenario for the NAFTA region, there will be a significant ramping up of auto production. The second market that will drive growth is oil and gas, chiefly oil sands development and pipeline construction. Third, power generation and distribution will generate a need for steel products. And finally, the industry has the potential to capture an increased share of the construction market by adapting high strength and coated products developed for the manufacturing sector.11

10 Detailed employment projections are provided in Chapter Four. 11 The ‘growth story’ is set out more fully in Peter Warrian, “The Importance of Steel Manufacturing to Canada – A

Research Study”, Canadian Steel Producers Association (May 2010)

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• The Foundries industry does not share the same potential for growth as the Primary Steel Producers. Over the next five years, the ‘commodity’ production that remains in Canada will be at increased risk of moving off-shore or losing market to off-shore suppliers. Higher-value casting work will increase, but will be limited by the overall growth in sophisticate durable products and machinery. While there is scope for metal casting replacing other materials (notably plastics and polymer compounds), that scope is limited.

• Growth of Construction Fabricators is tied to the construction industry’s outlook, especially non-residential building construction and to the steel share of the construction market. Over the next five years, demand is unlikely to exceed the levels seen in the period prior to 2008, though steel may capture an increased share of the structural and cladding market if prices remain competitive with other materials.

• The customer base for Metal Service Centres is chiefly metals using manufacturers, excluding the auto assemblers. In most regions of Canada, there has been a structural change which has seen a significant fraction of metals using manufacturers close or transfer operations to off-shore locations. While the remaining customer base will experience growth, in tandem with the overall recovery in the goods producing sector, the decline in the size of the customer base will offset much of that growth.

6. Anti-Competitive Trade Practices of Off-Shore Producers

The Primary Steel industry has historically been the focus of anti-competitive policies and unfair or illegal practices by offshore producers seeking to protect their domestic market or give their exporters an unfair advantage. It is a common practice for off-shore suppliers to engage in ‘dumping’, i.e., selling surplus product at less than the average cost of production12. As well, many of these offshore producers enjoy hidden subsidies from their governments. These anti-competitive practices are contrary to the international rules of trade. However, it can be both difficult and costly to police these anti-competitive practices. The secular decline in international shipping costs has put North American-based producers at increased risk of dumping.

Primary Steel Producers in many developing countries – especially China – receive direct and indirect state support. This support may take various forms, including below-market costs for capital, regulatory impedance of imports, and above-market prices for products (which allows dumping of surplus product).

12 All industries in which fixed costs constitute the lion’s share of production costs are vulnerable to dumping. A

simplified model illustrates the economics of dumping. A batch of output can be divided into two categories – A and B. The price charged for category A output covers the total fixed costs (i.e., amortization of the capital stock) of producing both A and B plus the variable cost (labour, materials, energy, and shipping) of producing A. The price charged for category B output, therefore, only needs to cover the variable costs, since the fixed costs were covered by the proceeds from the sale of category A output. If fixed costs are a high proportion of total costs, as they are in the Primary Steel Industry, a price which covers only variable costs will be substantially less than a price which covers both variable and fixed costs. If a producer has already covered its fixed costs from the proceeds of category A output, then any price above the variable cost for category B output will add to its profit.

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Governments in the NAFTA region will need to increase their vigilance in enforcing trade rules the prevent off-shore producers from ‘dumping’ product in the NAFTA market.

7. Energy Costs

Energy looms large as a production cost. Figure 3.7 compares the approximate share of labour and energy and water in production costs. For Primary Steel Producers, energy costs almost the same as labour costs. An important implication for Primary Steel Producers is that increased efficiency in energy utilization is on par with increased labour productivity as a source of overall improvement in productive efficiency.

Figure 3.7 ‘Labour Share’ and ‘Energy and Water Share’ in Production Costs

Average 2004 – 20078 Statistics Canada, CANSIM

●

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Chapter Four Employment Projections

1. Macroeconomic parameters 2. Technology impacts 3. Retirements and Quits 4. Primary Steel Producers 5. Construction Fabricators 6. Foundries 7. Metals Service Centres

The forecast scenarios set out in this chapter are based on four sources:

• a special forecast commissioned for this study from the Conference Board, • the Construction Sector Council’s forecast for the construction industry, • the Survey of Human Resources Managers undertaken for this study, and • occupational estimates developed by Prism Economics.

A forecast should be interpreted as a scenario that is based on expectations that are judged reasonable when the forecast is developed. For purposes of human resources planning, a forecast is helpful in identifying likely trends in employment if the macro-economic and technology assumptions on which the forecast rests are substantially borne out over the forecast period.

Macroeconomic Parameters

Figure 4.1summarizes the key assumptions that underpin the Conference Board’s projections for the Broader Steel Sector.

Figure 4.1 Key Macroeconomic Variables and Assumptions, 2011-2015

Conference Board of Canada Forecast (October 2010) (Special Forecast prepared for CSTEC)

C$ in US$

Oil Price Real GDP Growth Bank of Canada

Rate Canada US 2011 $0.99 $83 2.5% 2.9% 2.3%

2012 $1.01 $90 2.9% 3.9% 4.1%

2013 $1.01 $96 3.2% 3.2% 4.5%

2014 $1.00 $104 2.8% 2.8% 4.5%

2015 $0.99 $111 2.4% 2.6% 4.5%

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These macroeconomic assumptions and expectations are broadly comparable to those of other forecasters:

Technology Impacts

From a human resources perspective, the principal impacts of changes in technology are on the occupational composition of the work force and on productivity trends. The principal drivers of productivity growth are changes in work organization (‘soft technologies’) and capital investment (‘hard technologies’). It is difficult to sustain productivity gains of more than 0.5% annually based solely on improvements in work organization, such as continuous improvement (kaizen) or total productive maintenance (TPM) strategies. To consistently achieve an average annual productivity growth of 1.0%, and especially 2.0% (or more), requires ongoing and significant increases in investment in new machinery and equipment. Some companies may pursue this strategy. However, in the medium-term, this is likely to be the exception, rather than the norm. In the main, the weak economic recovery will lead most companies to be exceedingly cautious about major investments in new technology. This implies that productivity growth will be slower than prior to the economic downturn, i.e. in the range of 0.5% to 1.0% per year.

The employment forecasts that are set out in the balance of this chapter present estimates based on 0.5%, 1.0% and 2.0% productivity growth, relative to pre-downturn levels of productivity. For human resources planning purposes, the 1.0% assumption reflects the most likely trend.

Retirements, Voluntary Quits and Permanent Lay-Offs

An exit rate, composed of projected retirements, voluntary quits, and permanent lay-offs has been estimated, based on responses to the Survey of Human Resources Managers. Different exit rates have been calculated for each of the four industries that comprise the Broader Steel Sector and for different occupational groups within these industries.

Primary Steel Producers

Figure 4.2 shows actual employment for 2008 to 2010, based on Statistics Canada’s Survey of Employment, Payroll and Hours and projections for employment over the period 2011 to 2015. The employment projections are based on alternative productivity assumptions and the Conference Board’s output forecast. In these scenarios productivity growth and employment growth are inversely related rather than directly related. That is to say, higher productivity growth reduces total labour requirements while lower productivity growth implies greater overall labour requirements.13

13 This should not be interpreted as a policy preference for lower productivity growth. In the longer run, low

productivity growth implies higher costs and reduced competitiveness – both of which call into question the

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Figure 4.2 Primary Steel Producers (NAICS 3311)

Actual Employment: 2008- 2010 (Statistics Canada, CANSIM) Projected Employment: 2011-2015 based on Alternative

Productivity Assumptions and Projected Industry Output Conference Board of Canada Forecast (October 2010)

(Special Forecast prepared for CSTEC)

Under none of the productivity assumptions does employment in 2015 return to the 2008 level.

Figure 4.3 summarizes expected employment in the Primary Steel Producers by major occupational group, based on alternative productivity scenarios. The main impact of higher productivity growth is deemed to fall on workers in ‘production and materials handling’ occupations. Higher productivity growth is also expected to entail some degree of substitution of engineering and technology workers for tradespersons and production workers. Consequently, in the high productivity growth scenario, there is an increase in both the number and the share of engineering and technology workers.


Projected Employment by Major Occupational Group (Prism Economics and Analysis)

2010 2015

(Alternative Productivity Scenarios) Low

(0.5%) Moderate

(1.0%) High

(2.0%) Trades 6,895 7,585 7,274 6,702 Production and Materials Handlers 5,155 5,475 5,325 4,970 Engineering and Technology 1,632 1,795 1,746 1,723 Administration 1,686 1,855 1,787 1,669 Management 832 905 882 816 Sales 526 572 552 516 Other 231 251 242 226 Total 16,957 18,438 17,808 16,622

continued viability of a manufacturing operation. Higher productivity growth is also the ultimate economic foundation of higher wages and salaries.

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Figure 4.4 estimates hiring and recall requirements based on anticipated exit rates derived from the Survey of Human Resources Managers and changes in overall employment, based on the Conference Board’s output forecasts and alternative productivity scenarios. The projections indicate a serious human resources planning challenge for meeting the industry’s need for skilled tradespersons.


Projected Five-Year Hiring and Recall Requirements, 2011-2015 (Prism Economics and Analysis)

Five Year Hiring & Recall Requirements

based on Alternative Productivity Scenarios

Five Year Exit Rate

Low Productivity

Growth (0.5%)

Moderate Productivity

Growth (1.0%)

High Productivity

Growth (2.0%)

Trades 21% 2,138 1,827 1,255 Production and Materials Handlers 18% 1,248 1,098 743 Engineering and Technology 19% 473 424 401 Administration 14% 405 337 219 Management 14% 189 166 100 Sales 14% 120 100 63 Other 14% 52 44 28

Total including Recalls 4,624 3,997 2,809

The employment trajectories illustrated in Figure 4.4 do not indicate any significant spike in employment in 2011. Rather, the trajectories suggest that hiring needs will emerge over the course of the forecast period, i.e., 2011 to 2015. A consequence of this is that recalls of laid-off workers are unlikely to be a major source of meeting human resources need, though temporary hiring back of retired workers may address some short-term needs. By far the lion’s share of the human resources needs estimated in Figure 4.4 will need to be met through new hiring.

Independent Pipe, Rolling and Drawing Mills

Figure 4.5 depicts actual employment levels for the period 2008 to 2010 and projections for period 2011 to 2015. The employment projections are based on alternative productivity assumptions applied to the Conference Board’s output forecast.

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Figure 4.5 Independent Pipe, Rolling and Drawing Mills (NAICS 3312)




The first and most important inference from the projections is that, under none of the productivity assumptions, is employment in 2015 projected to return to the 2008 level. Compared to 2008, industry output in 2015 is projected by the Conference Board to be down by approximately 4.6%. Employment levels in 2015 are forecast to be 8% to 17% lower than 2008. Relative to 2010, however, both employment and output are projected to increase. Roughly two-thirds of the projected increase in employment after 2010 is expected to occur in 2011 as the industry experiences a recovery that is approximately in line with the rest of the manufacturing sector. An important implication of this employment path is that a large fraction of the projected five-year hiring and recall requirement may be met through recalling laid off workers.

Figure 4.6 summarizes expected employment in pipe, rolling and drawing mills by major occupational group. The main impact of higher productivity growth is deemed to fall on workers in ‘production and materials handling’ occupations. Higher productivity growth is also expected to entail some degree of substitution of engineering and technology workers for tradespersons and production workers. Consequently, in the high productivity growth scenario, there is an increase in both the number and the share of engineering and technology workers.

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2010 2015


(0.5%) Moderate

(1.0%) High

(2.0%) Trades 2,792 3,679 3,490 3,125 Production and Materials Handlers 2,454 3,234 3,044 2,733 Engineering and Technology 544 717 771 827 Administration 949 1,250 1,240 1,230 Management 557 734 728 716 Sales 268 353 353 353

Total 7,564 9,967 9,626 8,984

Figure 4.7 estimates hiring and recall requirements based on anticipated exit rates derived from the Survey of Human Resources Managers and changes in overall employment, based on the Conference Board’s output forecasts and alternative productivity scenarios.





Five Year Exit Rate

Low Productivity

Growth (0.5%)


Growth (1.0%)

High Productivity

Growth (2.0%)

Trades 14% 1,277 1,089 724 Production and Materials Handlers 12% 1,074 884 573 Engineering and Technology 10% 227 281 337 Administration 10% 396 386 376 Management 8% 222 215 203 Sales 8% 107 106 106

Total Hiring and Recall Requirements 3,303 2,961 2,319

As noted earlier, most of the increase in employment over 2010 is expected to occur in 2011. This implies that a substantial portion of the estimated hiring and recall requirements will be met by recalling workers who were laid off during the downturn. Actual recruitment challenges are likely to be around 35%-45% of the estimates set out Figure 4.7. For skilled trades, this would imply five-year recruitment needs in the range of 290 to 510 persons.

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Foundries

Figure 4.8 shows the actual employment in 2008 to 2010 and projections for period 2011 to 2015. The data refer to both Ferrous and Non-Ferrous Foundries. The employment projections are based on alternative productivity assumptions applied to the Conference Board’s output forecast.

Figure 4.8 Ferrous and Non-Ferrous Foundries (NAICS 3315)




The Conference Board anticipates that by 2015 output in the Foundries industry will be approximately 7.4% higher than in 2008. This projection is based on an expected recovery in the North American auto sector. Employment levels in the foundry industry depend on productivity and investment assumptions.

Under all three productivity scenarios, roughly two-thirds of the employment losses experienced during the downturn of 2009 will be recovered by the end of 2011. If the Foundry industry further rationalizes and upgrades its capital stock – as is envisioned in the high productivity scenario – employment will stabilize at around 90% of 2008 levels. Under lower productivity scenarios, Foundry employment will return to 2008 levels or moderately exceed those levels, though the longer term viability of some operations will subsequently come under increased competitive pressure.

An important implication of this employment path shown in Figure 4.8 is that a large fraction of the projected five-year hiring and recall requirement in the Foundry industry is likely to be met by recalling laid off workers. Recruitment requirements will be moderate, except in technology occupations where human resources managers in the Foundry industry anticipate high turnover and difficulty in recruiting persons with the required skills and experience.

Figure 4.9 summarizes expected employment in the Foundry industry by major occupational group. The main impact of higher productivity growth is deemed to fall on workers in ‘production and materials handling’ occupations. Higher productivity growth is also expected to entail some degree of substitution of engineering and technology workers for tradespersons and production workers. Consequently, in the

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high productivity growth scenario, there is an increase in both the number and the share of engineering and technology workers.



2010 2015 (Alternative Productivity Scenarios)

Low (0.5%)

Moderate (1.0%)

High (2.0%)

Trades 1,783 2,094 2,005 1,835 Production and Materials Handlers 4,598 5,398 5,040 4,510 Engineering and Technology 569 669 746 770 Administration 817 959 971 990 Management 212 249 260 270 Sales 515 604 610 615

Total 8,494 9,973 9,632 8,990






Five Year Exit Rate

Low Productivity

Growth (0.5%)


Growth (1.0%)

High Productivity

Growth (2.0%)

Trades 11% 506 418 248 Production and Materials Handlers 7% 1,122 764 234 Engineering and Technology 35% 298 376 400 Administration 10% 224 236 255 Management 13% 65 75 85 Sales 13% 156 162 167


As noted earlier, most of the increase in employment is expected to occur in 2011. This implies that a substantial portion of the estimated hiring and recall requirements will be met by recalling workers who

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were laid off during the downturn. Actual recruitment challenges are likely to be around 35%-45% of the estimates set out Figure 4.10. For skilled trades, this would imply five-year recruitment needs in the range of 100 to 200 persons. For metallurgical technologists, recruitment needs would be 120 to 160. In light of the experience requirements in this field, these recruitment needs may pose a challenge to the industry in some regions.

Construction Fabricators

Figure 4.11 shows the actual employment in 2006 to 2010 in Construction Fabricators and projections for period 2011 to 2015. These projections are based on forecasts for non-residential construction developed by the Centre for Spatial Economics for the Construction Sector Council.

Figure 4.11 Construction Fabricators (NAICS 3323)


Productivity Assumptions and Projected Non-Residential Building Construction Construction Sector Council (2010)

Only in the low productivity scenario does employment in Construction Fabricators return to pre-2008 levels. Most of the employment growth is spread over the forecast period, suggesting that human resources requirements will be met chiefly by hiring, rather than by recalling laid off workers.

Figure 4.12 summarizes expected employment in the Construction Fabricators by major occupational group. Higher productivity growth will entail a significant degree of substitution of engineering and technology workers for tradespersons and production workers.

42



2010 2015


(0.5%) Moderate

(1.0%) High

(2.0%) Trades 20,458 23,548 21,921 19,683 Production and Materials Handlers 15,285 17,594 16,225 15,430 Engineering and Technology 3,760 4,328 6,210 7,110 Administration 6,887 7,928 7,733 7,362 Management 4,487 5,165 5,038 4,796 Sales 2,078 2,392 2,333 2,221

Total 52,955 60,955 59,460 56,602






Five Year Exit Rate

Low Productivity

Growth (0.5%)


Growth (1.0%)

High Productivity

Growth (2.0%)

Trades 16% 6,363 4,736 2,498 Production and Materials Handlers 12% 4,143 2,774 1,979 Engineering and Technology 9% 906 2,788 3,688 Administration 11% 1,798 1,604 1,232 Management 15% 1,351 1,224 982 Sales 8% 480 422 309


In any of the productivity scenarios, the industry will have a significant challenge meeting its requirement for skilled tradespersons and for technicians and technologists with the requisite industry skills and experience.

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Metals Service Centres

Figure 4.14 shows the actual employment in 2008 to 2010 in Metals Service Centres and projections for period 2011 to 2015. The employment projections are based on the Conference Board’s estimates for industry output and alternative productivity assumptions.

Figure 4.14 Metals Service Centres (NAICS 4162)




In the Metals Service Centre industry, the primary sources of productivity gains – should they occur – will be consolidation, increased application of information technologies and automation of finishing functions. A degree of consolidation in the industry may be a pre-condition for a significant increase in investment in information technologies and automating finishing functions. In Figure 4.14, the low productivity assumption (0.5% annual productivity growth) describes the employment trajectory in the absence of consolidation and increased investment. In this scenario, employment in 2015 exceeds the level recorded prior to the downturn in 2009. The high productivity assumption (1% annual productivity growth) shows the employment path that is likely to result if there is a degree of consolidation in the industry and a step-function increase in investment in information technologies and automated finishing equipment. In this scenario, employment increases only moderately over the 2010 level and does not return to the 2008 level. This employment path could also occur if the appreciation of the Canadian dollar made the 2009 downturn in metal-using manufacturing permanent. In these circumstances, consolidation in the industry would further bend the employment trajectory downwards.

Figure 4.15 summarizes expected employment in the Metals Services Centre industry by major occupational group.

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2010 2015 (Alternative Productivity Scenarios)

Low (0.5%)

Moderate (1.0%)

High (2.0%)

Trades 2,080 2,346 2,266 2,115 Production and Materials Handlers 4,119 4,646 4,487 4,188 Engineering and Technology 583 658 636 593 Administration 2,271 2,562 2,474 2,309 Management 4,925 5,555 5,366 5,008 Sales 2,979 3,360 3,246 3,029

Total 16,957 19,127 18,475 17,242






Five Year Exit Rate

Low Productivity

Growth (0.5%)


Growth (1.0%)

High Productivity

Growth (2.0%)

Trades 12% 516 436 285 Production and Materials Handlers 11% 980 822 522 Engineering and Technology 20% 191 169 126 Administration 11% 540 453 288 Management 6% 926 736 378 Sales 6% 560 445 229


As noted earlier, the employment trajectory, and by implication, hiring and recall requirements, will largely turn on whether there is a consolidation and rationalization in the Metals Service Centre industry.

●

45

Appendix Consolidated Hiring and Recall Projections, 2011-2015


based on Low Productivity Scenario

(0.5% Annual Productivity Growth)

Primary Steel

Producers

Independent Pipe,

Rolling and Drawing

Mills


Ferrous and Non-Ferrous

Foundries


Total

Trades 2,138 1,277 6,363 506 516 10,800 Production and Materials Handlers 1,248 1,074 4,143 1,122 980 8,566 Engineering and Technology 473 227 906 298 191 2,096 Administration 405 396 1,798 224 540 3,363 Management 189 222 1,351 65 926 2,752 Sales 120 107 480 156 560 1,422

Total Hiring and Recall Requirements 4,572 3,302 15,042 2,371 3,713 29,000


based on Moderate Productivity Scenario


Primary Steel

Producers

Independent Pipe,

Rolling and Drawing

Mills



Foundries


Total

Trades 1,827 1,089 4,736 418 436 8,506 Production and Materials Handlers 1,098 884 2,774 764 822 6,341 Engineering and Technology 424 281 2,788 376 169 4,039 Administration 227 386 1,604 236 453 3,016 Management 166 215 1,224 75 736 2,417 Sales 100 106 422 162 445 1,236


46


based on High Productivity Scenario


Primary Steel

Producers

Independent Pipe,

Rolling and Drawing

Mills



Foundries


Total

Trades 1,255 724 2,498 248 285 5,009 Production and Materials Handlers 743 573 1,979 234 522 4,051 Engineering and Technology 401 337 3,688 400 126 4,953 Administration 219 376 1,232 255 288 2,370 Management 100 203 982 85 378 1,749 Sales 63 106 309 167 229 875


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Chapter Five Human Resources Managers Survey

1. Survey Coverage 2. Anticipated Recruitment Challenges 3. Participation in Work Experience Training 4. Training Budgets and Administration 5. Training Culture 6. Training Priorities

Survey Coverage

There were a total of 45 responses to the Human Resources Manager Survey. Many responses applied to multiple facilities. The coverage of establishments was: 11 Primary Steel Producing mills, 13 Foundries, 26 Fabrication plants, and 28 Metals Service Centres. The total employment reported by survey respondents was 12,364. This represents approximately 12% of total employment in the Broader Steel Sector, based on 2010 Statistics Canada estimates in the Survey of Employment, Payrolls and Hours (SEPH). The survey was administered from September to November 2010.

Anticipated Recruitment Challenges

Employers’ expected recruiting difficulties over the next five years vary by industry and by occupation. It should also be noted that current perceptions of future recruitment challenges may be overly influenced by current labour market conditions.

Figure No, 5.1 shows how HR Managers gauge their recruitment challenges over the next five years. As can be seen, the Primary Steel industry generally anticipates greater challenges, ranging from moderate to high, depending on the occupational group. Overall, HR Managers in the Steel Sector anticipate that the greatest challenges will be in hiring skilled trades. Among the skilled trades, welders and millwrights/industrial mechanics predominate among the specific occupations that are expected to pose hiring challenges.

48

Figure 5.1 Expectation of Recruitment Difficulties over the Next Five Years

(Based on a 1-10 Scale) Survey of Human Resources Managers

(September – November, 2010)

Primary Steel

Foundries Construction Fabricators

Service Centres

Operations/Production – Non-Supervisory Low No

Pattern Low Low

Operations/Production - Supervisory

No Pattern

Low to Moderate Low Low to

Moderate

Skilled Trades High Moderate High Low to

Moderate

Technicians/ Technologists Moderate Low to

Moderate No

Pattern Low

Engineers Moderate Low to

Moderate Low to

Moderate Moderate

Administration/ Management Moderate Low to

Moderate Low to

Moderate Moderate to High

Participation in Work Experience Training

The majority of Primary Steel mills reported that they currently employ apprentices. Approximately half of Foundry operations and Fabricator plants report that they currently employ apprentices. Among Metals Service Centres, the proportion falls to approximately one-third. All Primary Steel mills reported that they employed engineering interns as did almost half of Fabricators. The majority of survey respondents reported that they participate in co-op or internship programs with colleges to enable technology students to acquire practical experience.

Training Budgets and Administration

All respondents to the survey in the Primary Steel industry reported that their company has a formal training budget for their location. Formal training budgets were reported by approximately one third of Foundries and half of Fabricators and Metals Service Centres. Approximately a third of companies with formal training budgets had suspended their training budget as a result of the downturn in 2009.

In 88% of the 78 locations covered by the survey, management maintained individual records of training.

Only one-third of survey respondents reported that there is a formal management committee that oversees training. Half of the respondents reported that their company had a formal training plan.

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Approximately 10% of survey respondents reported that their company has benchmarks for training. Benchmarking metrics are chiefly applied to production processes. The application of benchmarking to human resources management is less advanced. However, the fact that around 10% of companies are employing metrics to monitor their training investment is a sign of the increased priority of training and development in a growing number of companies.

Types of Training

Figure 5.2 shows the incidence of different types of training for non-supervisory production workers and skilled trades across the four industries that comprise the Broader Steel Sector.

Figure 5.2 Incidence of Different Types of Training Survey of Human Resources Managers


Production and Trades Primary Steel

Foundries Fabricators Metals Service Centres

Health and safety High High Moderate Low Preventive maintenance/ Total productive maintenance Low Low Low Moderate Quality/Statistical process control/ Total quality management High Moderate Low Moderate Basic skills: Literacy, numeracy Low Very Low Very Low Very Low

Team working skills Low Very Low Very Low Very Low Problem solving skills Low Very Low Very Low Very Low Information technology training Low Very Low Very Low Very Low

>65% High 35-65% Moderate 20-40% Low <20% Very Low

Health and safety, quality/process control, and preventive maintenance/total productive maintenance emerge as the most important areas for training. ‘Soft skills’, including team-working and problem solving have lower priority.

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How Companies View their Training Performance

Survey participants were asked to assess the training performance of their companies with:

(1) the industry leader,

(2) other operations of the same company,

(3) other companies in the same industry, and

(4) other manufacturers.

Figure 5.3 shows that survey respondents believe that around 45% of their operations lag the industry leader in terms of training performance, while 55% believe that they are the leader or their training performance is approximately commensurate with the leader. Only 20% of respondents believed that they trail other companies in the same industry. These results reflect the participation in the Human Resources Manager Survey. If higher performing companies dominated the survey returns, the results could overstate actual trends.

Figure 5.3 Perceived Comparison to Other Companies and Operations

Broader Steel Sector Survey of Human Resources Managers


Compared to:

Lead Significantly

Lead Somewhat

About the Same

Trail Somewhat

Trail Significantly

• Leader in this Industry n/a n/a 55% 26% 19%

• Other Operations of the Same Company 7% 66% 28% 0% 0%

• Other Companies in the Same Industry 0% 15% 65% 15% 5%

• Other Manufacturers 0% 18% 59% 9% 14%

Importance of Various Training and Human Resources Issues

Survey participants were asked to rank the importance of various training and human resources issues on a 1-10 scale, where 1 is ‘not important’ and 10 is ‘very important’. Figure 5.4 summarizes the average response by industry.

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Figure 5.4 Importance of Various Training and Human Resources Issues

Average of 1-10 Scale Where 1=Not Important and 10=Very Important

Survey of Human Resources Managers (September – November, 2010)

The survey results suggest a number of possible findings:

• The ability to benchmark and compare training performance emerges as having moderate importance in the Primary Steel industry and lower importance in other industries.

• The loss of skills arising from retirements is viewed as moderately important in all industries, but especially important in the Metal Services Centres. Interviews suggest that, in the Metals Service Centres, the loss of skills arising from retirements pertains chiefly to sales representatives and is related to the importance of ‘relationship selling’ strategies.

• Weaknesses in basic skills (reading, numeracy and communications) ranks low as a priority in the Primary Steel industry and in Foundries and has moderate importance in Fabricators and Metals Service Centres.

• In the Primary Steel industry, the key skills challenges appear to be strengthening supervisory or leadership skills and improving machinery and equipment trouble-shooting skills.

• In Metals Service Centres, the priorities that emerge are strengthening supervisory or leadership skills and health and safety skills

• For Fabricators, team-working skills, trouble-shooting skills, and quality or process controls skills appear to be the priorities.

●

Primary Steel


Ability to Benchmark and Compare Training Performance 6.0 4.0 5.2 5.2

Loss of Skills from Retirements 6.7 5.6 5.4 8.0

Weaknesses in Basic Skills (reading, numeracy, communications) 4.0 4.4 6.1 6.6

Weaknesses in Supervisory or Leadership Skills 8.7 6.0 6.9 8.3

Weaknesses in Team-Working Skills 7.0 5.9 7.3 7.8

Weakness in Machinery and Equipment Trouble-Shooting Skills 8.3 6.6 7.1 6.6

Weaknesses in Quality or Process Control Skills 7.0 5.9 7.3 7.5

Weaknesses in Health and Safety Skills 6.3 6.3 6.8 8.1

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Chapter Six Local Union Leaders Survey

1. Survey Coverage 2. Consultation 3. Types of Training 4. CSTEC Courses 5. Training Culture 6. Training Priorities

Survey Coverage

The Union Leader Survey was administered in October and November of 2010. The United Steelworkers identified 121 workplaces in the Broader Steel Sector where they represent employees. Survey returns were received from 34 Locals. These Locals reported membership of 6,505 persons. The Locals comprised 12 Locals in the Primary Steel Producing industry, 2 Locals in the Foundry industry, 9 Locals representing workers in the Fabricator industry, and 6 Locals representing workers in Metals Service Centres. Five survey responses were from Locals that covered more than one Steel Sector industry or also represented workers in allied industries.

Consultation

Seventy percent of survey respondents reported that training had been an issue in contract negotiations. Sixty-four percent of respondents indicated that there was formal consultation with the Union on training matters. Just over half of survey respondents (18/33) reported that there is a joint labour-management committee which discusses training needs.

Types of Training

Figure 6.1 summarizes survey results describing the incidence of various types of training.

53

Figure 6.1 Incidence of Various Types of Training over the Past Two Years

Survey of Union Leaders (October – November, 2010)

Type of Training Primary Steel

Producers


Other

Sample Size

12 2 9 6 5

Health and Safety

11 2 9 5 5

Preventive Maintenance / Total Productive Maintenance

5 1 4 2 3

Quality Control/Statistical Process Control/ Total Quality Management

3 1 3 2 3

Basic Skills – Literacy, Numeracy

2 1 3 1 0

Team Working Skills

4 1 3 0 1

Problem Solving Skills

3 1 2 1 1

Supervisory/ Leadership Skills

4 1 4 1 1

Information Technology

2 1 3 1 1

Computer Training

4 1 4 2 1

Trade Skills Updating

6 1 3 1 0

Apprenticeship Enrichment

5 1 2 1 1

Equipment Training

8 2 8 5 4

Other

8 0 4 3 2

As can be seen from Figure 6.1, health and safety training is universal. Equipment training is widespread. Other types of training are less widespread though still evident. It is notable that half of the responding Locals in the Primary Steel industry indicated that trade skills updating had been provided. The survey results may understate the ongoing commitment to training. During the downturn of 2009 and 2010, many companies may have curtailed non-essential training.

CSTEC Courses

Figure 6.2 summarizes utilization of CSTEC courses. As can be seen from Figure 6.2, CSTEC’s courses have achieved a moderate utilization rate (4/12) in the Primary Steel industry, but have not been taken up by other industries in the Broader Steel Sector.

54

Figure 6.2 Use of CSTEC Courses in the Past Five Years


Industry No. of Locals reporting that CSTEC Courses

had been used in the Past Five Years Used Not Used Don’t

Know Total

Primary Steel Producers 4 5 3 12 Foundries 0 0 2 2 Fabricators 0 6 3 9 Metals Service Centres 0 3 3 6 Other 0 2 3 5 Total 4 16 14 34

Figure 6.3 shows that outside of the Primary Steel industry, Union Leaders report “low awareness” of CSTEC’s courses. Even within the Primary Steel industry, only half of respondents report a high level of awareness. The survey results summarized in Figures 6.2 and 6.3 suggest the need for a wide ranging review of CSTEC’s course design, course delivery, and course promotion strategies.

Figure 6.3

Union Leaders’ Awareness of CSTEC Courses Survey of Union Leaders

(October – November, 2010)

Industry Awareness of CSTEC Courses (1-10 Scale)

Low Awareness

(1-3)

Moderate Awareness

(4-7)

High Awareness

(8-10)

Total


Training Culture

Figure 6.4 summarizes respondents’ views on the importance of training to advancement within the bargaining unit. In the Primary Steel industry, most union leaders (7/11) attach high importance access to training.

55

Figure 6.4 Union Leaders’ Perception of Importance of Access to Training

to Advance to a Higher Paying Bargaining Unit Job Survey of Union Leaders


Industry Importance of Access to Training to Advance to Higher Paying

Bargaining Unit Jobs (1-10 Scale)

Low Importance

(1-3)

Moderate Importance

(4-7)

High Importance

(8-10)

Total


Figure 6.5 reports respondents’ perception of their company’s commitment to skills training, excluding health and safety training. The survey data suggest a broad range of perceptions. These perceptions are consistent with the diversity of managerial philosophies that was also reflected in executive interviews. It should also be borne in mind that the economic conditions in which the survey was conducted were not favourable to significant investments in training. To some degree, therefore, the survey results may reflect how companies have curtailed non-essential training in response to the economic downturn. It is also noteworthy that in the Primary Steel industry, notwithstanding the downturn, the majority of union leaders judged their companies to have at a least a moderate commitment to skills training. This suggests that there has been progress in building a stronger training culture, at least in the Primary Steel industry.

Figure 6.5 Union Leaders’ Perception of Company’s Commitment

to Training (excluding Health and Safety Training) Survey of Union Leaders


Industry Perception of Company’s Commitment to Training (excluding Health and Safety Training)

(1-10 Scale) Low

Commitment (1-3)

Moderate Commitment

(4-7)

High Commitment

(8-10)

Total


56

Figure 6.6 reports respondents’ perception of their company’s commitment to health and safety training.

Figure 6.6 Union Leaders’ Perception of Company’s Commitment

to Health and Safety Training Survey of Union Leaders


Industry Perception of Company’s Commitment to Health and Safety Training

(1-10 Scale) Low

Commitment (1-3)

Moderate Commitment

(4-7)

High Commitment

(8-10)

Total


Training Priorities

Figure 6.7 reports the relative importance that respondents assigned to weakness in various types of skills.

Figure 6.7 Union Leaders’ Perception of Weaknesses in Various Types of Skills


Primary Steel Industry Perception of Weaknesses in Various Types of Skills

(1-10 Scale) Low

Importance (1-3)

Moderate Importance

(4-7)

High Importance

(8-10)

Total

Skill Losses from Retirements 0 3 8 11 Weaknesses in Basic Skills (Reading, Numeracy, Communications) 2 5 4 11 Weaknesses in Front-Line Supervisory Skills 1 3 7 11 Weaknesses in Team Working Skills 0 4 7 11 Weaknesses in Quality or Process Control Skills 0 3 8 11 Weaknesses in Health and Safety Skills 1 3 7 11 Weaknesses in Basic Computer Skills 1 4 6 11 Need to Upgrade Trade Skills 1 3 7 11 Need to Enrich Apprenticeship Training 2 4 5 11 Weaknesses in Equipment Operation Skills 1 2 8 11

57

Foundries Perception of Weaknesses in Various Types of Skills (1-10 Scale)

Low Importance

(1-3)

Moderate Importance

(4-7)

High Importance

(8-10)

Total

Skill Losses from Retirements 0 1 1 2 Weaknesses in Basic Skills* 2 0 0 2 Weaknesses in Front-Line Supervisory Skills 0 2 0 2 Weaknesses in Team Working Skills 0 2 0 2 Weaknesses in Quality or Process Control Skills 0 1 1 2 Weaknesses in Health and Safety Skills 2 0 0 2 Weaknesses in Basic Computer Skills 1 0 1 2 Need to Upgrade Trade Skills 1 1 0 2 Need to Enrich Apprenticeship Training 1 0 1 2 Weaknesses in Equipment Operation Skills 0 1 1 2 Fabricators Perception of Weaknesses in Various

Types of Skills (1-10 Scale) Low

Importance (1-3)

Moderate Importance

(4-7)

High Importance

(8-10)

Total

Skill Losses from Retirements 4 3 2 9 Weaknesses in Basic Skills* 5 0 4 9 Weaknesses in Front-Line Supervisory Skills 3 1 5 9 Weaknesses in Team Working Skills 3 2 4 9 Weaknesses in Quality or Process Control Skills 3 3 5 9 Weaknesses in Health and Safety Skills 4 3 2 9 Weaknesses in Basic Computer Skills 4 3 2 9 Need to Upgrade Trade Skills 4 2 3 9 Need to Enrich Apprenticeship Training 4 1 4 9 Weaknesses in Equipment Operation Skills 1 4 3 8 Metals Service Centres Perception of Weaknesses in Various

Types of Skills (1-10 Scale) Low

Importance (1-3)

Moderate Importance

(4-7)

High Importance

(8-10)

Total

Skill Losses from Retirements 3 2 1 6 Weaknesses in Basic Skills* 1 4 1 6 Weaknesses in Front-Line Supervisory Skills 3 3 0 6 Weaknesses in Team Working Skills 2 2 2 6 Weaknesses in Quality or Process Control Skills 2 1 3 6 Weaknesses in Health and Safety Skills 1 1 4 6 Weaknesses in Basic Computer Skills 3 2 1 6 Need to Upgrade Trade Skills 3 3 0 6 Need to Enrich Apprenticeship Training 5 0 1 6 Weaknesses in Equipment Operation Skills 1 3 2 6

*Basic Skills include: reading, writing, numeracy, and basic communications

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Among the patterns which are suggested by these survey results are the following:

• In the Primary Steel industry, the survey results suggest that Local Union leaders attach a comparatively high priority to training. The gap between expectations and training performance may be attributable, in part, to an increase in the importance that Local Union leaders are assigning to these issues. CSTEC’s efforts to encourage greater emphasis on training is having an impact on Local Union leaders’ thinking.

• The survey results suggest that while basic skills (reading, numeracy, communications) continue to be important, these skill areas may not be as high a priority as previously. The survey data suggest, therefore, that CSTEC may need to review how it understands essential skills needs.

• In the Primary Steel industry, the loss of skills from retirements is seen by Union Leaders (8/11) as having high importance. This contrasts with the other three industries. This finding also highlights the importance in the Primary Steel industry of the distinct demographic profile and the depth of the accumulated skill base on the shop floor.

• Support for enriching apprenticeship training is stronger in Primary Steel than in other industries.

• In Metals Service Centres, Health and Safety training appears to be the most important priority.

• In Fabricators, the most important priority appears to be training in quality and process control, front-line supervisory training, and training in team work skills.

Comparisons with HR Managers

Both the Survey of Local Union Leaders and the Survey of Human Resources Managers show that training and skills development are important to both workers and employers. However, the surveys suggest differences that should be addressed through sector-level and plant-level discussions.

The Survey of Local Union Leaders, along with interviews with Union leaders, confirms that the Union see itself not just as a bargaining agent, but as stakeholders in the industry. Union leaders care profoundly about the future of the steel industry and the jobs that the industry supports. Union leaders, in the main, have accepted the argument that the future of Canadian industry will turn, to a substantial degree, on the quality of its human resources. For this reason, Union leaders attach considerable importance to training. It is clear from the Survey of Local Union Leaders that many Local Union leaders believe that they attach greater importance to training and skills development than their employer counterparts. Union leaders also appear to give priority to training across a broader range of skills than is suggested by the priorities shown in the Survey of Human Resources Managers. In particular, Local Union leaders attach more important to basic skills, computer skills, and equipment operator skills.

●

59

Chapter Seven What We Heard

1. Technology 2. Knowledge Transfer 3. Skilled Trades – Replacement Challenge 4. Skilled Trades – Skill Needs 5. Production Workers 6. Training Culture 7. Essential Skills 8. Importance of Benchmarking 9. Technician / Technologists / Engineers 10. Outlook

This chapter reproduces comments from interviews and focus groups. Comments have been edited for readability, but not for content.

Technology Primary Steel:

• Automation may change the skills set at the base level in the front end of the mill. At the finishing end of the mill, automation is generally equivalent to other types of manufacturing, like autos. The most important shift will be into a ‘visual management system’ on the shop floor level. Primary Steel, Manager

• ‘World Class Manufacturing’ will change the skills and people, their tools and their methods of work. Process improvements on the shop floor save you cents at a time but will cumulate into major savings over time. This is the key, for instance, in energy savings. What has been learned in auto and elsewhere in manufacturing has not yet been applied to steel. Primary Steel, Manager

• We intend to drive process improvement from the shop floor. It is a problem solving methodology from Kaizen and leading approaches to training. It requires a mindset change. But it will not be the same in steel as in auto. Primary Steel Manager

• There has been a lot of automation over the last few years. We had a new program for management and orders. There has been a reorganization of work, in order to put out greater volume. We have seen an optimization of production. This has resulted in greater workloads for each worker. Primary Steel, Steelworker

60

• We see an increase in the workload for each employee, in order to increase productivity. In the past, it was a small factory. Everyone knew each other. Now we feel more like a number. The idea that it is the people on the factory floor that make the whole thing work is no longer prevalent. Primary Steel, Steelworker

• We have new equipment and new bosses. For production workers there are new processes to work on. This is true both for skilled trades and production workers. Primary Steel, Steelworker

• We have to optimize our assets. We now produce three times as much in the same facility. Future improvement will mostly be organic. There will be no big jump. It is continuous. Primary Steel, Manager


• Robotics is a step function change in a fabrication shop. Robotics will be the game changer. Construction Fabricator, Manager

• Optimization in fabrication is done by spreading BIM [Building Information Modelling] throughout the company in all aspects of operations. While everyone talks about it, we actually do it. There are other traditional and smaller firms that don’t do technology at all. They will go to the wall in the downturn. Construction Fabricator, Manager

• Safety is huge and is a much bigger focus today. Now it’s about 1/3 of my workday, where before it was zero. Construction Fabricator, Steelworker

• The tracking system of maintenance is now computerized. Construction Fabricator, Steelworker

• We will be migrating to more IT intensive processes, particularly for automation and controls systems. This will have HR implications. Construction Fabricator, Manager

• Further consolidation in fabricating will take place. There will be a few large players. It will happen with the downturn and soon. Technology will be the dividing line. We will become information providers. The traditional fabricator business will become a commodity. The information infrastructure will be BIM [Building Information Management]. Construction Fabricator, Manager

• Commodity suppliers have exited. Construction Fabricator, Manager

• The whole world of fabrication is going high tech, particularly in light of the high-end CAD systems. Companies have brought in more 3D modeling and CNC technology. The leading edge is BIM [Building Information Modelling]. It automates the whole chain from architect to consulting engineer to steel contractor. Construction Fabricator, Manager

• It has always been our objective to improve output and efficiency but now it has HR and demographic issues. Construction Fabricator, Manager

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• Maintenance is a major focus. We have so many maintenance people because we had such poor reliability and poor uptime. Construction Fabricator, Manager

Foundries

• We moved from the foundry business to fabricating. We had first generation CNC machines, not the new 4-6 axial equipment. Initially, trained machinists were the key to successfully using CAD and CAM systems. We progressed with simple graphics then escalated in the past 10 years. Foundry, Manager

• The key change has been robotics. It reduces manpower needs, but increases skill requirements. Foundries, Manager

Metals Service Centres:

• If you are speaking of Kaïzen continuous improvement, no, we don't work with that. It is less applicable to distribution. Metals Service Centre, Manager

• The big changes: 1. Management of inventory, 2. Logistical transport getting increasingly automated and computerized, 3. Laser cutting. Metals Service Centre, Manager

• Our service centres are moving up in the value stream. We are adding processes that contribute to quality and compliance functions: a metallurgy department, a customer metallurgy service, lasers, bending and forming, presses and plasma cutters. Service Centre, Manager

• Skill needs will evolve with the technology, like scanners in the warehouse - but it is relatively low tech at the operator end. For example wands on the floor and computers in the trucks. Metals Service Centre, Manager

Knowledge Transfer

• We have 100-140 retirees per year on average. It could go to 300. If it does, we can’t handle the Knowledge Transfer. In the past we focused on head counts for cost reasons and ignored the knowledge transfer. We have started video taping problem-solving, specialized and intermittent jobs. Primary Steel, Manager

• One third of our workforce was hired in last six years. All those hired in 1972 are now going. It is a ‘U’ distribution. It was probably an error to hire in such concentrated age groups. The plant is being managed by an older group with lesser skills. Primary Steel, Manager

• We have many retirements on the horizon. We need both explicit and undocumented knowledge. KT [Knowledge Transfer] and early hiring of replacements is important. We now recall retirees for

62

specific KT tasks on a project basis. But this use of retirees is not sustainable in the long run. Primary Steel, Manager

• We have lost 25% of our work force in last 5 years. We will lose 50% in the coming 5 years. We want to manage the turn over but also re-base plant operations. Construction Fabricator, Manager

• We started two years ago to document processes and procedures. We put it into a database. Its objectives are to improve reliability and maintenance. Primary Steel, Manager

• Is the company doing anything to facilitate the transfer of knowledge and skills from workers who will retire to younger workers? They say we are, but, in our opinion, not enough. We’ve never had a formal succession plan between us and the company. We talk the talk but we don’t walk the walk. Primary Steel, Steelworker

• Transfer of knowledge from older and retired workers by writing down knowledge and creating documents and manuals is going on. The downside is that training is not as good as in the past; reading a bunch of procedures is never as good as hands-on, one-on-one teaching. Construction Fabricator, Steelworker

• We are trouble-shooting the problem that knowledge is leaving the firm. A lot of our equipment is 40+ years old. New people are learning, but sometimes key knowledge is concentrated in a few key people. You lose them and that’s it. Sometimes it’s the senior guys who get first stab at training and some jobs. The problem is that it may be a senior guy who gets the training but then when he retires that training doesn’t remain with the company. Construction Fabricator, Steelworker

• There is also the situation where an older worker trains a younger one. But in this case, the older one knows the younger one is going to replace him and take his job. So sometimes this kind of training is of very poor quality. The older worker, knowing he will lose his job, trains the younger one very poorly. Sometimes, people who are themselves poorly trained, become trainers. This of course, yields poor results. It’s a problem. The person will not even have obtained all the required knowledge himself and then goes on to train others. Primary Steel, Steelworker

• We are having a loss of skill and knowledge. No planning to secure knowledge from retiring workers. We are not replacing skills. We don’t replace the person that leaves. We’re not training new people. New people are not being prepared to acquire the skills that are leaving. We are hiring people with more education but they need the on-the-job skills. We’d better hope that new apprentices learn from the old guys. If you hire only university-educated people they won’t be satisfied turning a wrench. Some of the demographic gap was created by the company when early retirements were encouraged in the past with the downturn. Primary Steel, Steelworkers

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Skilled Trades – Replacement Challenge

• Individual facilities vary a lot. One facility has 30% with over 30 years of service. Another has 45% over 30 years of service. Primary Steel, Manager

• Operating Engineers are the huge problem near term. There is intense competition for retentions and wage levels with OPG. Stationery Engineers are critical to the huge Boiler Plants in steel mills. Without a First Class Engineer on hand, the mills will shut down in 90 days. Primary Steel, Manager

• Currently the industry is operating at 70% so the supply of trades pressure is off but it will pick up big time when the economy starts back up. Construction Fabricator, Manager

• We will lose 20-30% over the next five years. The biggest challenges are in senior management and trades. The biggest problem is the trades. We need apprenticeships and an attraction and retention programme. Primary Steel, Manager

• We will probably downsize the work force because of the BIM-based [Building Information Modelling] productivity impacts. We were really afraid of it ten years ago. A small number of aging craftsmen were the core of the business. Technology has replaced much of it. We now have a balanced work force, perhaps a little older than ideal. Construction Fabricator, Manager

• Trades are the big risk. We need to replace 37% in five years. Primary Steel, Manager

• Today about 70% of our work force is trades. We will reduce to about 15% in three years and 10% in ten years. The numbers are a combination of maintenance issues and demographics. We will work our way out of the problem through an optimization and reliability strategy. Construction Fabricator, Manager

• Employees with 15-18 years are reluctant to go to the new equipment. We had no other operators so we went with conventional machines rather than the latest technology. Five years ago we went heavily into new CNC equipment. We eventually hired new younger operators and ran both. Now we have the problem of the older employees retiring and there are no conventional operators around. Foundry, Manager

• We looked at an adjunct pool of retirees. We have used it for the trades. But we don’t really want to rely on recalling retirees. It is finite and you get lazy doing it and could be vulnerable to the Double Dip. We have been pulling back after 1-2 years. It works for trades but not for others. Primary Steel, Manager

• Maintenance gets a major focus. We have so many maintenance trades because we had such poor reliability and poor uptime. It was pure reactive maintenance. We are moving to Preventive Maintenance, but have a long way to go. Preventive Maintenance will align better with the demographics challenge. Construction Fabricator, Manager

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Skilled Trades – Emerging Skill Needs

• Electricians are a problem. Most are construction trained, not industrial electricians. There are plenty of welders around, but their quality is the issue. For machinists, there are more than enough. Construction Fabricator, Manager

• We use an adjunct steel skills pool called Staff Aid. It is a pool of managers, engineers and skilled trades who come in under contract. Primary Steel, Manager

• The aging problem is there, but many will stay on because of the recession. But you generally keep the ones you can do without and lose the best ones. There may be replacements for the shop floor, but there are language problems. Primary Steel, Manager

• Fabricators are all moving in the direction of a migration from fabricating to project management as it is all automated. We are hiring new engineers and technologists but need people to supervise them. CNC Operators have Red Seal welding tickets but need post-secondary Engineering Technologist or Engineering Technology. Construction Fabricator, Manager

• The work force will be more computer intensive. Employees will probably carry around iPads. The traditional welder-fitter probably goes away. Construction Fabricator, Manager

• World Class Reliability applies to both Maintenance and Safety. Employees should assess risks every day and be observant of anything that is out of compliance. There should be a plan for each asset. It also applies to contractors. Primary Steel, Manager

• In the trades, accessing the internet is very useful in troubleshooting and research. www.ask.com is used frequently by some. Construction Fabricator, Steelworker

• The maintenance side has different accountability. Five years ago, it used to be the foreman making decisions. Now it is the superintendant. This is different. Primary Steel, Steelworker

Production Workers

• We are under the gun lately - fighting compliance, taking large orders, always playing catch-up. It’s hard to get material to customers on time. We used to have more of a time cushion, from start to delivery of a product. That cushion is gone now. . Primary Steel, Steelworker

• We are acquiring new equipment to do some testing in-house now. We do specialty production and this requires more testing. Doing more of the testing in-house. Primary Steel, Steelworkers

• We kept people on during the downturn to keep from losing them. We didn’t want to escalate the demographics problem. It takes about two years to get a new hire up to speed. Primary Steel, Manager

• For production workers, we were in past the employer of choice. We’re not there now. We need to do things to get back to it. We are not getting the same quality of entry level people which leads to higher turnover. Primary Steel, Manager

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• When you hire high school grads, many of them are nearly illiterate. The company can recruit the work force it needs, but this is a social problem about the work force in general. Metals Service Centre, Manager

• The place is less forgiving than in the past. Moving up quickly will stress people out, even though it will be necessary to move people up quickly. The company is pushing for flexibility, which it did not do in the past. There is some cross-training, but the expectation is that everyone will work different tasks. Operator maintenance is the norm here now. Primary Steel, Steelworker

• There is more accountability from everyone. There is no room for mistakes. Not even common mistakes. Not long ago, a person put the wrong fluid in the machine. The machine had to be stopped. It was a very big deal, but the guy just didn’t know. He wasn’t trained properly. We need to see improvements in training if accountability goes up. Primary Steel, Steelworker

• People in the warehouse will have to be computer literate. Metals Service Centre, Manager

• ISO is very important because of the link to quality standards. Foundries, Manager

• Today, an employee who has a question, must pass that question to an increasingly higher level of management. Managers on site don’t have the answers to employees’ questions and must constantly go elsewhere to ask others – sometimes to head office in [deleted]. Primary Steel, Steelworker

Training Culture

Primary Steel

• We need to get it [more training] off the ground. There has been so little of it. Senior management is on board, but there is no one to carry it forward on the shop floor. The only training we did in the past was health and safety. Primary Steel, Manager

• New skills will be needed to match increased levels of automation. There will be a new employee profile. We will need to hire more technologists. We are running a test case now in iron making where technologists have not been used before. Technologists understand automation better. Primary Steel, Manager

• We don’t have any clear priorities right now. Five years ago, there was a lot of training, but it has gone down. We’ve had five different CEOs in five years. What is missing is a commitment from the company to fund training, to accomplish training. Primary Steel, Steelworker

• Much of the training will be on the job, in support of current assets through peer learning. We may do more on-line. More training will be done for continuous improvement. Primary Steel, Manager

• Health and safety training is strong, but not around WHIMS. It is about behaviours. Primary Steel, Manager

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• We have just put on an experiential learning course, four hours for everybody. We call it ‘Smart Training’. It emphasizes visual management recognition, i.e. see and deal with risks and causes of injury. This is the future. Primary Steel, Manager

• Training is effective, but too condensed and there is not enough of it. This is the case for both hands- on training and classroom training. There is no web training. We also have tandem training, as a complement to technical training - a new worker is paired up with a more experienced worker when learning to use equipment. There is also a system which resembles mentoring more, where a worker is paired with a more senior one on a longer-term basis. This pairing is geared towards a more global set of objectives – career objectives, learning about the company in general (rather than just focused exclusively on technical skills related to a piece of equipment.) Primary Steel, Steelworker

• There is a universal lack of training after course work. The person ahead of you gets all the more interesting tasks because he has only a few months more experience than you. Management prefers to give him that work rather than train you to do it. Primary Steel, Steelworker

• We did a mix - half and half of hands-on and classroom. Sometimes the problem arises in not knowing how to train the apprentice. Could be no one here knows how to formally train with an apprentice. In Europe the trades training is far superior. We had some Germans training with us. These are the best millwrights I’ve seen. Primary Steel, Steelworkers


• We are using mostly the new stuff. It’s a switch from 1950s to 2000s technology. The older methods of training were more personal (with more one-on-one attention), whereas now, things are more impersonal. Now older workers are creating documents and writing down their knowledge, so the training involves reading a lot of material. Construction Fabricator, Steelworker

• Our training has always been and will continue to be in-house. We tried working with a college, but it didn’t work. They couldn’t generate the numbers [of students] needed to make a go of it. Construction Fabricator, Manager

• A key problem is Detailers. Today it is a trade with an apprenticeship. But it is becoming more technical with 3-D modelling and BIM [Building Information Modelling]. The old approach won’t work in the future. Construction Fabricator, Manager

• The number one form of training is hands-on with coaching by senior workers. This is the best. Ideally, a worker gets trained by different people. That way they don’t learn all their mistakes from one guy. Someone can come along and correct mistakes they learn. The vast majority of production training is work to worker. Construction Fabricator, Steelworker

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• Occupational health and safety training is very, very important. It's our number one priority. Even before setting foot in the factory, people are trained in health and safety. There is on-going training on this. Metals Service Centre, Manager

• There are no middle career steps any longer because of eliminating layers. This can be a problem. At the lower end, there is lots of scope to learn and gain experience, but the steps upward are big. It makes it hard to move up the chain. It is a long way to the top. Metals Service Centre, Manager

• Hands-on is the most effective training. It’s best to have a mix of hands-on and classroom training. Sometimes we have not had the numbers to train hands-on. Apprenticeship training is lacking in hands-on training. Primary Steel, Steelworker

Essential Skills

• Many entry level jobs comprise very basic tasks. Education won’t impact that. We may hire for entry level below standards for affirmative action hires. Primary Steel, Manager

• We have a minimal problem [with essential skill]. We work with the college for Math and English upgrading. There is nothing beyond that until the apprenticeship program. Primary Steel, Manager

• Some basic skill requirements have changed. For production workers, we do more computer-based work now. Jobs have become more technical and less manual. There is a decrease in manual jobs. Jobs are more technical. The same changes have affected both management and production. Primary Steel, Steelworker

• Basic skills is one of the only ones we’ve put money into. The biggest lack is in the simple training required to let people move up as per the terms of the collective agreement. Primary Steel, Steelworker

• We don’t see a need for more basic skills training on the shop floor. Basic skills may have been a problem years ago, but not now. It has been overcome by new hires. Metals Service Centre, Manager

Importance of Benchmarking

• Reliability and management of machinery up time are key measures. Construction Fabricator, Manager

• We encourage organic, continuous improvement by utilizing benchmarking and feedback. There is an internal continuous improvement reference with a head office team. We look process by process

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around the world and produce a document. We define the best practices and review KIs [key performance indicators] monthly. Primary Steel, Manager

• We are running a lean operation now. God only knows where it will go. Everyone is on pins and needles. Primary Steel, Steelworker

Technicians/Technologists/Engineers

• The future work force growth will be shop floor 4-5%, white collar 8-10%. Overseas sales growth will require more technical and marketing support. Construction Fabricator, Manager

• We always relied on the local labour pool. We now draw from the global steel labour pool for operations, technologists, process specialists, suppliers. We have a challenge in Support Services - IT, HR, Financial People - with no background in steel. Primary Steel, Manager

• We need metallurgists, technicians, mechanics and electro-technicians. This is what is lacking for us. Foundry, Manager

• Historically, engineers competent in structural steel came from the universities. The steel professors are now starting to retire and are not being replaced. This has a direct impact on industry. It means that steel is not being spec’ed for projects where it is the best option. Construction Fabricator, Manager

• We need more engineers. We are now taking people in from mergers and closures but it won’t last. Primary Steel, Manager

• We are trying to get more metallurgical engineers. They are key to a step change in processes, including product management. We are also changing recipes. Primary Steel, Manager

• The skills issues arise from the high performance which will be required in the new environment of dollar parity. Productivity improvement will come from better use of existing technology through optimization. Continuous improvement will be critical. You need to have the skills to learn. Technical skills, but others too. Existing employees have the experience-based knowledge. The technologists have the problem solving skills. You need both. Construction Fabricator, Manager

• Professional health and safety personnel are a big problem. It is very tough to recruit and keep them. Primary Steel, Manager

• Foreign-trained engineers don’t know the Canadian codes. Construction Fabricator, Manager

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Outlook

Primary Steel

• 2009 was our worst year. We are picking up, but not to 2006-08. Primary Steel, Manager

• 2009 was the worst year ever. We see a return to profitability in 2011. Primary Steel, Manager

• Overall, demand will come back to the ‘normal’ levels by 2013-14. But it will not be 2007-08. Exports will increase. So will imports. Primary Steel, Manager

• We see oil patch demand [for pipe] coming back. Primary Steel, Manager

Foundries

• There will be a lot more off-shore competition. Foundries, Manager

• More ferrous will go off-shore unless it is a high-value product… if it hasn’t already gone. Foundries, Manager


• For us, the crash was in 2009. 2008 was an exceptional year for us. We hope to see that again, but it will take more time before we get there. As of today, we are back to 2007 levels [of output]. Construction Fabricator, Manager

• Demand for fabricators in 2006 was sane and should be the new normal. We are clawing our way back to it. 2008 was insane and not supportable but it changed the market and competition. Construction Fabricator, Manager

• Offshore will be more of a problem. There are import pressures from Asian fabricators. We have just purchased a 50% interest in an Asian firm. Construction Fabricator, Manager

• Exports were big: in 2008, exports (mostly to USA) were 50% of the business. They are now 5-10%. Construction Fabricator, Manager


• We saw our peak in 2004. We will not see this level again. It was tied to the launch of China's consumption which caused shortages. There has been a decline since 2008. We won’t see 2008 again. Metals Service Centre, Manager

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• If 2009 hadn’t happened, then service centres might very well not be here. Otherwise we would have been taken over by the mills. It might still happen by 2015. The trend may emerge by 2012. Metals Service Centre, Manager

• We anticipate steel mills buying distributors. That way they will be able to own the distribution chain. It is the only way that the mills will be able to maintain demand; it will be like in Europe. Metals Service Centre, Manager

• Service centres in Ontario have declined in last 10 years. We are now 80% of where we were in 2006. We could get back to that in 2012. But we still see a down tend. Metals Service Centre, Manager

• The Big Thing is the Thumbs Generation [smart phones, blackberries, etc.]. They are a very different generation. It will impact the sales and order side. It will come in five years and could be sooner. Our business is now based on relationship sales, relationships and prices. The next generation will not have the same relationships, or at least the traditional relationships. Relationship selling may be over. The business could just be purchasing and inventory management. IT staff will go up, sales staff down. Metals Service Centre, Manager

• We are going to see consolidation in this industry. It’s going to change. Metals Service Centre, Manager

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Chapter Eight Primary Steel Producers

1. Geographic Distribution of the Steel Industry in Canada 2. Transformation of Ownership 3. Import and Export Trends 4. Output and Productivity Trends 5. Employment Trends 6. Technology and Investment Trends 7. Demographics 8. Skilled Trades: The Replacement Challenge 9. Knowledge Transfer Challenge 10. Technicians and Technologists: A Skills Shortage not a Labour Shortage 11. Essential Skills Needs are Changing 12. ‘ Steelworkers of the Future’ 13. Training Culture 14. ‘Employer of Choice’ Status in Local Labour Markets 15. Human Resources Planning Challenges

Geographic Distribution of the Steel Industry in Canada

The steel industry is a significant employer in every region in Canada. This is important because, as described in Chapter Two, the Primary Steel Industry’s linkages to other sectors of the economy make the industry an important driver of regional employment and economic growth.

Figure 8.1 shows the distribution across Canada of facilities that make primary steel and primary steel products, as well as the mining operations and scrap processing centres that supply those facilities.

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Figure 8.1 Locations of Canadian Steel Industry Operations

Canadian Steel Producers Association

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Transformation of Ownership

The most dramatic change in the Primary Steel industry since the last human resources study has been the complete transformation of ownership structures.

Figure 8.2 shows the change in ownership in the Canadian Primary Steel Producers. Not a single company in the industry has the same ownership today as it did in 2005 when the previous human resources study was published.

Figure 8.2 Changes in Ownership in Canadian Steel Producers and Closely Related Facilities

Who They Were

Who They Are

Today

Head Office

Location

Capsule Description

Stelco US Steel USA United States Steel Corporation is headquartered in Pittsburgh, with major production operations in the United States, Canada and Central Europe. The company manufactures a wide range of value-added steel sheet and tubular products for the automotive, appliance, container, industrial machinery, construction, and oil and gas industries. US Steel is a leader in both process and product technology. The company has three research and development facilities.

Dofasco ArcelorMittal EU ArcelorMittal is the world's largest steel company, headquartered in London, with operations in more than 60 countries. It is present in all major global steel markets, including automotive, construction, household appliances and packaging. ArcelorMittal is a leader in R&D and technology development. The company has its own supplies of raw materials and distribution networks.

Algoma Essar India Essar Global is a private company headquartered in Mumbai, India with subsidiaries in steel, oil and gas, power, communications, shipping, logistics, and construction businesses, primarily in India, Canada, and the United States. Essar views its Algoma acquisition as a platform for growth in the North American market. The company produces plate, sheet, blanks, and welded shapes and profiles

Ipsco Evraz Russia Evraz Group is the largest producer of steel and steel products in Russia. Its North American headquarters is in Portland, Oregon. Evraz has focused on the plate market and pipe business in North America and is the leading rail producer globally. Evraz is also an important presence in the world vanadium market

Co-Steel Gerdau Brazil Gerdau Group is headquartered in Brazil. Gerdau is the world´s 14th largest steelmaker and the largest producer of long products in the Americas. Gerdau Ameristeel is the fourth largest overall steel company and the second largest mini-mill steel producer in North America. The compnay’s products are used in a variety of industries including construction, automotive, mining, and cellular and electrical transmission.

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Stelco (Quebec)

ArcelorMittal EU See above

Algoma Tube Tenaris Argentina Tenaris is headquartered in Buenos Aries, Argentina. Tenaris is a leading supplier of tubes and related services for the world’s energy industry. The company’s principal products include casing, tubing, line pipe, and mechanical and structural pipes. It operates Tenaris University which gathers and codifies the knowledge and best practices within the company’s operations for both salaried and hourly employees.

AltaSteel Scaw Metals Group OneSteel

South Africa Australia

The Scaw Metals Group (Scaw) is headquartered in Johannesburg, South Aftrica with an international office in Luxembourg. On January 4, 2011 Scaw announced the sale of AltaSteel to OneSteel of Australia. OneSteel manufactures and distributes a range of structural and pipe products.

Stelpipe Lakeside Steel Canada Lakeside is a diversified steel pipe and tubing manufacturer. The company is located in Welland. Lakeside Steel is publicly traded on the TSX Venture Exchange.

Courtice Gerdau Brazil Acquired by Gerdau in 1989.

Prudential Steel

Tenaris Argentina See above

Atlas Steel MMFX USA MMFX acquired the former Atlas Steel facilities in 2006 which had ceased operations. MMFX re-opened the mill in 2008 under the name MMFX Steel of Canada. The mill closed in 2009. MMFX Steel of Canada went into bankruptcy in 2010.

Sorel Forge Schmolz + Bickenbach A

Germany The mill continues to operate under its original name. The mill was integrated into Schmolz + Bickenbach in 2007 as part of S&B’s acquisition of the U.S.-based A. Finkl & Sons.

QIT Fer et Titane

Rio Tinto Group

Australia The Rio Tinto Group acquired QIT in 1989.

Ivaco Hecio Companies

USA Heico Companies LLC acquired Ivaco’s assets in 2004.

MRM Gerdau Brazil See above.

Slater Steel Woodside Capital Partners

USA and UK

After becoming insolvent, Slater Steel sold its Hamilton mill to Delaware Street Capital in 2004. The mill as subsequently acquired by Woodside Capital. The mill resumed operations as Hamilton Specialty Bar (2007) Inc.

The transformation of ownership has had three important consequences for Canadian steel producers. The first of these is the rationalization of production to take advantage of the scale economies permitted by creation of a NAFTA market. This has led to a substantial increase in both the export share of

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production and the import share of domestic consumption. A second consequence of capacity rationalization was a step-function increase in productivity. And finally, a third and equally important consequence of the ownership transformation was the introduction of international benchmarking standards.

Import and Export Trends

Figure 8.3 shows the trends in the share of Canadian primary steel output that is exported and conversely the share of the domestic market that is supplied by Canadian Primary Steel mills.

Figure 8.3 Export Share of Shipments of Primary Steel Producers and

Domestic Producers’ Share of Apparent Domestic Market, 1990-2009 Industry Canada and Statistics Canada

As can be seen in Figure 8.2, in 2004, 26.2% of domestic steel production was exported. By 2009, this proportion had increased to 45.7%. The other side of the coin was a decrease in the share of the domestic market that was supplied by Canadian producers. In 1990, Canadian mills supplied three-quarters of apparent domestic demand. By 2000, the domestic producers’ share of the domestic market had fallen to 60%. By 2009, Canadian mills supplied only 43.8% of domestic demand. The only sensible way to understand the Canadian steel industry today is to see it as an integral component of the international steel market, and more particularly, the NAFTA steel market. The industry’s future is inextricably tied to the future of steel consumption in the NAFTA region and to the technology and investment decisions of international steel producers.

Output and Productivity Trends A direct consequence of the rationalization of production that was driven by the ownership transformation was a sharp increase in productivity. This increase in productivity was further augmented by applying

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international benchmarking standards and best practice technologies. Figure 8.34 compares output and employment over the last 15 years.

Figure 8.4 Output per Employee in Primary Steel Production, 1995-2010

Statistics Canada and World Steel Association Statistics Canada

As can be seen in Figure 8.4, between 1995 and 2002, output per employee in the Primary Steel industry increased by an average of 2.1% per year. Between 2003 and 2008, as ownership was transformed and the industry was rationalized and further integrated into the NAFTA region, productivity growth ratcheted up to an average annual rate of 5.2%. This sea change in productivity conditions is one of the most important factors re-shaping human resources needs in the Primary Steel industry.

Figure 8.5 shows that the increase in manufacturing value-added per employee in the Primary Steel industry compared to the All Manufacturing average. (‘Manufacturing value-added’ is an alternative measure of productivity based on the value of output, rather than a physical measure of output). As can be seen in Figure No. 8.4, the magnitude of the productivity surge in the Primary Steel industry was distinctive.

Figure 8.5 Manufacturing Value-Added Employee, 1999-2008

Primary Steel Producers compared to All Manufacturing Average Industry Canada

(Data are Approximate)

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It is unlikely that productivity will continue to increase at the same high rate in the Primary Steel Producing industry. Much of the productivity gain evident after 2003 was attributable to once-only rationalizations of capacity that enabled mills to focus on particular products and to thereby achieve greater economies of scale. Productivity gains over the next five years are likely to return to historic trends, i.e., around 2.0% per year. The step-function increase in productivity has put a considerable strain on both human and organizational resources. This was especially evident in focus group discussions where a common observation was that it is more difficult to ‘get things fixed’ and that ‘we always seem to be playing catch-up.’

Employment Trends Figure 8.6 compares output and employment trends in the Primary Steel industry. From 1995 to 2000, employment in the Primary Steel Producing industry was essentially stable, while output increased moderately.

Figure 8.6 Comparison of Output and Employment in Primary Steel Producers, 1995-2010

Statistics Canada and World Steel Association Statistics Canada

In 2001, employment and output declined as a consequence of the brief economic downturn caused by the bursting of the dot-com bubble. Thereafter, production recovered and remained stable at around 15,600 mmt of crude steel. Employment, however, declined from 27,500 to just under19,000 before the downturn in 2009. In this period, productivity increased by almost 36%. The decline in employment cut across all occupational categories, but disproportionately affected production workers. In the skilled trades and production work force, seniority policies resulted in a greater number of younger employees being laid off, although, in some instances, early retirement provisions facilitated voluntary retirements by older workers. Notwithstanding the operation of early retirement benefits, an important consequence of the way the industry downsized between 2002 and 2008 was to alter the demographic profile of the work

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force such that the distribution of the remaining work force was skewed towards older workers. This was especially evident in the skilled trades and production work force.

In 2009, the general economic downturn forced a sharp reduction in employment levels and working hours in the Primary Steel industry. Companies differed in how they dealt with the downturn. In some companies, work force reductions were carried out primarily by laying off workers in accordance with seniority rules. In other companies, early retirement provisions resulted in a significant, voluntary exit of older workers. Other companies used work-sharing and reduced hours to avoid lay-offs. Total employment, which includes workers employed on a ‘short-time’ basis, fell from 18,855 in 2008 to 16,738 in 2009. In 2010, there was a marginal increase in employment to 16,957. While total output levels were still depressed, compared to 2008, output per employee in 2010 had returned to 96% of 2008 levels.

Technology and Investment Trends 1. No Transformative Technologies Anticipated

While it is impossible to predict the trajectory of technological change, there are no transformative changes in technology on the horizon over the next five years. That is to say, while the adoption of new machinery and equipment will continue to alter human resources needs, changes in technology will not fundamentally reshape those needs. From a human resources planning perspective, technological change will be incremental, rather than transformative. No step-function increases in productivity are anticipated comparable to the sharp change in the productivity trend in 2002-2008.

2. Green Manufacturing will be a Technology Driver

In the Primary Steel industry, environmental factors will be increasingly significant. A key focus will be on reducing green house gas emissions. This will lead to major changes in iron-producing end of steel-making. As Figure 8.7 shows, the iron-making stage of production accounts for the preponderance of green house gas emissions.

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Figure 8.7 CO2 Emissions related to Manufacture of Steel

POSCO, Report on Climate Change (2007)

Over the course of the next decade, current blast furnace technology is likely to be replaced with more environmentally benign technologies for iron-making. At present, there are competing technologies in the development stage. The widespread adoption of these technologies is not expected until the second half of the current decade. To some degree, capital investments in environmentally benign technologies may displace investment in labour-saving technology.

3. Capital Expenditure Projects

Prior to the economic downturn in 2009, the Primary Steel Producers announced a number capital expenditure projects. Many of these projects were postponed as a result of the economic downturn. Some of these projects have already been re-started. Others will be back on the agenda as the recovery proceeds. Overall, these investments will increase Canadian steel-making capacity by approximately 20%.

These capital expenditure projects will not alter the fundamental profile of human resources requirements in the Primary Steel industry. As the steel industry returns to its pre-2008 level of output, the industry will also encounter a labour market, especially for maintenance trades and for stationary engineers, who are required to operate boiler plants.

4. Central Importance of Benchmarking in Primary Steel

As discussed in Chapter Three, one of the important consequences of the globalization of ownership in the Primary Steel industry was the rigorous application of international benchmarking norms.

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Benchmarking applies to all aspects of production and management, including human resources management performance. Achieving benchmarks is critical to attracting new investment and new technology. In the long run, achieving benchmarks is essential to the continued viability of a production facility. Achieving international benchmarking norms is a key driver of innovation at the plant level, including innovation in organizational strategies.

5. Continuous Improvement (‘Kaizen)

Toyota is credited with introducing the ‘kaizen’ or ‘continuous improvement’ strategy into the global manufacturing industry. The process seeks ongoing, incremental improvements in productivity through plant floor problem solving. The ‘kaizen’ approach to productivity improvement reflects its auto industry origins where production processes are initially over-engineered and then progressively modified to maximize efficiency by reducing cycle times. There is no simple port over of this approach to a steel plant where engineering decisions have long-term consequences. Nevertheless, the philosophy of ‘kaizen’ – which achieves results through the cumulative impact of small changes – has become central to management strategy in the primary steel industry. The adoption of a continuous improvement strategy is also consistent with the increased emphasis on plant-level, process optimization as the primary focus of R&D efforts and with the application of international benchmarking norms. The adoption of a continuous improvement strategy to achieve long-term, incremental improvements in efficiency has broad implications for work organization and supervisory styles.

6. Maintenance Strategies – Total Productive Maintenance

Primary Steel Producers are adopting “Total Productive Maintenance” (TPM) as their principal strategy to achieve and maintain optimal utilization of machinery and equipment. In TPM , a machine operator or team carries out many, and sometimes all, of the routine maintenance tasks. TPM increases the autonomy of equipment operators and operation teams. The objective is to reduce equipment down-time by carrying out regular preventive maintenance. TPM is sometimes linked with the ‘5-S’ philosophy of good maintenance: sort, set in order, systematic cleaning, standardize, and sustain the discipline. The premise of TPM is that machine operators develop tacit knowledge through active management of the machinery with which they work. TPM has important implications for upgrading the skill requirements and responsibilities of equipment operators and for introducing flexible work structures.

7. Visual Management

The intent of a visual management is that the whole workplace is set-up with signs, labels, color-coded markings, monitors, etc. Through these visual indicators, anyone unfamiliar with the process can, in a matter of minutes, know what is going on and whether it is being done. Visual management is linked to both TPM and continuous improvement.

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8. Safety Performance

A potentially significant development in Primary Steel production is the increasing tendency to integrate safety objectives into continuous improvement. This has potential implications for the way safety is benchmarked and the inculcation of a ‘safety first’ culture.

9. Increased ICT-Intensiveness of Production Processes

All aspects of production, distribution and management in manufacturing industries are being affected by the adoption of information and communications technologies (ICT). Data are not specifically available for the steel industry. However, Figure 8.8 shows the relative importance of ICT and non-ICT technology inputs into the manufacturing sector as a whole. As can be seen, over the past decade, ICT technologies increasingly dominated capital inputs. These trends suggest that the skill profile of the overwhelming majority of occupations will be affected by investments in ICT technologies. This has implications for both occupational skills as well as underscoring the importance of essential skills (e.g., reading, communications, numeracy, computer literacy) that are a prerequisite to ICT skills.

Figure 8.8

Capital Inputs into Manufacturing Information and Communications Technology and Non-Information and Communications Technology

1998-2008 Index: 1998=100

Statistics Canada, CANSIM 383-0021

Demographics

The downsizing of the Primary Steel industry that occurred from 2003 to 2008 was effected through a combination of seniority-based lay-offs and retirement (both normal retirement and early retirement). However, seniority-based lay-offs predominated. This work force adjustment process redrew the age profile of the remaining work force. The result was that an unprecedented proportion of workers who were over age 50. The industry was facing what can only be described as a ‘demographic cliff’. Census

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data for 2006, which reflects the picture mid-way through the downsizing process, showed that 38% of skilled trades workers and 35% of production workers were age 50 or older.

In the downturn of 2009, retirement played a greater role in the work force adjustment process. As a result, the Survey of Human Resources Managers indicates that the industry has made significant progress in re-balancing its demographic profile. Figure 8.9 compares the 2006 Census profile with data from the 2010 Survey of Human Resources Managers.

Figure 8.9

Primary Steel Industry Age Distribution

Comparison of 2006 Census and 2010 Survey of Human Resources Managers

In both the skilled trades and in production worker occupations, the industry has seen an increase in the share of workers under age 45 and a decrease in the share of workers over age 45. Moreover, the change

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in the age structure has been significant. In 2006, 53% of production workers and 63% of skilled tradespersons were over the age of 45. By 2010, based on the Survey of Human Resources Managers, those proportions had fallen to 42% and 47% respectively.

Skilled Trades: The Replacement Challenge

In round terms, the Primary Steel Industry currently employs approximately 6,900 skilled tradespersons. The distribution of these tradespersons across specific trades is summarized in Figure 8.10.

Figure 8.10 Distribution of Skilled Trades across Specific Trade Groups

In the Primary Steel Industry Statistics Canada, Census 2006

Trades Supervisors 3% Metal Working Trades14 29% Industrial Mechanics / Millwrights 22% Crane Operators 16% Electricians 10% Heavy Equipment Operators 5% Machinists and Allied Trades 5% Pipe Trades 3% Masons 2% Stationary Engineers 2% Other Trades 2%

100%

As described in Chapter Four, hiring requirements over the period 2011 to 2015 will range from approximately 1,255 to 2,138 persons, depending on the industry’s investment and productivity trajectory over this period. Annual hiring requirements will range from around 250 persons to 430 persons. Some of these human resources needs may be met by bringing back retired tradespersons on a temporary basis. Other needs may be met by augmenting contracting out of maintenance services. Current labour market conditions will provide an easier recruitment environment for at least a couple of years. However, none of these ‘cushions’ is likely to do anything more than buy time. The pool of retired workers who will return on a part-time or partial year basis will diminish. Slack labour markets will not be a permanent condition for the economy. Moreover, there is a significant body of human resources literature which suggests that workers who experience long-term unemployment (i.e., more than one year) lose important skills and are therefore less attractive to employers. Contracting out of maintenance work shifts responsibility for managing skill supply, but does not eliminate the need for a supply strategy. It is imperative, therefore, that the steel industry should develop a long-term strategy to ensure an adequate supply of skilled tradespersons.



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The foundation of a replacement strategy can be found in CSTEC’s Workforce Development Initiative which tackled the skill trades challenge by establishing the Hamilton Skilled Trades Apprenticeship Consortium (HSTAC) and leveraging Ontario’s Co-op Diploma Apprenticeship program (CODA). Working with the industry, CSTEC recruits prospective apprentices. These candidates qualify as technicians and also complete the first two segments of their trades training at Mohawk College. The candidates are formally sponsored in their apprenticeship by CSTEC and receive on-the-job training through co-op placements with participating employers. Employers are able to use these co-op placements as a screening process. The formal training period comprises 32 months, of which 16 months are placement training and 16 months are college training. When candidates are formally hired by one of the participating employers, their apprenticeship sponsorship is transferred from CSTEC to their employer.

As of 2010, approximately 70 young workers have participated in CSTEC’s apprenticeship program. This program addresses two important obstacles to expanding apprentice training. Many employers are deterred from hiring new apprentices by the high drop-out rate among first and second year apprentices. CSTEC’s program eliminates this risk. Employers only make a hiring commitment when they have screened candidates and after those candidates have demonstrated a substantial commitment to completing their trades training. And second, CSTEC’s apprenticeship program recognizes that skill requirements in the steel industry have changed by combining trades training with technician training.

Knowledge Transfer Challenge Workers who are over 50 – especially workers in the skilled trades – have acquired knowledge about the production process and the maintenance of machinery and equipment which is typically undocumented. Transferring this tacit knowledge smoothly and efficiently to new hires is important for maintaining high levels of effective utilization of machinery and equipment. Indeed, failure to transfer tacit skills and knowledge efficiently could jeopardize the high productivity levels that were achieved in this decade. Given that access to capital and to new technology are both dependent on meeting international benchmarking standards, it is strategically important that Canadian Primary Steel Producers succeed in meeting the knowledge transfer challenge. It is noteworthy that one senior executive in the industry reported that 10% of the company’s work force was now engaged in documenting work processes for knowledge transfer purposes.

Technicians and Technologists: A Skills Shortage, not a Labour Shortage

Interviews with industry executives point to the increased importance of technology skills and a potential increase in both the number and the share of technicians and technologists in the Primary Steel industry’s work force. The steel industry is not unique. This trend is evident in most industries. The key driver is the increased application of information technology to all business processes, including production processes. An important consequence of this trend has been an increase in the difficulty experienced by employers when they endeavour to recruit technical employees with the requisite industry experience. There has been no tendency for this recruitment difficulty to abate. Indeed, as the cohort of experienced

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technicians and technologists ages, the recruitment difficulties will grow more serious. Many companies will find that an ad hoc approach to recruiting technologists will prove to be unsatisfactory. As with the skilled trades, there is a need for a long-term strategy to ensure an adequate and appropriate supply of technicians and technologists with the requisite industry experience.

In most regions of Canada, there is no shortage of persons with college-level or equivalent qualifications in technology. This is particularly true in regions which receive large numbers of internationally trained professionals. Many of these individuals have university level training in engineering, although they often have not become licensed as professional engineers in Canada. The challenge for the Primary Steel Producing industry is that jobs in technology are usually intermediate positions, not entry-level positions. That is to say, these jobs typically require relevant experience. Most labour markets have an adequate supply of persons with college-level or equivalent qualifications in technology. However, many employers encounter difficulty in recruiting technicians and technologists with the requisite industry experience. What employers are experiencing is a skills and experience shortage, not a labour shortage per se. The traditional tools for dealing with a labour shortage are increased immigration and an increase in enrolments in college technology programs. However, these tools will have little effect on alleviating a skills and experience shortage. Dealing with a skills and experience shortage requires more focused initiatives.

There are two distinct mismatches between the demand for persons with technology skills and the supply. The first pertains to recent graduates from college technology programs. Efficient integration of recent graduates into jobs for which they have been trained requires bridging programs. Three types of programs are relevant: co-op placements which are concurrent with college training, internships which follow college training, and specialized programs which blend industry-specific training with paid or unpaid placements. Employers who participate in these types of programs almost invariably report that they provide a valuable screening opportunity and also increase the value-added contribution of these individuals when they are subsequently hired. Students who participate in these programs express greater satisfaction with their training and report greater ability to obtain work in the technical field for which they were trained. As a consequence, the most motivated technology students gravitate to programs that offer experience-based components. To attract the most motivated technology students, the Primary Steel industry must offer the same or better training that other industries are beginning to provide. The competition for talent will not be won by relying on strategies that were developed for recruiting entirely different types of workers in entirely different labour market conditions.

The second aspect of the mismatch between the supply and demand for persons with technology skills pertains to internationally trained professionals. In the main these individuals have university-level training in engineering. In recent years, approximately 4,000 persons have immigrated to Canada with university-level qualifications in engineering and an intention to work in a technical field. Data from engineering regulators indicate that only a minority will pursue professional licensure and find employment as engineers. By far the majority will seek jobs as technologists. The Canadian labour market has been notably inefficient in integrating these internationally trained professionals. Numerous studies have shown that the core needs of internationally trained professionals are more advanced language training than is usually available from standard programs, training in Canadian business practices and technical standards, and an opportunity to obtain Canadian experience. Programs which tackle these three needs in a structured manner have shown significant benefits for both companies and

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internationally trained professionals. The Primary Steel Producing industry could usefully engage with such programs and, by doing so, could contribute to meeting its recruitment challenge for experienced technicians and technologists.

Essential Skills Needs are Changing Essential skills have generally been understood as encompassing basic reading, verbal communications, and computational skills. Weaknesses in these essential skills are frequently a constraint on the ability of production and maintenance workers to fully implement quality control procedures, understand and interact with electronic controllers, and correctly apply preventive maintenance routines. Weaknesses in essential skills can also affect health and safety performance and the capacity to adapt to new forms of work organization.

There are no current data on the extent of the essential skills challenge in the Primary Steel industry. The survey of Union Leaders found that in roughly 40% of Primary Steel industry locals, essential skills weaknesses are a ‘very important’ human resources issue while in the remainder of Locals, the problem is seen as less important. To some degree, this reflects changes in the demographics of the industry. Interviews with both human resources managers and union leaders suggest that essential skills weaknesses are clustered, but not restricted to, workers in the over-50 segment of the work force. As these workers retire, the importance of the essential skills problem diminishes. This is not to suggest that the challenge of essential skills is no longer an appropriate priority. One steel producer, for example, suspended a course on new technology when it was clear that the workers participating in the training did not have sufficient mathematics skills. Clearly, essential skills weaknesses, even on the traditional definition, continue to be a challenge for the Primary Steel industry. CSTEC and the steel industry will need to broaden their understanding of essential skills.

One area to which CSTEC’s experience in essential skills training could be adapted readily is assisting apprentices to successfully complete both their trades school examinations and their Certificate of Qualification examination. An unsettling trend in apprenticeship is the high proportion of apprentices who have difficulty with the in-school portion of their trades training. Often this difficulty arises because their basic mathematics skills and reading skills fall short of current trade school requirements.

A second area in which CSTEC’s experience may prove useful is in bridging gaps in the reading and verbal communications skills of new hires who are recent immigrants and who may be held back from progressing in technical or trades occupations by their weak French or English reading and verbal communications skills.

As with all training strategies, essential skills training needs to be explicitly tied to supporting companies’ efforts to achieve or exceed international benchmarking standards. CSTEC should explore the opportunities for linking essential skills upgrading to continuous improvement strategies and to total productive maintenance strategies.

Lastly, the challenge of knowledge transfer is not limited to persons in trades and technical occupations. Equipment operators also develop experience-based knowledge and skills which it is important to document and transfer to new hires. Many of these older production workers are the same workers who

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have essential skills challenges. There may be scope to link the documentation of tacit knowledge and skills to essential skills training.

Steelworker of the Future Production Workers

Two trends will incrementally alter the skill requirements of production workers. The first of these is the application of ‘continuous improvement’ (kaizen) to the steel industry. ‘Continuous improvement’, as it was pioneered in the Japanese auto industry, is the opposite of top-down, engineered productivity strategies. ‘Continuous improvement’ seeks cumulative gains in energy use, productivity and quality from incremental improvements that originate as shop floor initiatives or shop-floor experiments. Studies of companies that have endeavoured to implement a ‘continuous improvement’ strategy stress the change in attitude that is required, on the part of both managers and shop-floor workers, for implementation to be successful. Closely linked to the implementation of ‘continuous improvement’ strategies is a flattening of job hierarchies and an expansion of scope within jobs. Narrowly defined jobs do not align well with a ‘continuous improvement’ strategy.

The second trend that will incrementally change the skill requirements of production workers is the increased application of information technologies to every aspect of the production process. At the ‘finishing’ end of the steel-making process, automation will reduce labour requirements and also may reduce reliance on some of the tacit skills that have been accumulated by production workers. At the ‘front’ end of the steel-making process, automation will increase skill requirements. Over the course of the next ten years, increased reliance on sensors and computer control systems will make basic computer literacy an essential skill for the majority of production workers.

Skilled Trades

As information technologies are applied more profoundly to every aspect of the production process, the line between the technology skills of technicians and technologists and the trade skills of a skilled tradespersons will become blurred. In some regions, Primary Steel Producers are addressing this evolution of skill requirements by raising the training requirements for apprentices. Consequently, in some companies, apprentices are required to have at least some college training in technology in addition to their regular trades training. Indeed, one company requires successful completion of two years of training as a technician prior to hiring a worker into an apprenticeship.

Current trade standards are geared to meeting representative skill requirements in the economy. To the degree that the Primary Steel industry’s needs are the same as the representative needs in the economy, the training system for apprentices will meet the Primary Steel industry’s needs. However, to the degree that the Primary Steel industry has more advanced or different skill requirements, the normal trades school curriculum and training standards for apprentices will fall short of meeting the Primary Steel industry’s needs. There is suggestive evidence from the surveys undertaken for this study that Local Union leaders may have a better appreciation of this need. In our Survey of Local Union Leaders, nine out of eleven respondents in the Primary Steel industry attached a moderate or high degree

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of importance to enriching apprenticeship training beyond the current trade standards. The majority of these attached a very high importance to such enrichment.

Training Culture There is no single human resources philosophy among Primary Steel Producers. In companies with a strong training culture prior to the transformation of ownership structures, that culture appears to have been maintained and even strengthened. In companies that had a weaker training culture, prior to the downturn in 2009, there was a discernible increase in the importance of skills development. The downturn interrupted this trend.

Both Tenaris and ArcelorMittal operate corporate universities that support their companies’ training and development investments. ArcelorMittal has been among the clearest in anticipating a future competition for talent and seeking to position the company favourably in that competition.15 Tenaris has been the first to extend its offerings to production and maintenance employees.

There is a difference in how companies and Local Union leaders see the training culture in the Primary Steel industry. The Survey of Human Resources Managers suggests that, in the main, Human Resources Managers believe that their companies’ training performance is on par with or ahead of both industry norms and norms for the manufacturing sector as a whole. Local Union leaders do not necessarily dispute this view. However, there is often a gap between the importance which they attach to training and the level of managerial commitment that they perceive in the workplace. In part, this may reflect the retrenchment in training expenditures that was part of the business response to the downturn in 2009. However, the gap also reflects a reprioritization of training on the part of Local Union leaders.

The most notable change since the 2004 Human Resources Study has been the transformation of ownership in the Primary Steel industry and the consequent importance of the role of international benchmarking standards. The key finding of the 2004 study, that the Primary Steel industry needs to strengthen its training culture, remains valid. What has changed is that this need must now be understood in the context of meeting international benchmarking standards.

Employer of Choice Status in Local Labour Markets Historically, Primary Steel Producers have been the ‘employer of choice’ in their local labour markets. The steel industry offered high paying jobs with good benefits and a significant prospect of career employment. Two changes have altered this. The first is the downsizing that occurred following the transformation of ownership. Over the ten years from 1998 to 2008, the Primary Steel industry shed 35% of its jobs. 15 ArcelorMittal, Winning in the Post Crisis World (20101)

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The second change is a discernible narrowing of the gap between wages in the Primary Steel industry and wages in other major employment sectors. Figure 8.11 shows the change in the Primary Steel industry’s wage premium, i.e., the percent by which earnings in the Primary Steel industry exceed earnings in other industries. Four industries have been chosen for comparison: government, construction, transportation and wholesaling, and health care. These industries are found in virtually every local labour market.

Figure 8.11 Primary Steel Industry Wage Premium over

Government, Construction, Health Care, Transportation and Wholesaling, and Health Care

Statistics Canada, Survey of Employment Payroll and Hours

As can be seen from Figure 8.10, the Primary Steel industry still enjoys a wage premium over the four comparator industries. However, in all four comparator industries, the wage premium has declined. The narrowing of the gap did not arise because of a decline in the Primary Steel industry. Rather, over the past decade, wages and benefits in the comparator industries have increased more rapidly.

Current labour market conditions in most regions mean that there are many more job seekers than there are job openings. Consequently the change in the relative position of the Primary Steel industry will not affect recruitment in 2011 or 2012. However, the forecast in Chapter Four suggests that recruitment in the next two years is likely to be moderate. The majority of hiring needs will arise after 2012 when

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labour market conditions will also have improved and competition for hiring between steel and other industries will be much sharper.

Human Resources Planning Challenges

For the Primary Steel Producers, the principal human resources over the next five years will be:

1. Meeting the need for new skilled tradespersons.

It is imperative that the Primary Steel industry should develop a long-term strategy to ensure an adequate supply of skilled tradespersons.

2. Addressing the knowledge transfer challenge.

Primary Steel Producers need a strategy to replace the undocumented tacit skills and knowledge that is lost when workers retire. Employers and unions will need to address the shop floor concern that documenting tacit skills (especially in maintenance operations) can be a prelude to contracting out.

3. Meeting future needs for technicians and technologists with the requisite industry experience.

There is no shortage of technicians and technologists with the requisite educational qualifications. The challenge is to find technicians and technologists with industry experience. Other industries have turned to co-op programs, internships, and similar types of initiatives to bridge the experience gap and position themselves to recruit the most motivated candidates. The competition for talent will not be won by relying on ad hoc strategies that were developed for recruiting entirely different types of workers in entirely different labour market conditions.

4. Adapting essential skills strategies to a changing environment.

While there continues to be an essential skills gap in the traditional sense, there is a need to broaden the understanding of essential skills.

5. Developing skills for the steelworker of the future.

Over the next five years the skills of production workers will be altered by the increased application of information technologies and by managerial commitment to adopt ‘continuous improvement’ strategies. The technology skills required by skilled tradespersons will increase. The industry’s skill needs will not be fully addressed by current trade standards. Upgrade training and apprentice enrichment training will be needed. At the same time, especially in unionized workplaces, it is important to recognize that shop floor co-operation with ‘continuous improvement’ strategies will require that productivity gains not be a prelude to further lay-offs.

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6. Strengthening the training culture.

The need to strengthen the industry’s training culture continues to be important. As the industry moves out of the downturn, there should be an increased recognition of the importance of consultations over training and discussion between the industry partners over long-term training goals.

7. Meeting recruitment needs in a more competitive labour market.

The wage gap between the steel industry and other major sectors has narrowed. The industry will need to develop new recruitment strategies if it is to continue to attract the talent that it needs.

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Chapter Nine Foundries

1. Profile of the Canadian Foundry Industry 2. Changes in the Structure of the Industry 3. Technology and Business Trends 4. Demographic Trends 5. Skilled Trades 6. Technicians and Technologists 7. Essential Skills

Profile of the Canadian Foundry Industry The Foundry industry melts and casts metals. Some Foundry operations make their own moulds. Others purchase moulds from specialized mould-making firms. Cast products must be finished by grinding, sanding or machining. More complex products require specialized coatings or welding.

In 2009, there were around 1503 working Foundries in Canada. The majority of these were small businesses. Only 32 Foundries employed 100 or more workers.16 Roughly 48% of employment in Foundries is in Ontario, 31% in Quebec, 12% in British Columbia, and 5% in Alberta. The remaining provinces account for less than 5% of Foundry employment.

Foundry products can be cast from any metal. Historically, ferrous foundries accounted for the majority of foundry capacity. In recent years, however, ferrous casting has declined precipitously in Canada. The majority of Canadian foundry operations to-day cast in aluminium, copper and brass.

Changes in the Structure of the Industry In the foundry industry, there have been three drivers of change over the past decade. The first is a shift from steel to non-ferrous metals, principally aluminium, Over the past decade the ferrous share of apparent domestic consumption of foundry products declined from approximately 58% to 50%.17 Second, the import share of apparent domestic consumption for ferrous foundry products increased from approximately 17% to 29%. And finally, as a result of the deterioration in competitive conditions, the number of foundry operations in Canada fell.

16 Statistics Canada, Canadian Business Patterns Database, December 2009 17 Estimates are based on Industry Canada and Statistics Canada data.

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Figure 9.1 shows employment trends for ferrous and non-ferrous foundries. Over the course of the last decade, foundry employment declined by roughly 40%. More than 70% of this decline was in ferrous foundries. The share of ferrous foundries in industry employment declined from 55% to 44%.

Figure 9.1 Employment in Ferrous and Non-Ferrous Foundries

1998 to 2010 Industry Canada and Statistics Canada

(2008-2010 estimated by Prism Economics, based on Statistics Canada)

For purposes of human resources planning, it no longer makes sense to maintain a distinction between ferrous and non-ferrous foundries. Sector-level planning is only practical if the two branches of the Foundry industry are taken together.

Much of this change in the structure of the Foundry industry is a result of the appreciation of the Canadian dollar which increased the importance of imports and made smaller foundry operations uncompetitive. Changes in technology and consolidation in the industry were also important. Between 2000 and 2006, the decline in production workers (-60%) far exceeded the decline in the number of technicians and technologists (-4%) and the number of skilled tradespersons (-8%).

Technology and Business Trends The principal technology trends in the foundry industry involve automation of design and production processes and the implementation of quality control systems, such as statistical process control. Companies that supply the auto industry and the aeronautics industry are typically required to apply industry-specific quality control systems. ISO certification is also common in the foundry industry. These technology trends have a number of implications for the structure of the foundry industry and its human resources needs:

First: investments in automated design and production equipment are restructuring the industry. The high cost of technologically advanced machinery and equipment is

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beyond the financial reach of the majority of smaller foundry operations. As a result, their competitive position may continue to deteriorate. Of approximately 280 foundry operations in Canada, 60-80 companies account for 70% of production. The process of rationalization in the industry still has a way to go;

Second: the loss of the low value / high volume products to off-shore producers has forced the remaining Canadian foundries to move into higher value-added products. These products involve more complex metallurgy, greater casting precision, and more complex designs. The movement to higher-value added products is associated with the adoption of advanced quality control systems and certifications (e.g., ISO);

Third: the move into higher value-added products and the adoption of quality certification standards has increased the industry’s need for workers with college-level training in metallurgical technology. The industry has responded to this need by partnering with Mohawk College to establish the Modern Foundry Technologies Institute which delivers distance training to workers in the industry. In Quebec, a similar training capacity is centred on CEGEP de Trois Rivières. There is also a metallurgical technician program at the Southern Alberta Institute of Technology in Calgary;

Fourth: the adoption of advanced quality control systems has generated new skill needs in quality assurance and metrology;

Fifth: automation of production and design processes has reduced the industry’s need for semi-skilled production workers and for some skilled trades. In particular, automated welding and automated machining have reduced the need for metal working trades in these fields. To some degree the skills of these trades have migrated to technologists who carry out the same functions using automated equipment and CAD applications;

Sixth: the application of information technologies to process equipment has changed the skills required of maintenance trades. While larger foundries undertake their own maintenance, for many medium-sized foundries (and virtually all small foundries), it is more efficient to contract for specialized maintenance services. As a result, in-house maintenance tradespersons need broader skills than those traditionally associated with specific trades;

Seventh: environmental compliance and occupational safety continue to be important skill areas that require ongoing training.

Demographic Trends Figure 9.2 shows the demographic profile for technical workers, skilled trades, and production workers in the foundry industry, based on 2006 Census data.

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Figure 9.2 Foundries

Demographic Profiles, 2006

0.0%2.0%4.0%6.0%8.0%

10.0%12.0%14.0%16.0%18.0%20.0%

FoundriesTechnical Employees

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

FoundriesSkilled Trades

0.0%2.0%4.0%6.0%8.0%

10.0%12.0%14.0%16.0%18.0%

FoundriesProduction and Materials Handling

Only in the skilled trades is there a degree of clustering in the over 50 age group. Workers over the age of 50 account for approximately 29% of skilled trades persons, as opposed to 21% for technicians and technologists and 24% for production workers.

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Skilled Trades

Foundries currently employ approximately 1,600 tradespersons. Figure 9.3 summarizes the distribution of these tradespersons across the major trades.


Ferrous and Non-Ferrous Foundries Statistics Canada, Census 2006

Trade Per Cent of

Trades Employment

Trades Supervisors 3% Machinists and Allied Trades 30% Metal-Working Trades18 24% Industrial Mechanics / Millwrights 24% Electricians 10% Crane Operators 4% Other Trades 5%

Total 100%

The employment projections in Chapter Four estimated that the industry will need to hire 248 to 506 skilled tradespersons between 2011 and 2015, depending on the productivity scenario. These are not significant numbers in aggregate, although it should be borne in mind that Foundries will be in competition with other employers who face similar hiring needs. Three trade groups will comprise 78% of the industry’s requirements – machinists, welders, and industrial mechanics. Foundry employers need to consider an industry-based or sector strategy to ensure that they have the skilled trades they will require. CSTEC’s apprenticeship program is an obvious option. For its part, CSTEC would need to explore expanding its program to include metal-working and mechanical trades.

Technicians and Technologists As discussed earlier, the application of information technologies to machinery and equipment and the automation of design and production processes have increased the Foundry industry’s need for college-trained metallurgical technicians and technologists and for tradespersons with college-level training in metallurgy. This need applies to both new hiring requirements and to upgrading the skills of current workers.

The geographic dispersion of the foundry industry, together with the comparatively small size of the industry, poses distinct challenges in designing and delivering industry-specific training. The industry is currently served by specialized training programs in three colleges:



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• Southern Alberta Institute of Technology (SAIT) in Calgary, Alberta

• Mohawk College in Hamilton, Ontario, and

• CEGEP de Trois Rivières in Quebec.

The Mohawk College program is delivered through distance training.

The small size of the Foundry industry makes it difficult to support any expansion of these college-based programs if that expansion is focused exclusively on the skills needs of the Foundry industry. Indeed, the challenge will be to sustain the programs that are already in pace. As noted earlier, the demographic profile of technical employees in the Foundry industry does not suggest that the industry will face a significant retirement and replacement challenge over the next 5-10 years.

The pace of technical change in the foundry industry and the need to upgrade the skills of both technical staff and skilled trades persons nevertheless requires an industry-based strategy. Given the small size of the Foundry industry and its geographic dispersion, the most viable strategy for delivering specialized metallurgical training to employees is through a combination of distance learning and college training.

Essential Skills There are no reliable data that gauge the extent of essential skills weaknesses in the foundry industry. A proxy that is suggestive of likely weaknesses in essential skills is the proportion of workers who have not completed high school. Figure 9.4 shows that this proportion is high among tradespersons, equipment operators, and materials handlers.

Figure 9.4 Percent of Major Occupational Groups with Less than High School Completion

Foundries Statistics Canada, Census 2006

Clerical 11% Trades 15% Equipment Operators, Materials Handlers 29%

These data suggest that essential skills weaknesses may constrain some companies in the Canadian Foundry industry as they seek to implement new technologies and quality control systems.

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For the Foundry industry, the principal human resources over the next five years will be:

1. Partnering with other industries in the metals sector to preserve current training capacity for technicians and technologists.

The continued viability of the Foundry industry in Canada will depend on the capacity of the industry cast more complex designs and more sophisticated alloys. Properly trained and experienced technicians and technologists are critical to this shift into higher value, more skill-intensive production. The Foundry industry is currently supported by three college technology programs. There are already well established links between the industry and the college system to support co-op placements and internships. However, the capacity of these programs to supply graduates may exceed the industry’s ability to absorb those graduates. Our employment projections suggest that the industry’s hiring requirement for technologists over the next five years are likely to be between 300 and 400. (See Chapter Four.) Certainly, given the size of the Foundry industry, there is no scope for adding a new program that is focused solely on the Foundry industry’s needs. Indeed, to preserve and further develop the existing training capacity, the Foundry industry may need to partner with other industries in the metals sector that have similar training needs.


The Foundry industry will need to recall or hire between 250 and 500 skilled tradespersons over the next five years. (See Chapter Four.) The Foundry industry is not sufficiently large and is too geographically dispersed to mount an apprenticeship strategy on its own. The industry should therefore consider the potential benefits of participating in CSTEC’s sector-based apprenticeship strategy. In turn, CSTEC will need to expand its apprenticeship initiative so that the trades covered by that program are alsoaligned to the specific trades needs of the Foundry industry.

3. Dealing with gaps in essential skills.

A significant proportion of workers in the Foundry industry are likely to have gaps in their essential skills which will hold the industry back in its efforts to transition into higher value-added types of production. The industry, for the most part, has not yet taken steps to address its essential skills gaps.

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Chapter Ten Construction Fabricators

1. Overview of Construction Fabricators 2. Production and Employment 3. Technology Trends 4. Skilled Trades 5. Steel Detailers 6. Technologists 7. Essential Skills

Overview of the Construction Fabricators:

Construction Fabricators manufacture and customize structural, cladding, and architectural products for use in the construction industry and in other heavy industries, notably the mining and energy sectors by cutting, punching, bending, shaping and welding steel purchased from Metals Service Centres or from Primary Steel Producers. Construction Fabricators are the principal channel through which the steel industry’s products enter the construction market.

For statistical classification purposes, the industry comprises two sub-groups, although some companies operate in more than one sub-group:

Figure 10.1 Statistical Definition of Construction Fabricators

and Estimated Employment in 2008 Industry Canada and Statistics Canada

NAICS Code

Description Employment 2008

3323 Architectural and Structural Metals Manufacturing 64,489

Sub-Groups

33231 • Plate Work and Fabricated Structural Product Manufacturing 30,869 33232 • Ornamental and Architectural Metal Product Manufacturing 33,620

Some companies that are considered Construction Fabricators also manufacture architectural iron and steel products, such as staircases. Construction fabricators are the principal channel through which structural steel products enter the construction market. As a structural product, steel’s principal competitor in the construction market is reinforced concrete. In the cladding market, steel competes with

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glass, masonry, and aluminium. In non-structural applications, steel also competes with polymer compounds and wood.

The Construction Fabricator industry comprised approximately 3,200 establishments in 2008. Of these, only 127 had more than 100 employees. However, these establishments accounted for the majority of employment and output in the industry.

Production and Employment

Canadian Construction Fabricators supply approximately 90% of the domestic market. There has been little change in this trend over the past decade. Exports have accounted for between 15% and 20% of shipments. The export share of shipments declined from 20.2% of shipments in 2002 to 15.5% in 2008. This was partially attributable to the appreciation of the Canadian dollar, but also a result of the high level of domestic demand in the construction industry which absorbed an increased share of domestic productive capacity.

Figure No. 10.2 shows the close relationship between non-residential building construction and employment in the Construction Fabricator industry. In 2008 and 2009, employment fell further than construction spending owing to a sharp fall in exports which declined by more than 50% relative to 2007.

Figure 10.2 Employment Construction Fabrication Industry (NAICS 3323)

And Spending on Non-Residential Building Construction ($2002) Statistics Canada, CANSIM

Construction Sector Council

Technology Trends

Five technology trends are of particular importance to Construction Fabricators. The first of these is the emergence of the ‘meccano’ approach to constructing buildings and equipment. Recent tar sands

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projects have demonstrated that it is now technically feasible to construct large-scale production equipment outside Canada and transport that equipment to the operating site for assembly. It is inevitable that this ‘meccano’ approach to constructing buildings and equipment will be adapted to other types of projects. Currently, this strategy is only being attempted with large-scale projects. However, as experience and expertise develop, the scale of projects to which the ‘meccano’ strategy will be applied will fall. Inevitably, the ‘meccano’ strategy will become an important factor in globalizing the supply of fabricated steel projects.

One of the most labour intensive aspects of supplying structural steel is welding. Welding is also critically important to the quality of supplied steel systems. Robotic welding systems are now widespread in structural steel fabrication. Given the intense competitive pressures that Canadian fabricators will face in the new high dollar environment, companies that do not invest in these systems will face an uncertain outlook. The cost of robotic welding systems may lead a degree of consolidation in the Construction Fabrication industry.

High definition plasma cutting technology is a third technology trend of importance. These systems will replace CNC beam drill lines. A beam drill line is a machinery system that uses a conveyor to move a steel section into position so as to drill bolt holes in several locations, following the details provided in a CAD-based engineering drawing. Typically, however, there are many more manufacturing operations that must be performed on a steel section, including, cutting different features (for example copes, notches, and bevels), trimming the end of the beam to get the required length, and engraving different characters and symbols into the surface. CNC beam drills do not automate these functions. High definition plasma cutters, using a plasma torch, in place of drill tool, enable these other tasks to be automated. This technology automates all operations except welding and painting. Like robotic welding systems, the cost of high definition plasma cutters may foster a degree of consolidation in the industry.

Building Information Modelling (BIM) is replacing CAD as the construction industry’s standard for automated design. BIM applications include all information and specifications for every aspect of a building design. This allows the changes made in one aspect of a design to feed through, as appropriate, to every other aspect. For example, a decision to increase a building’s footprint or its height has implications for structural engineering and structural design, as well as the placement of mechanical systems. BIM automates the process of making these adjustments. BIM also strengthens the links between designers (architects and engineers) and suppliers.

Finally, structural steel’s principal competitor is cast-in-place concrete. Over a range of structures, the engineering advantages of structural steel and concrete are approximately commensurate. Design decisions are therefore made on cost considerations and aesthetic factors. For some types of buildings where long spans or domes are aesthetic features, structural steel has an advantage. For others, where distinctive shapes or exposed surfaces provide aesthetic character, cast-in-place concrete is often preferred. The competitive challenge for structural steel is to replicate, as far as practical, the scope for distinctive design that has been one of concrete’s competitive advantages. This will involve more complex designs and more sophisticated coatings. As well, the industry has clearly embraced quality control standards, such as ISO, as a means of differentiating itself from other building materials.

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Skilled Trades

In the Construction Fabricator industry, skilled trades account for almost 40% of the work force. Approximately 25% of these tradespersons are age 50 or older. The industry currently employs around 20,458 tradespersons. The majority of these are in metal-working trades, chiefly welders. However, the industry also employs maintenance trades to keep equipment operational. These are chiefly millwrights, fitters and electricians. Over the next five years it is estimated that approximately 16% of skilled tradespersons will exit the industry, mostly as a result of retirement. It is expected that between half and three-quarters of these will need to be replaced. Overall, taking account of growth factors as replacement requirements, the industry will need to hire at least 2,500 skilled tradespersons between now and 2015. On lower productivity assumptions (which imply slower investment in robot welding systems and plasma cutters), the number of skilled trades the industry will need to hire more than doubles.

A shortage of skilled trades would pose a serious constraint on the industry. In 2011 and 2012, the overhang of skilled tradespersons laid off as a result of the downturn will likely ensure there is an adequate number of job-seekers to meet the industry’s requirements. However, after 2012, the supply of skilled tradespersons is likely to diminish. It requires three to five years required to train a journeyperson. Meeting the industry’s long-run needs require a strategy that looks beyond the short-term. The Construction Fabricator industry should consider participating in CSTEC’s multi-employer apprenticeship program. CSTEC, in turn, will need to expand the scope of its apprenticeship program to include the metal working trades that are central to Construction Fabricator industry.

Steel Detailers

One of the key skilled occupations in the structural steel industry is Detailers. A Steel Detailer produces detailed drawings for the manufacture and erection of steel members, e.g., columns, beams, braces, trusses, stairs, handrails, joists, metal decking, etc. A Detailer prepares two primary types of drawings: shop drawings and erection drawings. Shop drawings specify the exact requirements for fabricating each individual steel member. Complete shop drawings show material specifications, member sizes, all required dimensions, welding, bolting, surface preparation and painting requirements, and any other information required to describe each completed member. Erection drawings guide the on-site installation process. These drawings show dimensioned plans to locate the steel members and indicate all work that must be done in the field, such as bolting, welding, and installing wedge anchors.

Detailers must be knowledgeable of industry standards and protocols, such as those established by the Canadian Institute of Steel Construction, the Canada Welding Bureau and their respective U.S. counterparts for work exported to the U.S. Detailers’ drawings must usually be stamped by a professional engineer. Manual drafting has been largely replaced by CAD and by industry-specific software applications. Three dimensional modelling (suck as Tekla Structures) and Building Information Modelling (BIM) applications are displacing CAD as industry standards. Steel Detailers acquire their training through college programs. In Alberta and Quebec, steel detailing is an apprenticeable trade. In other provinces, aspects of the steel detailing trade are covered in Metal Fabricator or Fitter trades. To some degree, Steel Detailing is covered in drafting technology programs,

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though not at the depth that is required by the Construction Fabricator industry. Moreover, these programs do not provide the hands-on training of an apprenticeship program. The U.S-based National Institute of Steel Detailing has established occupational standards and voluntary certification. The American Institute of Steel Construction offers web-based training for Steel Detailers. Detailers are a critical occupation in the Construction Fabrication industry. A shortage of this skill will impose a real constraint on the capacity of companies to undertake work. At the same time, technology trends in the industry – notably the introduction of Building Information Modelling (BIM) - are transferring the functions of Steel Detailers to Technologists. However, training programs for Technologists often lack the hands-on component that was integral to the apprenticeship-based training received by Steel Detailers. At present, the industry does not have a strategy to deal with this pending skills gap.

Technologists

The Construction Fabricator industry currently employs around 3,760 technicians, technologists and engineers. This number could rise to over 7,000 if there is significant investment in robotic welding systems, high definition plasma cutting technology, and Building Information Modelling (BIM) applications.

The industry faces three challenges. The first is to transition the incumbent technology work force to 3-D and BIM applications. The second is to transition the incumbent work force to fully automated manufacturing systems. The third is to recruit new technologists who have both the requisite college-level training in structural engineering and metallurgy and the necessary industry experience. There is unlikely to be a shortage of persons with formal qualifications in structural engineering and metallurgy. However, meeting the industry’s additional need for persons with industry experience will be a serious challenge. Data from the Human Resources Managers Survey suggests that very few employers in the industry participate in college co-op or internship programs. In light of the industry’s future needs for technologists with industry experience, consideration should be given to a more structured relationship between the industry and the college system. In the absence of such an initiative, the industry may find that the most motivated technology graduates gravitate to industries that have instituted such programs.

Essential Skills There are no reliable data that measure either the scope or the severity of essential skills weaknesses. The proxy that is used to assess whether such weaknesses are likely, is the proportion of workers who have not completed high school. In the Construction Fabricator industry, approximately 18% of the work force, based on the 2006 Census, did not complete high school. This proportion is higher among production workers and somewhat lower among skilled tradespersons.

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The proportion of workers who did not complete high school is also higher among workers who are over the age of 50. However, the workforce of the Construction Fabricator industry is not skewed towards older workers. Consequently, voluntary retirements will not significantly reduce the proportion of workers with low educational attainment. Some, however, will exit the industry as automated technology eliminates semi-skilled jobs. However, as the projections in Chapter Four show, even in this scenario, the industry will stay have approximately a quarter of its work force in semi-skilled, production jobs. The essential skills gap is therefore likely to be a continuing issue for the Construction Fabricator industry. While new technologies will reduce the size of the problem, those technologies will also diminish the scope for ‘work around’ strategies. Over the next five years, the essential skills gap may constrain the ability of companies to realize the full advantage from their investments in computer-controlled technologies and sophisticated quality control systems.

Training Culture

There is a well established training culture in the Construction Fabricator industry. Most large employers, for example, participate in the apprenticeship system. Some employers have established a strong relationship with the college system, though this is far from universal. The leading example of a company initiative to support training needs was the establishment in 2006 of the Waiward Centre for Steel Technologies at the Northern Alberta Institute of Technology in Edmonton.

The fabricator industry also has access to training that is delivered by the Canadian Institute of Steel Construction. In the main, this training is geared to design professionals. Similar technical training is also available through the American Institute of Steel Construction. Recently, the Canadian Institute of Steel Construction launched an initiative to support training of more Steel Detailers.

There are four key gaps in human resources planning in the fabricator industry. The first is the absence, in some regions, of a strategy to ensure an adequate supply of skilled tradespersons. The second is the need for a strategy to support upgrade training for incumbent detailers, technologists and skilled tradespersons. The third challenge is the need for an industry strategy to establish a more formal relationship with colleges so as to bridge the industry experience gap. And finally, the fourth challenge is to address weaknesses in essential skills before they become a mores serious constraint on the industry’s transition to more automated production technologies.


For the Construction Fabrication industry, the principal human resources over the next five years will be:

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Construction Fabricators will need to recall or hire at least 2,500 skilled tradespersons over the next five years. (See Chapter Four.) On lower productivity scenarios, this number increases. The industry will find itself in competition with other sectors that also have significant replacement needs. In the absence of a serous strategy to ensure an adequate supply of skilled tradesperson oriented to the needs of the Construction Fabrication, the industry will find that it faces unexpected skill constraints. The industry should therefore consider the potential benefits of participating in CSTEC’s sector-based apprenticeship strategy. In turn, CSTEC will need to expand its apprenticeship initiative so that the trades covered by that program are alsoaligned to the specific trades needs of the Construction Fabrication industry.

2. Steel Detailers.

The industry will need to replace retiring Steel Detailers. This trade is critical to the industry. While changes in technology will alleviate some of the replacement need, the industry is still going to require Steel Detailers, whether as tradespersons (as at present) or as technologists. An effective strategy to ensure an adequate supply of Steel Detailers is impeded buy the lack of national occupation standards and by absence of an apprenticeable trade in Steel Detailing in some provinces. The industry needs to develop an appropriate occupational standard and then ensure that there is sufficient training available to meet this standard either in college technology programs or in apprenticeship training programs.

3. Meeting future needs for technicians and technologists with the requisite industry experience.

In most parts of Canada, there is no shortage of technicians and technologists with the requisite educational qualifications or professionally trained immigrants with experience in steel design. The challenge is to find persons with industry experience and knowledge of Canadian design standards and codes. Other industries have relied on co-op programs, internships, and similar types of initiatives to bridge the experience gap and position themselves to recruit the most motivated candidates. Some companies in the Construction Fabrication industry already do this. However, to ensure that its skill needs are met, the industry needs to move in this direction in a much more systematic way.


A significant proportion of workers in Construction Fabrication are likely to have gaps in their essential skills. These gaps will hold the industry back as it transitions into higher value-added types of production. The industry, for the most part, has not yet taken steps to address its essential skills gaps.

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Chapter Eleven Metals Service Centres

1. Profile of the Canadian Metals Service Centres 2. Relationship to Primary Producers 3. Employment and Shipment Trends 4. Technology and Business Trends 5. Demographic Trends 6. Skilled Trades 7. Technicians and Technologists 8. Essential Skills

Profile of the Metals Service Centre Industry

Metals Service Centres inventory and distribute basic metal products that they purchase from domestic or foreign mills. In 2009, there were approximately 1,200 Service Centres in Canada. Of these, only 78 employed more than 50 persons.19 However, these larger Service Centres accounted for 40-45% of total employment in the industry.

In 2009, Canadian Primary Steel producers distributed 26.3% of their production through Metals Service Centres.20 In addition to steel produced by Canadian mills, Service Centres also purchase steel in the international market. In 2009, roughly 50% of steel shipped by Canadian Service Centres was imported. While iron and steel products, predominate, many Metals Service Centers also supply products fabricated from other metals.

Metals Service Centres are the principal channel for supplying manufacturers, excluding the auto industry. For the most part, the construction industry and the auto assemblers are supplied directly by the Primary Producers, as are some of the larger auto parts makers. The inventory function of Metals Service Centres is especially important to manufacturers. The predominance of ‘just-in-time’ manufacturing processes, which minimize on-site inventories, makes manufacturers especially dependent on Service Centres to meet supply requirements in a timely manner. Figure 11.1, shows the strong correlation between production of metal durable products and shipments by service centres.

19 Statistics Canada, Canadian Business Patterns (June 2009) 20 Estimates based on American Iron and Steel Institute, 2009 Annual Statistical Report. Data are for Canadian

producers.

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Figure 11.1 Shipments of Metals Service Centres

and Shipments of Metal Durable Products (Current Dollars) Index: 1993=100

Statistics Canada

Canadian service centres almost exclusively support domestic customers. While some companies have operations in both Canada and the U.S., it is uncommon for a company to supply a U.S. customer from a Canadian-based service centre.

Relationship to Primary Producers

In North America, Metals Service Centres are independent of the Primary Steel Producers. Outside of North America, it is common for primary steel producers to market their products through wholly-owned Service Centres. This model – which industry nomenclature refers to as the ‘European Model’ – has not achieved significant traction in North America, although Thyssen Krupp recently introduced in-house service centres into the North American market. It is possible that the transformation of ownership structures in Canada will lead other Primary Producers to consider a change in their distribution strategies. However, to displace the ‘North American Model’, Service Centres operated by Primary Producers would need to offer the same inventory services and timely delivery as are currently provided by independent Service Centres. As well, Service Centres operated by Primary Producers would also need to match the price performance of independent Service Centres. As noted earlier, a key element in the pricing strategy of independent Service Centres has been drawing on sources of supply outside North America.

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Employment and Shipment Trends

Figure 11.2 shows average monthly shipments from Canadian Service Centres. These data are collected by the U.S.-based Metals Service Center Institute (MSCI) and reflect only shipments reported by the MSCI’s Canadian members. MSCI estimates that its Canadian members account for around 70% of total Canadian shipments. Employment data are based on Statistics Canada’s estimates for the entire industry.

Figure 11.2 Average Monthly Shipments of MCSI Members (Tonnes)

and Average Annual Employment (Total Industry) of Metals Service Centres, 1995 to 2009

Shipments: Metals Service Center Institute Employment: Statistics Canada

As can be seen in Figure 11.2, average monthly shipments by Service Centres peaked in 2003. The decline in shipments from 2003 to 2009 was 44%. Roughly a third of this decline preceded the downturn in North American manufacturing which started in 2008. In large measure, this was a result of the downturn in Canadian metals-based manufacturing that accompanied the appreciation of the Canadian dollar. In 2005, the Canadian dollar breached $0.80 for the first time since the early 1990s. Thereafter, the dollar moved steadily towards parity. As a result of the higher dollar, many of the metal manufacturing establishments that were part of the customer base for Service Centres permanently ceased production operations in Canada.

Figure 11.2 shows an unexpected divergence between shipments and employment after 2003. Even though shipments decline after 2003, employment continued to increase until 2006. In part, this was a result of the migration of ‘finishing functions’ from the Primary Steel Producers to Service Centres. ‘Finishing functions’ include a range of processes: cutting to standard sizes, angling, punching, drilling, sanding, coating, etc. Historically, most finishing functions were performed by Primary Steel Producers, although Service Centres always undertook some degree of product customization (e.g., cutting to size). An important consequence of the rationalization that occurred in Primary Steel production over the past decade was a reduction in the number of ‘finishing functions’ carried out in the Primary Steel mills. These functions migrated to Service Centres. The increased importance of imported steel was similarly

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an important factor in Service Centres taking on more ‘finishing functions’. Figure 11.3 illustrates the range of ‘finishing functions’ performed by one of the larger Metals Service Centres in Canada.

Figures 11.3 Examples of Finishing Functions

Russel Metals Inc.

By 2006 (or sooner), the employment impact of this migration of finishing functions to Service Centres was largely complete. Thereafter, the decline in shipments began to pull down employment in the Service Centre industry.

Figure 11.4 shows that since 2003, there has been a decline in shipments per employee. To some degree this apparent decline in productivity reflects the increase in the number of workers required to carry out ‘finishing functions’. However, the trend continues even after this migration of ‘finishing functions’ is largely complete. It appears that the Service Centre industry may not yet have adjusted to the reduced levels of demand that are a consequence of the higher Canadian dollar which forced a permanent contraction in the industry’s customer base.

The Service Centre market is bifurcated. Approximately 25-30 companies account for an estimated 70% of the wholesale market in metals. The remaining 30% of the market is serviced by small centres. The decline in metal manufacturing and the need to finance the capital costs of acquiring the equipment necessary for finishing functions will put considerable pressure on the industry to rationalize and

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consolidate over the next five years. Interviews with industry executives suggest that this trend is not yet evident, but is widely anticipated.

Figure 11.4 Tonnes of Iron and Steel Product Shipped per Employee

by Metals Service Centres, 1995 to 2009 Shipments: Metals Service Center Institute

Employment: Statistics Canada

Competing Materials and Customer Support

Across a range of manufactured products, steel has lost ground to polymers and polymer composites. Steel has also lost ground to aluminium, although for some Service Centres this involves nothing more than a change in the composition of shipments. Reversing this trend will require the introduction of new products. A recent study for the Canadian Steel Producers Association speculates that the Primary Steel industry may seek to move new alloys and coated products that were developed for the auto industry into other uses, such as cladding products for the construction market. As steel products become more sophisticated, the users of those products may require technical support beyond what is currently available through Service Centres.

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Human Resources

Figure 11.5 shows the distribution of service centre employment by occupational category.

Figure 11.5

Occupational Distribution of Service Centre Employment Statistics Canada, Census 2006

The share of ‘white collar’ jobs, including sales, in total employment is substantially greater in Service Centres than in other industries in the steel sector. Although skilled trades account for only 16% of the total work force in service centres, that amounts to approximately 2,100 tradespersons. Figure 11.6 shows the distribution of these tradespersons by trade.


Metal Service Centres Statistics Canada, Census 2006

Trade Supervisors 11% Metal Working Trades21 45% Crane Operators 22% Mechanics 6% Machinists 6% Other Trades 10% 100%

The age profile of tradespersons in service centres is generally younger than in other industries in the Broader Steel Sector. Replacement challenges, therefore, are not a priority. (See Figure 11.7)



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Figure 11.7 Metals Service Centres

Demographic Profile of Skilled Trades Work Force Statistics Canada, Census 2006

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Service CentresSkilled Trades

The more critical human resources issues in service centres pertain to likely weaknesses in essential skills, i.e., reading, basic trade arithmetic, and communications skills. While there are no data that directly measure the incidence of essential skills weaknesses, the proportion of the work force that did not complete secondary school is generally accepted as a good indicator of the likelihood of essential skills problems. In service centres, this proportion is comparatively high, as summarized in Figure 11.8.

Figure 11.8 Percent of Major Occupational Groups with Less than High School Completion

Metals Service Centres Statistics Canada, Census 2006

Clerical 12% Sales 9% Trades 27% Equipment Operators, Materials Handlers 34%

The high proportion of the work force that did not complete high school suggests that companies may encounter difficulties when introducing automated technologies that require programming, new finishing services that require computational skills, and new software applications that require familiarity with information technologies. Unlike the primary steel producers, retirements will not significantly lessen the essential skills problem. (See Figure 11.9)

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Figure 11.9 Metals Service Centres

Demographic Profile of Production Workers and Materials Handlers Statistics Canada, Census 2006

Training Training for service centres is available through the Metals Service Center Institute. This training is available through a variety channels including designated training partners, on-site training, and web-based training. The primary focus of this training is on management and sales skills, though some courses are also offered in technical skills. The industry relies heavily on vendor training for training of materials handlers, production workers and skilled trades. There are no well-developed links between the Service Centre industry and the college system. The Human Resources Managers Survey suggests that while some Metals Service Centres participate in the apprenticeship system, most companies rely on ‘poaching’ to meet their need for skilled tradespersons.


For the Construction Fabrication industry, the principal human resources over the next five years will be:

1. The Need for an Industry Perspective on Human Resources Planning.

The principal gap in human resource planning is the absence of an overall industry perspective on human resource needs and how human resources planning could strengthen the industry’s competitive position. More specifically, the industry lacks strategies to deal with its future skilled trades requirements, upgrading the skills of production workers to take on ‘finishing functions’ and dealing with essential skills weaknesses

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2. Dealing with inadequate productivity growth.

There is disconcerting evidence suggesting a lagging productivity challenge in Metals Service Centres. Rationalization may address some of this problem. However, the industry will also need to ‘re-engineer’ some of its business processes to achieve higher productivity growth. The further application of information technologies to inventory and distribution processes and to the automation of ‘finishing functions’ will be central to this productivity growth. These changes will involve new skill requirements that the industry not well equipped to deal with. The industry does not have strong relations with the college system. Nor is there an industry-based training capacity in Canada. This challenge points again to the need for an industry perspective on human resources planning.


A significant proportion of workers in the Metals Service Centre industry are likely to have gaps in their essential skills. These gaps will hold the industry back as it seeks to achieve higher productivity through the further application of information technologies to its inventory and distribution processes and to its ‘finishing functions’.

4. White Collar Skills.

As a major wholesaling industry, Metals Service Centres are critically dependent on ‘white collar skills’ – notably customer relationship management, supply chain management and distribution management. To maintain, let alone improve, its current position in the broader materials market, the Metals Service Centre industry will need to compete successfully with suppliers of other materials, chiefly polymers and polymer compounds. The evidence on steel consumption trends in North America suggests that this is not a competition that the steel industry is winning. While come companies have the internal ability to upgrade their white collar skills, on the whole, the industry relies on ad hoc human resources planning to meet its human resources needs. This ad hoc approach needs to be reconsidered. Metals Service Centres are a key link in the steel value chain and the steel supply chain. As competition with other materials intensifies, the Service Centre industry will need to respond by providing increased value to its customers. This cannot be done without a vision of the skills that will be needed to support such a strategy.

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Chapter Twelve Recommendations

Context

• The Steel Sector of the Future • The Steelworker of the Future • The Steel Sector and the Labour Market

Recommendations

• Strengthening the Steel Sector’s Training Culture Rec. No. 1: Benchmarking Training and Development Rec. No. 2: Workplace Advisory Committees

• Attracting the Best and the Most Motivated Rec. No. 3: Implementing a Career Information Strategy

• Ensuring the Future Supply of Skills for the Steel Sector Rec. No. 4: A National Skilled Trades Strategy

Rec. No. 5: A National Steel Technologist Strategy Rec. No. 6: Steel Detailers

• Building on Human Resources Capacity in the Steel Sector Rec. No. 7: Knowledge Transfer Rec. No. 8: Essential Skills Rec. No. 9: Energy Efficiency and Continuous Improvement

Context The Steel Sector of the Future Senior leaders in the Steel Sector describe their vision of the Steel Sector of the Future in terms of five inter-connected objectives:

1. Zero accidents, 2. Zero product defects, 3. 100% reliability for on-time delivery, 4. Ongoing productivity gains, and 5. Securing existing and new markets based on new products and a

reputation for quality and delivery.

The sector intends to achieve these objectives while concurrently improving its environmental sustainability through more efficient use of energy, increased recycling, and adopting new technologies. Achieving the objectives that describe the steel sector of the future means more investment, more jobs,

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better wages and benefits and increased opportunity. For the Canadian economy, the Steel Sector of the future will be an important source of economic growth through its linkages to other sectors of the economy and through the importance of steel to new ‘green’ products and technologies.

The transition from the Steel Sector of today to the steel sector of the future has important implications for human resources planning. The Steelworker of the Future will not be doing the same work as the Steelworker of Today, nor will the Steelworker of the Future have the same demographic or skill profile as the Steelworker of Today.

The Steelworker of the Future Skills:

The nature of both production and maintenance work in the Steel Sector is changing. While the specifics of these changes differ across the industries that comprise the Steel Sector, there is a common theme. In all of the industries that comprise the Steel Sector, both production and maintenance are becoming more skilled trades-intensive and more technology-intensive. This, in turn, has implications for both technical skill needs and for soft skill requirements.

• In the Primary Steel industry, the adoption of continuous improvement (‘kaizen’) and total productive maintenance (TPM) will change the way that production and maintenance work are organized. Both production workers and skilled trades workers will need a greater understanding of metallurgical and production technologies. Equally importantly, both production and skilled trades workers will need stronger ‘soft’ skills, including communications skills and the ability to problem-solve in a team environment. There may also be increased overlap between production work and maintenance work as production processes become more complex. This will have implications for how jobs are defined and work is organized.

• In Foundries, a greater knowledge of metallurgy will be critical as foundry operations transition to more complex castings and more advanced alloys. The industry will also need skilled tradespersons and technicians and technologists to maintain and operate the more sophisticated technology that is required to produce complex castings with advanced alloys.

• In Construction Fabrication, control systems for robotic welding and high definition plasma cutting will be central to production processes, as will be the ability to work with 3-D design applications and Building Information Modelling (BIM). The industry needs to transition the traditional skills of Steel Detailer into the more complex environment of 3-D design and BIM.

• Metals Service Centres will see more sophisticated systems for managing inventories and meeting the just-in-time delivery requirements of manufacturing customers. Additionally, service centres will continue to take on a greater share of the finishing functions that historically were performed by the Primary Steel Producers.

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Demographics:

The demographics of the labour force in the Steel Sector will change. This has a number of implications. In the first place, the Steel Sector will need to systematically recruit new workers to replace retiring workers. Second, the Steel Sector will be recruiting in a labour market environment that is quite different from earlier periods of hiring. To meet its human resources requirements the Steel Sector will need to recruit more women and more workers from an aboriginal and visible minority background. The sector will also need to accommodate generational changes in values and aspirations, in particular the increased importance that will be attached to family/work balance and ongoing development of skills. The competitive context of this recruitment challenge will be different. The Steel Sector will be in more intense competition with other industries for the best and most motivated workers.

The Steel Sector and the Labour Market The cumulative impact of changes in skill requirements, demographics and competitive conditions, is to put the Steel Sector in a different relationship to the labour market compared to previous decades. Historically the Steel Sector could recruit most of the skills that it needed directly from the labour market and rely on informal learning to fill in most of the gaps. Structured training was focused chiefly on health and safety and training in new technologies where that was needed. Moreover, historically the Steel Sector could rely on its wage premium over other industries and favourable supply conditions to ensure that the sector had limited difficulty in meeting its human resources needs. That world has changed:

• For many jobs, the Steel Sector cannot count on the local labour market to supply ‘ready-made’ workers. Consequently, employers in the Steel Sector will need to take proactive steps to ensure that the skills they need are being developed by colleges, universities and the apprenticeship system. Employers will also need to address the gap between the skills of new recruits and the industry-specific skills of the Steel Sector.

• The Steel Sector’s wage premium over other industries, while still relevant, has narrowed. Consequently, employers in the Steel Sector face increased competition for the best and most motivated workers. Today, this trend is partially concealed by the lingering effects of the 2008 downturn, but will be more evident as recovery gains momentum.

• Changes in demographics and the skill profile of recent immigrants means that supply conditions in most regional labour markets will be less favourable than they were in earlier decades.

Recruitment strategies and human resources planning strategies must change, if they are to adapt to the Steel Sector’s new needs and new circumstances. To attract the best and most motivated workers, the Steel Sector will need to continue to offer good wages and benefits. What is different is that this, in itself, will not be enough. The Steel Sector will need to offer the kinds of jobs and opportunities that will be attractive to the best and most motivated workers. Unless the sector attracts and retains those workers, the objectives that define the Steel Sector of the Future will be out of reach.

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Recommendations

Strengthening Steel Sector’s Training Culture The 2004 sector study discussed the uneven development of a training culture in the Broader Steel Sector. The evidence collected for this study points to some important changes. The most notable or these are:

• the Waiward Centre for Steel Technology at the Northern Alberta Institute of Technology,

• CSTEC’s Workforce Development Initiative which adopts a regional, multi-employer approach to recruiting and training apprentices,

• the introduction into Canada of high level training developed by ‘corporate universities’ (ArcelorMittal and Tenaris),

• CSTEC’s Essential Skills Program,

• metallurgical technology programs at three colleges in association with the Foundry industry,

• initiatives by the Canadian Institute of Steel Construction to address the emerging shortage of Steel Detailers.

Notwithstanding these developments, the core finding of the 2004 sector study remains valid: the Broader Steel Sector needs to strengthen its training culture. The recommendations that follow will support the sector in moving to a higher plateau in training culture. The recommendations draw on two practices that have a strong history in the Steel Sector: benchmarking and joint consultation.

Benchmarking Training and Development:

Companies in the Steel Sector apply sophisticated performance benchmarking to most aspects of production and management. A key finding from this study is that, especially in the Primary Steel industry, benchmarking will increasingly be applied to various aspects of human resources utilization. However, there are fewer examples of benchmarking being applied to training policies and practices or to the return to investment in training. Benchmarking is one of the keys to strengthening training culture. The first task of a benchmarking exercise is to identify with employers and unions what types of policies and practices can be measured. The second task is to determine the most efficient way to gather data that properly measures those policies and practices. And finally, the third task is to present benchmarking data in a way that captures current conditions (the ‘base-line’) and enables employers and unions to identify priorities and gauge progress towards meeting those priorities.

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Recommendation No. 1: Benchmarking Training and Development (a) CSTEC should implement an annual benchmarking survey of employers,

unions and workers that tracks indicators of training and professional development. Individual companies should not be identifiable from the survey results. The initial Training and Development Benchmarking Survey should generate base-line data that can be used in assessing subsequent performance.

(b) The annual Training and Development Benchmarking Survey should be at the core of CSTEC’s Labour Market Information services. Survey results should be presented to stakeholders through a webinar and a written report.

Consultative committees in the workplace are often a useful prompt to improved performance. This has certainly been the case with occupational health and safety where the principle of ‘joint responsibility’ is embodied in the operation of statutorily directed joint committees. Survey evidence indicates that formal and informal consultations on training are common in the Steel Sector, though not universal.

Recommendation No. 2: Workplace Advisory Committees on Training and Development CSTEC should work with stakeholders to establish joint workplace-level, advisory committees on training and development or, if appropriate, to broaden the mandate of existing consultative structures to include training and development. In support of this initiative, CSTEC should develop support materials for the workplace parties to assist them in identifying needs and possible resources. Among the training needs that should be considered are:

• essential skills, • apprenticeship, • skilled trades upgrading, and • the skills required to successfully implement

continuous improvement and total productive maintenance.

Attracting the Best and the Most Motivated

Chapter Four of this report found that the industries that comprise the Broader Steel Sector will need to hire or recall between 19,000 and 29,000 employees over the next five years. These estimates are summarized in Figure No. 12-1 below.

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Figure No. 12-1 Five-Year Hiring and Recall Requirements, 2011 – 2015

Primary

Steel Producers

Independent Pipe, Rolling and Drawing

Mills


Ferrous & Non-

Ferrous Foundries


Total

Skilled Trades: High Productivity Scenario 1,255 724 2,498 248 285 5,009

Moderate Productivity Scenario 1,827 1,089 4,736 418 436 8,506

Low Productivity Scenario 2,138 1,277 6,363 506 516 10,800

Production & Materials Handling: High Productivity Scenario 743 573 1,979 234 522 4,051

Moderate Productivity Scenario 1,098 884 2,774 764 822 6,341

Low Productivity Scenario 1,248 1,074 4,143 1,122 980 8,566

Engineering and Technology: High Productivity Scenario 401 337 3,688 400 126 4,953

Moderate Productivity Scenario 424 281 2,788 376 169 4,039

Low Productivity Scenario 473 227 906 298 191 2,096

Administration: High Productivity Scenario 219 376 1,232 255 288 2,370


Low Productivity Scenario 405 396 1,798 224 540 3,363

Managerial: High Productivity Scenario 100 203 982 85 378 1,749


Low Productivity Scenario 189 222 1,351 65 926 2,752

Sales: High Productivity Scenario 63 106 309 167 229 875

Moderate Productivity Scenario 100 106 422 162 445 1,236

Low Productivity Scenario 120 107 480 156 560 1,422

Total Hiring and Recall Requirements: High Productivity Scenario 2,781 2,320 10,689 1,389 1,829 19,008

Moderate Productivity Scenario 3,953 2,962 13,548 2,031 3,060 25,554

Low Productivity Scenario 4,572 3,302 15,042 2,371 3,713 29,000

Historically the Steel Sector was an employer of choice in its local labour markets. For semi-skilled workers, the Steel Sector’s wages and benefits will continue to put the industry in a favourable competitive position. However, for skilled trades and for technical employees, the steel industry’s wage

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premium over other industries has narrowed. The Steel Sector is now in greater competition with other industries for the pool of qualified and motivated workers, especially in the skilled trades and technician and technologist occupations. The Steel Sector needs a strategy to attract the best and most motivated employees. In framing this strategy it will be important to work with other partners in the Broader steel Sector, including the Canadian Steel Producers Association, the Canadian Institute of Steel Construction, the Canadian Foundry Association, and the Canadian Division of the Metal Service Centre Institute.

Recommendation No. 3:

Implementing a Career Information Strategy In collaboration with other partners in the Steel Sector, including the Canadian Steel Producers Association, the Canadian Institute of Steel Construction, the Canadian Foundry Association, and the Canadian Division of the Metal Service Centre Institute, CSTEC should develop:

(a) web-based, career information targeted to students and to young workers who are considering an apprenticeable trade or a career as a technician or technologist,

(b) career information focused on non-traditional sources, including young women, technically trained recent immigrants, aboriginal Canadians and workers who are members of visible minorities,

(c) a social media strategy to reach a broader range of potential steel sector employees and to draw attention to the opportunities in the steel sector.

Ensuring the Future Supply of Skills for the Steel Sector A National Skilled Trades Strategy:

Ensuring a long-run supply of skilled tradespersons will continue to be a central human resources planning need for the Broader Steel Sector, but especially for Primary Producers and Construction Fabricators. Projections prepared for this study indicate that, on a national basis, the Broader Steel Sector will need to hire an average of 1,000 to 2,000 skilled tradespersons each year over the next five years. This reflects both the impact of retirements and the need for new skilled tradespersons as the steel sector recovers. The demographic challenge is more acute for Primary Steel Producers, but is still a factor for other industries in the steel sector. In 2011, a significant proportion of the labour requirement can be met by recalling laid off workers. As well, in 2011 and 2012, skilled tradespersons laid off by other industries will be seeking jobs. However, as the economy recovers, the pool of skilled tradespersons seeking re-employment will diminish. In the longer run, the Steel Sector – especially Primary Steel Producers and Construction Fabricators – needs a strategy to ensure a reliable supply of skilled tradespersons. In the absence of such a strategy, the sector

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will face serious human resources constraints that will impede the sector’s ability to meet its business objectives and to provide more well-paid jobs.

CSTECs Workforce Development Initiative (WDI) supports the Hamilton Skilled Trades Apprenticeship Consortium. The Consortium takes on the initial role of recruiting and sponsoring apprentices. Apprentices receive a combination of trades and technology training through Mohawk College under the Co-operative Diploma Apprenticeship (CODA) program which allows apprentices to concurrently obtain a college diploma and work towards completing an apprenticeship. Apprentices also receive initial workplace experience without employers being required to make a full employment commitment. Apprentices who demonstrate commitment to their training are then hired on a permanent basis by the participating employers. Only after this permanent hiring decision do these employers assume responsibility for continuing the apprentice’s sponsorship. This approach reduces many of the initial risks associated with apprenticeship. It also ensures that apprentices receive both trades training and technology training. A key finding of this study is that CSTEC’s skilled trades strategy needs to be expanded in terms of its geographic reach, the range of Steel Sector industries that participate, and the number of trades covered.

Recommendation No. 4: National Skilled Trades Strategy

a) CSTEC should continue to develop a National Skilled Trades Strategy, based in part on the success of its pilot program in Hamilton. The strategy should be expanded to include all industries in the Broader Steel Sector. In some regions, to achieve critical mass, the strategy may need to involve other manufacturing industries.

b) The focus of the National Skilled Trades Strategy should be to create regional consortia that will manage the regional design and implementation of the national strategy. Administrative support would be provided by CSTEC through its regional staff. The CMSO should lead the design and implementation of the strategy in Quebec.

c) CSTEC should develop supplementary curriculum material to strengthen the training of apprentices in their understanding of metallurgy and related topics.

d) CSTEC’s National Skilled Trades Strategy should cover the full range of

skilled trades needed by the Steel Sector. Among the trades which should be included are:

• Industrial Electricians • Industrial Mechanics / Millwrights • Pipefitters

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• Stationary Engineers22 • Crane Operators • Welders • Other Metal-Working Trades23

e) The Steel Sector should aim to train at least one-third of its anticipated, five-year hiring requirements for skilled tradespersons. This goal implies the following annual targets for new apprentices

2011 2012 2013 2014 2015 Total

Primary Steel Producers 61 85 122 171 171 609

Independent Pipe, Rolling & Drawing Mills 36 51 73 102 102 363

Construction Fabricators 158 221 316 442 442 1,579

Foundries 14 20 28 39 39 139

Metals Service Centres 15 20 29 41 41 145

Totals 284 397 567 794 794 2,835

The Steel Sector is not alone in facing a looming shortage of skilled tradespersons. Most industries in Canada face the same challenge. While a Steel Sector strategy is critical to meeting the sector’s human resources needs, that strategy will be far more effective if it is undertaken in the context of a national strategy. CSTEC should work with other partners to promote such a national strategy.

A National Steel Technologist Strategy:

The employment of technologists is increasing in the Broader Steel Sector. As well, there has been a migration of functions to technologists both from the skilled trades and from engineers. For Primary Steel Producers, but especially for Construction Fabricators and Foundries, recruiting experienced and qualified technologists will be a human resources priority over the next five years.

The central challenge in recruiting technologists is not gaps in the supply of persons with relevant post-secondary qualifications. Companies almost invariably report that there are no shortages of applicants for technician/technologist jobs. There is, however, a serious shortage of applicants with experience or training that is focused on the needs of the Steel Sector.

The key to bridging the gap between theoretical training and industry experience is an expansion of co-op and internship placements. There is also an important competitive factor. The most motivated technology students gravitate to fields that offer co-op placements and internships and to the employers

22 In most jurisdictions, Stationary Engineers are regulated under Pressure Vessel legislation, rather than Trades and

Apprenticeship legislation. However, the training and certification model closely resembles the regulated trades. 23 Metal Working Trades include: Sheet Metal Workers, Boilermakers, Structural Metal and Plate Work Fabricators,


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that participate in them. If the Steel Sector does not offer these opportunities then the best and most motivated students will go to industries that do.

Recommendation No. 5: National Steel Technologist Strategy

To better meet the need for steel sector technology skills, CSTEC should implement a National Steel Technologist Strategy. The elements of this strategy would be:

(e) A census of current Steel Sector participation in co-op and internship placements of technology students,

(f) A national target to increase the number of co-op and internship placements of technology students,

(g) Development of an occupational standard for a Steel Technologist,

(h) Partnerships with colleges and CEGEPs to deliver training to meet the Steel Technologist standard.

Steel Detailers:

Steel Detailers are critically important to Construction Fabricators. In Alberta and Quebec, Steel Detailers are an apprenticeable trade. In other provinces, the skills of a Steel Detailer are partly covered by Metal Fabricator or Fitter trades. Related training also is delivered as part of college programs in drafting technology. This training, however, does not cover steel detailing in sufficient detail, nor does it provide the hands-on training of an apprenticeship program.

The Canadian Institute of Steel Construction (CISC) is currently exploring ways of ensuring an adequate supply of qualified Steel Detailers. CISC is also considering how the occupation will need to evolve as new technologies are adopted, notably 3-D modelling and Building Information Modelling (BIM). These technologies will fundamentally change the skill requirements of Steel Detailers.

The absence of a national occupational standard is a hindrance to expanding training in this occupation.

Recommendation No. 6: Steel Detailers

CSTEC should support CISC in developing a national occupational standard for Steel Detailers and making Steel Detailing an apprenticeable Red Seal trade or a certifiable occupation in all provinces.

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Building on Human Resources Capacity in the Steel Sector Knowledge Transfer:

Knowledge transfer is the transmission of undocumented or tacit skills and knowledge from experienced workers to new hires. The transfer occurs across all occupational categories, but, in the context of the steel sector, is most relevant in the skilled trades and equipment operator occupations. Workers in these occupations acquire experience-based knowledge about the operation and maintenance of machinery. In the normal course of events, this knowledge is informally passed on to newer employees. A difficulty arises, however, when there is an abrupt increase in retirements or turnover that removes this experience-based knowledge before new employees are hired or fully integrated. There is a significant risk of a knowledge transfer gulf in the Primary Steel industry.

Recommendation No. 7: Knowledge Transfer

CSTEC should produce a best practices guide on how companies in the steel industry and in other industries are tackling the knowledge transfer challenge.

CSTEC also should develop a strategy to link the documentation of experience-based skills and knowledge to essential skills training.

Essential Skills:

The conventional understanding of essential skills is that these skills encompass basic reading, verbal communications, and computational skills. Weaknesses in these skills can constrain the ability of production and maintenance workers to implement quality control procedures, understand and interact with electronic controllers, and apply preventive maintenance routines. The successful implementation of continuous improvement strategies and total productive maintenance strategies will be undermined by essential skills weaknesses. Gaps in essential skills also affect health and safety performance and undermine the achievement of zero accidents.

There are no data that measure the scope or severity of essential skills weaknesses. However, the proportion of workers who have not completed high school is an indicator of the likelihood of essential skills weaknesses. This measure indicates the likelihood of an essential skills gap in every industry in the Steel Sector. Various trends in the industry are also changing the nature of the essential skills problem. Retirement trends are reducing the extent of the essential skills problem among older workers. However, there is much greater variance today in the essential skills of high school graduates. The increased importance of apprenticeship focuses attention on the need to support apprentices in their classroom training and their Certificate of Qualification examinations. For recent immigrants, the main focus of essential skills training is on language skills.

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Recommendation No. 8: Essential Skills

CSTEC needs to broaden its essential skills training strategy to include:

• Supporting apprentices,

• Bridging the language skills gaps of recent immigrants,

• Linking essential skills to the implementation of continuous improvement and total productive maintenance,

• Linking essential skills training to documenting tacit knowledge and skills and thereby supporting knowledge transfer,

• Health and safety.

The Human Resources Dimension of Energy Conservation: In every industry that comprises the Steel Sector, energy costs are significant component of operating costs. This is especially the case in Primary Steel production where energy costs are approximately equal to labour costs.

Over the next decade, every industry in the Steel Sector will be under increased pressure to increase its energy efficiency. Much of this challenge will be met by adopting new technologies. However, an important part will also be played by continuous improvement strategies on energy conservation in production and maintenance work. Leveraging continuous improvement to achieve energy efficiencies will require an increased awareness of energy efficiency on the part of both maintenance and production staff and an understanding of how seemingly small changes can have a cumulative impact. There is a potentially important role for CSTEC to pay in supporting this awareness.

Recommendation No. 9: Energy Conservation in Production and Maintenance

CSTEC should develop a training program to support companies in the steel sector that are seeking to achieve operational excellence in the use of energy through the adoption of best practices on the part of operators and maintenance workers.

●●●

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Appendices

Appendix A: Steering Committee

Appendix B: Interviews and Focus Groups

Appendix C: Local Union Leader Survey

Appendix D: Human Resources Manager Survey

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Appendix A Steering Committee

DANIEL ROBERT – MANAGEMENT CO-CHAIR VICE-PRESIDENT, HUMAN RESOURCES AND LEGAL AFFAIRS ARCELORMITTAL MONTREAL INC. DOUG OLTHUIS – LABOUR CO-CHAIR DEPARTMENT LEADER GLOBAL AFFAIRS AND WORKPLACE ISSUES USW NATIONAL OFFICE TORONTO BRIAN BABCOCK MANAGER INDUSTRIAL RELATIONS, TENARIS PRUDENTIAL CANADA GRAHAM BROWNE VICE PRESIDENT HUMAN RESOURCES ARCELORMITTAL DOFASCO HAMILTON DANA COULOMBE CHAIR OF THE EDUCATION COMMITTEE CANADIAN FOUNDRY ASSOCIATION WYLIE CRAIG PRESIDENT USW LOCAL UNION 7726 (PRUDENTIAL/TENARIS) MIKE DAPRAT PRESIDENT USW LOCAL 2251 (SAULT STE. MARIE) MARIO DEMARCO CORPORATE MANAGER – HUMAN RESOURCES U. S. STEEL CANADA INC. A SUBSIDIARY OF UNITED STATES STEEL

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BILL FERGUSON PRESIDENT USW LOCAL UNION 8782 (U.S. STEEL, NANTICOKE) MARSHALL HAMILTON VICE PRESIDENT- EMPLOYEE RELATIONS AND TALENT MANAGEMENT EVRAZ INC NA CHERYL JENSEN VICE PRESIDENT, ACADEMIC MOHAWK COLLEGE, HAMILTON SUZANNE PROULX DIRECTRICE GENERALE COMITE SECTORIEL DE MAIN-D’OEURVRE DE LA METALLURGIE DU QUEBEC JIM RENNIE VICE PRESIDENT– HUMAN RESOURCES ESSAR STEEL ALGOMA INC. IAN WILLIAMS MANAGING DIRECTOR (CANADA) METAL SERVICE CENTRE INSITITUTE ED WHALEN PRESIDENT CANADIAN INSTITUTE OF STEEL CONSTRUCTION

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Appendix B Interviews and Focus Groups

Interviews

Pierre Arseneau, Président, Locale 2843, Syndicat des Métallos Peter Barnes, Vice-President Communications & Corporate Affairs, Samuel, Son & Co. Ron Bedard, President and CEO, Lakeside Steel Alain Boyte, Vice-President of Operations and Sales, Acier Picard Graham Browne, Vice-President Human Resources, ArcelorMittal Dofasco Bob Cohen, President, Soo Foundry & Machine Dana Coulcombe, Chair- Education Committee, Canadian Foundries Association Wylie Craig, President, USW Local 7226

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Mike Da Prat, President, USW Local 2251 Mario Demarco, Corporate Manager - Human Resources, US Steel Canada Yves Desmeules, Director of Human Resources, Acier Leroux Bill Edwards, President, USW Local 5890 François Éneault, Fédération de la métallurgie – CSN Glen Gibson, Associate Chair – Steel Construction, Northern Alberta Institute of Technology Marshall Hamilton, Vice-President Employee Relations and Talent Management, Evraz Inc NA Allan Harapiak, Industrial Operations Director, Tenaris Brian Hedges, CEO, Russel Steel Pierre Héroux, Chef en ressources humaines, ArcelorMittal Daniel Jetté, General Director, Acier Nova/Nova Steel

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Kerry Jones, Presdent, Armour Steel John Bruzzese Armour Steel Owner Robert Jones, Executive Director, CSTEC Nadia Julien, General Manager, Logiball Jim Kanerva, Vice-President Operations, Waiward Steel Fabricators Walter Koppel, President, Walter Steel Yves Langlois, Executive Director, Rio Tinto Fer & Titane Catherine Lussier, Director of Human Resources, Bibby-Ste-Croix Tom McGrogan, Vice President - Operations, Samuel, Son & Co. Dave McHattie, Planning Director, Tenaris Metallos, Executive Members - Locals 2423, 6586, 6839, 6951, 8897, 8060, 9399 & others

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Steve Morin, Chef en ressources humaines, Rio Tinto Fer & Titane George Nakitsas, National Apprenticeship Co-ordinator CSTEC Robert O`Brien, Vice-President Human Resources, Lakeside Steel Colin Osborne, CEO, Vicwest Chris Progger, CEO, AltaSteel Dave Rantoul, CEO, US Steel Canada Mark Rehoric, Manager Industrial Relations, Tenaris Jim Rennie, Vice-President, Human Resources, Essar Steel Algoma Inc. Daniel Robert, Vice-President Human Resources and Legal Affairs, ArcelorMittal Montreal Inc. David Seyler, Co-President, Riverside Brass Pramod Shukla, CEO, Essar Steel Algoma

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Charles J. (Gus) Shuster, Director of Human Resources, US Steel Canada Brenda Stenta, Manager Corporate Communications, Essar Steel Algoma Michel Vaillancourt, President, Acier Leroux Henry Weigel, Manager of Government Relations, ArcleorMittal Dofasco Ed Whelan, President, Canadian Institute of Steel Construction Ray White, Vice President, Russel Metals, Wilkinson Steel, Esco Foundry Ian Williams, Executive Director (Canada), Metals Service Centers Institute

Focus Groups

Scaw Metals Edmonton, AB Waiward Steel Edmonton, AB Métallos – various Locals Longueuil, QC

Essar Steel Algoma Sault Ste Marie , ON Tenaris – Algoma Tubes Sault Ste Marie

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Appendix C Local Union Leaders Survey Questions

Survey sponsored by

Canadian Steel Trades and Employment Congress (CSTEC) with the support of

USW National Office.

The purpose of the Canadian Steel Sector Study is to identify human resources challenges and to support strategies to improve workplace training and the productivity of the Canadian Steel Sector. Your participation in this survey is appreciated. Individual respondents will not be identified in the presentation of survey results. If your Local covers more than one company in the steel industry (steel producers, foundries, fabricators, or service centres), please complete a separate survey return for each of these companies in the steel industry.

The survey requires approximately 20 minutes to complete. Background

1. Local 2. Company 3. Location 4. How would you describe the company's principal business operations?

Steel producer

Foundry

Fabricator

Metals service centre

Other

4b. If your company has foundry operations, please indicate which type: (Please check all that apply)

Ferrous

Aluminium

Other metals

Not applicable

Work Force 5. Current unionized work force at this company (excluding lay-offs):

Operations/Production - Non-supervisory


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Skilled trades

Technicians/Technologists

Engineers

Other

Training 6. Approximately how many apprentices does the company currently have at this location?

Approximate Number of Apprentices?

7. Has training been an issue in bargaining at any time in the past 5 years?

8. Is there formal consultation with the union on training?

9. Is there a joint union/employer committee to discuss training needs?

10. Please indicate the areas in which there has been formal training for workers in the past two years:

Training Provided

No Training Provided

Don't Know

Health and safety

Preventive maintenance/Total productive maintenance

Quality/Statistical process control/ Total quality management

Basic skills: Literacy, numeracy

Team working skills

Problem solving skills Supervisory/Leadership training

Information technology training Computer training

Trade skills updating

Apprenticeship enrichment training

Equipment training Other types of training

11. Has the company used any CSTEC courses in the past five

years?

12. How would you rate your awareness of CSTEC's course offerings?

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Skills and Training Challenges

13. In your workplace, how important is access to training for workers to advance to higher paying jobs in the bargaining unit?

14. Overall, how would you rate your company's commitment to skills training, excluding health and safety training (see next question)?

15. Overall, how would you rate your company's commitment to health and safety training?

16. At this location, how important is the potential loss of skills arising from anticipated retirements?

17. At this location, how important are weaknesses in basic skills (literacy, numeracy, English

communications)?

18. At this location, how important are weaknesses in front-line supervisory or leadership skills?

19. At this location, how important are weaknesses in team-working skills?

20. At this location, how important are weaknesses in quality or process control skills?

21. At this location, how important are weaknesses in health and safety skills?

22. At this location, how important are weaknesses in basic computer skills?

23. At this location, how important is it to update or upgrade trade skills?

24. At this location, how important is it to enrich apprenticeship training beyond current trade standards?

25. At this location, how important are weaknesses in equipment operation skills?

26. What is the most serious short-term training need (if any) facing the company at this location?

27. What is the most serious long-term training need (if any) facing the company at this location?

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Appendix D Human Resources Managers Survey Questions

Survey sponsored by

Canadian Steel Trades and Employment Congress (CSTEC) with the support of

Industry-based Steering Committee

Background Please respond only for the plant or facility at which you are located.

1. Location of plant/facility

2. How would you describe your company's principal business operations?

Steel producer

Foundry

Fabricator

Metals service centre

Other

2b. If your company has foundry operations, please indicate which type: (Please check all that apply)

Ferrous

Aluminium

Other metals

Not applicable

3. Is this location unionized or non-union? ¡ Unionized ¡ Non-union

Work Force

4. Current work force at this location:

Operations/Production - Non-supervisory


Skilled trades

Technicians/Technologists

Engineers

Administration and Management

5. Anticipated work force changes at this location over the next five years:

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Anticipated Number of Quits, Retirements, or Permanent, Lay-Offs

Anticipated Number of New Hires

Operations/Production - Non-supervisory Operations/Production - Supervisory

Skilled trades Technicians/Technologists Engineers

Administration and Management

6. Anticipated recruitment challenges at this location:

Over the next five years, how much difficulty do you anticipate in hiring new employees or in promoting from within your current work force to meet your human resources needs?

7. For what specific occupations (e.g., welders) are you anticipating significant difficulty (ranked 7 or greater in the above question) in meeting your human resources needs? (up to 500 characters)

8. Are there specific skills (e.g., TIG welding) for which you are anticipating significant difficulty in meeting your human resources needs? (up to 500 characters)

9. What is the estimated age distribution of your current work force (numbers or percent) at this location?

Estimated Numbers or Estimated Percent

Training and Human Capital

10. What is the estimated service distribution of your current work force (numbers or percent) at this

location?

11. At this location, does your company currently have any apprentices?

12. At this location, does your company currently have "Engineers in Training", i.e., persons who are in the process of qualifying for a P.Eng./ing. (Québec) designations?

13. At this location, does your company currently have any engineering or technology interns, i.e., persons who are completing the co-op work component of their post-secondary engineering or technology education program?

14. At this location, does your company participate in work experience, co-op, or internship programs with boards of education, colleges, or universities?

15. For this location, does your company currently have a formal training budget?

16. For this location, if there is currently no formal training budget, has it been temporarily suspended or has there not been a training budget in recent years?

17. For this location, does your company maintain records of completed training?

18. At this location, is there a management committee that oversees training?

19. At this location, is there a formal consultation with the union or with an employee committee on training?

20. At this location, does your company have a formal, overall training plan?

21. At this location, is there a formal training plan for specific categories of employees?

22. If there is formal training provided to employees at this location, please indicate the areas of training:

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23. Does your company have any formal benchmarks for training that are used to compare this location with other operations owned by the company or your company with other companies?

25. How important to you is it to be able to benchmark your location's training policies and practices against policies and practices in your industry or related industries?

Human Resources Challenges

26. At this location, how important is the potential loss of skills arising from anticipated retirements?

27. At this location, how important are weaknesses in basic skills (literacy, numeracy, communication)?

28. At this location, how important are weaknesses in supervisory or leadership skills?

29. At this location, how important are weaknesses in team-working skills?

30. At this location, how important are weaknesses in machinery and equipment trouble-shooting skills?

31. At this location, how important are weaknesses in quality or process control skills?

32. At this location, how important are weaknesses in health and safety skills?

33. What is the most serious short-term human resources challenge facing your company at this location?

34. What is the most serious long-term human resources challenge facing your company at this location?

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Appendix E A Report on Three Trends in the Primary Steel Industry:

• International Global Benchmarking • Knowledge Transfer and Knowledge Management • Corporate University

based on a Study Visit to:

• ArcelorMittal (Ghent) • TenarisDalmine • TenarisUniversity (Dalmine)

Introduction:

This study reports on a hosted study tour undertaken in March 2011 of ArcelorMittal (Ghent), TenarisDalmine, and the TenarisUniversity operations in Italy. The tour was undertaken with the assistance and cooperation of ArcelorMittal and TenarisUniversity. Meetings with the unions at ArcelorMittal (Ghent) and TenarisDalmine were arranged through the United Steelworkers.

The participants in the study visit were: Dr. Peter Warrian (Prism Economics and Analysis) Cathia Badiere (Prism Economics and Analysis) Ron McClure (Project Manager, CSTEC)

The primary focus of this report is on information provided by the persons interviewed. In some cases, where additional context may be beneficial, this information is supplemented by the results of a literature review undertaken prior to the study tour.

The purpose of this report is to use case studies to explore in greater detail three topics that emerged as important themes in the 2011 Report on Human Resources in the Canadian Steel Sector. The first of these is the challenge of knowledge transfer, i.e., transferring tacit (and usually undocumented) skills and experience from retiring workers to younger workers. The second theme is the nature and implications of global benchmarking, in particular the implications of global benchmarking for human resources management and human resources planning. The third theme is the nature of the corporate university phenomenon in the international steel industry and its potential implications for CSTEC.

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Part I of the report provides background information on the two steel mills visited, namely Arcleor Mittal Gent and TenarisDalmine.

Part II discusses knowledge management and knowledge transfer at these facilities.

Part III summarizes information on TenarisUniversity and its relationship to knowledge management and transfer within Tenaris’ operations.

Annex 1 provides links to relevant European Commission directives on the information, consultation and participation rights of employees and their representatives.

Part I:

ArcelorMittal Ghent and TenarisDalmine

ArcelorMittal Gent: 24

The Ghent steel operations started in the early 1960s as Sidmar (an abbreviation of Sidérurgie Maritime or Maritime Steel). The majority shareholder in Sidmar was Arbed. After 2002, a series of mergers occurred involving the Spanish steelmaker, Aceralia, and the French steelmaker, Usinor. The merged entity took the name Arcelor. In 2006, Arcelor and Mittal Steel merged to create ArcelorMittal which is now the world’s largest steelmaker. The original Sidmar mill is now known as ArcelorMittal Gent.

ArcelorMittal Gent produces flat carbon steel products. In 2010, the mill produced 4.3 mmt. The mill’s maximum capacity is 5.0 mmt. Total workforce at the mill is just over 4800 workers, nearly two-‐thirds of which are in trades, production or other ‘blue collar’ occupations. Approximately 20% of the workforce are skilled tradespersons, working chiefly in maintenance of plant and equipment. The anticipated retirement rate is 12% over the next five years for both production workers and skilled trades workers. In the local labour market, ArcelorMittal Gent competes, among others, with Volvo which also has a manufacturing facility in Ghent.

A distinctive feature of ArcelorMittal Gent’s history over the past forty years is the modest decline in its workforce when compared to overall trends in the European steel industry. From 1975 to 1990, the European steel industry shed approximately 5% of its work force each year. Over the same period, employment at the (now) ArcelorMittal Gent mill was essentially stable. Between 1990 and 2005, the European steel industry reduced its employment by an average of nearly 4% each year. At ArcelorMittal Gent, the work force reduction was less than 1% per year. (See Figure No. E-‐1). During the recent downturn, there were no layoffs at ArcelorMittal Gent. This contrasted with other industries in the region and has affirmed ArcleorMittal Gent’s position as an ‘employer of choice’. 24 The mill uses the Dutch/Flemish spelling of the city’s name (Gent), though in the international press the English spelling (Ghent) is more common.

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Figure No. E-1

Employment in European Steel Industry

and ArcelorMittal Gent, 1975-2009

(Index: 1975=100)

When asked about the relative stability in their workforce over time, Human Resources at ArcelorMittal Gent stated that the high wage bill in Western Europe, in general, and in Belgium, in particular, has always pushed the company to seek improvements in labour productivity. The organisation improved continuously, which lead to a continuous decrease in the work force and a corresponding improvement of productivity, without necessity of sudden and drastic lay offs.

One recent example is the automation of all cranes. For every automated crane, four fewer people are required. “This has an enormous effect. It is important to remember that the higher the wage cost, the higher the payback in finding improvements and the greater the incentive to search for automated methods.” As production increased, employment either remained stable or decreased slowly but continuously. (See Figures No. E-2 and E-3). Production gains were achieved primarily through productivity gains.

The last recession was weathered through a hiring freeze. The reduction in the workforce was due to voluntary departures and retirements.

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Figure No. E-2

Employment and Shipments, 1991-2010

ArcelorMittal Gent

(Index: 1991=100)

Figure No. E-3

Productivity Trend, 1991-2010

ArcelorMittal Gent

Despite relative stability in the workforce and a reluctance to lay off workers, in 2009, ArcelorMittal Gent implemented two cost-saving plans. The first of these (known as ‘Formula 1’) focused on everything except personnel. The second (Plan 2009) reduced fixed personnel costs, in part, by outsourcing some functions. Human Resources anticipates that future hiring will only be to replace retiring workers. No employment growth is anticipated.

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Health and safety performance at ArcelorMittal Gent has improved steadily and exceeds national averages for Belgium. (The head of Health and Safety Global Benchmarking participated in some of the discussions with the study tour delegation.)

When asked how the union responds to plans around automation and productivity increases, Human Resources at ArcelorMittal Gent described a process of discussion and negotiation which occurs over many rounds. A new plan is first discussed with the union:

“It was very intensive the first year. We worked a lot together and we went over the big plan. Then we went into detail, department by department on how many jobs would be lost in each area, as a result of automation. Then the union came back with the adjustments to the plan they were requesting. We have a system where we discuss these kinds of reorganizations every two months. And this always includes the manager of the department in question. The first discussion is with management, then it goes to the department. Some departments may have ideas which have to be inserted or fit into the global objectives and the general agreed framework. So we monitor to make sure we stick to the original plan. A framework agreement is set up.”

Human Resources clarified, however, that they were not obligated to reach an agreement with the union on these matters:

“We don’t need the union to agree, but a lack of agreement with the union involves risk. So we discuss with the union.”

It should be noted that some of the consultations between the company and the union are also supported by European Community directives. (Annex 1 lists the major directives and provides links for further information.)

The unions at ArcelorMittal Gent view the greatest challenges facing the industry and the mill as:

• Reducing CO2 emissions and meeting environmental goals;

• Addressing the need for skilled workers. (Steel mills used to be attractive, but they are now less competitive);

• Dealing with the increased stress on the workers arising from the need to meet production targets with decreased labour;

• The supply and cost of raw materials;

• Sustaining an automobile industry in Europe.

Among the more difficult labour-management issues at ArcelorMittal Gent is the mill’s increased use of contracting out to reduce its fixed labour costs. The union believes that contracting out of maintenance work will erode the company’s skill base, diminish the skilled labour pool of and make long-term recruitment of skilled labour more difficult. The union also suggested that the greater use of contractors could weaken health and safety performance in the mill.

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According to Human Resources, the greatest long-term challenge is for the mill to produce more steel with fewer workers, i.e., to achieve ongoing productivity gains through new technology and improved processes. In the short-term, the greatest challenge is cost control.

What has changed the most in the last ten years, according to Human Resources, is the expectation that change will occur permanently and quickly. Hiring freezes and suspensions of training activity reduce short-term costs, but create long-term challenges. For example, the mill has an ongoing effort to re-establish its relationship with training institutions.

A permanent challenge is also to be and to remain the most preferred employer in the region.

There is also much more focus on financial objectives, as opposed to engineering and production objectives. Product will not be stockpiled in inventory. “If there is no customer, you shut down your operations.”

On 2 November 2009, the European management of ArcelorMittal and the European Metalworkers’ Federation signed a European framework agreement on managing and anticipating change at the company. The agreement applies to all of the 115,000 workers employed by ArcelorMittal in Europe. Ths includes provisions aiming to safeguard employment and maintain workers’ purchasing power. The company agreed not to resort to compulsory dismissals. If dismissals are envisaged, the company committed to enter into negotiations with the trade unions to reach socially responsible solutions. The agreement also included provisions for maintaining workers’ purchasing power in the event of short-time work.

Tenaris SA

Tenaris SA specializes in the production of steel pipe and tubular products. The company supplies a range of markets including industrial, structural and mechanical markets, the petrochemical sector and the oil and gas industry. Tenaris originated in Argentina with Siderca. Tenaris SA is now a Luxembourg public limited liability company (société anonyme). Tenaris SA is listed on several stock exchanges. Tenaris SA has production and distribution facilities throughout the world. The company has an annual production capacity of 3.3 mmt of seamless, and 2.8 mmt of welded pipes.

Tenaris SA has grown rapidly through a series of mergers and acquisitions. Currently, the company employs approximately 25,000 persons. The company has mills throughout the world, including Canada. Figure No. E-‐4 shows the geographic distribution of the group’s operations.

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Figure No. E-4

Tenaris SA – Distribution of Facilities, 2010

TenarisDalmine is located in Dalmine which is near Milan, Italy. The Dalmine mill commenced operations in 1906 under the name Società Anonima Tubi Mannesmann. In 1920, the mill took the name Stabilimenti di Dalmine. In 1996, the Dalmine mill became part of the Techint Group, which went on to form Tenaris S.A. in 2002.

TenarisDalmine produces a range of pipe and tube products for the mechanical, industrial, structural, energy and petrochemical markets. The Dalmine mill employs approximately 2,000 workers. Another (approximately) 600 workers are employed in four other mills in Italy that are also operated by Tenaris. TenarisDalmine uses electric arc furnace technology and also has continuous casting capability. This mill has a capacity of 950,000 metric tonnes of finished product.

In 2009, TenarisDalmine received UNI CEI EN 16001:2009 certification from Lloyd’s Register Quality Assurance. The certification is open to medium and large companies that register significant improvements in energy consumption. Certified companies must demonstrate management systems designed to safeguard energy, reduce consumption, and thereby minimize the environmental impact of their operations. Currently there are only a limited number of companies that have received the EN 16001 certification. TenarisDalmine is the first pipe and tube mill to obtain this certification, and only the fourth company in Italy.

As a result of the international economic downturn, during 2009 a re-organization plan was agreed with the unions to launch a major investment and to gradually decrease the workforce by 741 workers. Italian

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law allows companies to manage downturns through Cassa Integrazione Straordinaria (lay-offs) and Mobilità (job mobility). The company also used the downtime to provide additional training.

Restriction on the ability of companies to lay-off workers have led to two classes of employees: permanent employees (under ‘open-ended employment contracts’) and temporary employees, whose employment has a pre-defined end. In 2007, the company-level agreement between TenarisDalmine and its unions provided a mechanism whereby temporary employees who have been employed for longer than 12 months could be converted to ‘open-ended employment contracts’ under certain circumstances. The 2007 collective agreement also expanded the role of four labour-management ‘commissions’ dealing with work organization, training, health and safety and outsourcing. The Tenaris Dalmine collective agreement also provides for a ‘quality and productivity bonus’, a ‘risk prevention’ bonus to improve safety performance, and a special bonus related to TenarisDalmine’s economic performance. An earlier agreement established a voluntary employee share ownership scheme which as subsequently rejected by the unions. There are also provisions for new skills training.

Part II:

Knowledge Management and Knowledge Transfer

Demographic Context:

Over the course of the last three decades, the European steel industry has restructured and consolidated (Den Hertog et al, 2010; Stroud & Fairbrother, 2009; Wallis & Stuart 2004). As in other jurisdictions, this restructuring led to shedding labour primarily in the younger (and less senior) age cohorts and limited new hiring into those cohorts. As a result, the demographic structure of the work force shifted towards older age cohorts. A large proportion of workers in older age cohorts are now retiring, taking with them the experience-‐based skills that they acquired. As in Canada, the demographic profile of the work force is bifurcating. At the older end of the distribution the work force has lower levels of formally acquired skills, but a wealth of experience-‐based skills. At the younger end, the converse is the case: the work force has higher levels of formal skill training, but much lower levels of experience-‐based, industry-‐specific skills. (Stroud & Fairbrother 2008; Wallis & Stuart, 2004).

In the context of the case studies undertaken for this review the knowledge transfer challenge is of immediate concern in the TenarisDalmine operation. In the AcelorMittal Gent operation, the knowledge transfer challenge was acute ten years ago, but has since receded.

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Training and Knowledge Transfer at ArcelorMittal Gent

ArcelorMittal Gent currently has about 100 co-‐op/internships. Approximately 10-‐15% of these are linked to university programs. Human Resources commented that that the workers they get directly from the training institutions are not prepared for employment.

Inter-‐generational knowledge transfer is not a current preoccupation at ArcelorMittal Gent. In part this is a result of the distinct employment trajectory at the mill. ArcelorMittal Gent achieved ongoing productivity gains that made the mill highly efficient. As a result, the mill was able to avoid significant labour reductions during recessions. This, in turn, meant that the younger age cohorts were not laid off. There was a ‘natural progression’ through the age structure and therefore a natural acquisition of experience-‐based knowledge across the work force. The employment security context also encouraged older workers to share knowledge with younger workers.

It would be incorrect, however, to conclude that knowledge transfer is not a challenge at ArcelorMittal Gent. The contrast with other steel mills is one of degree. Management at the mill described various types of knowledge transfer activities, including the creation of ‘manuals’ and ‘instructions’. A best practices handbook is also underway. Manuals are described as ‘knowledge books’. Typically they are prepared by older workers during their last two years of employment. Currently the focus of these manuals is on documenting the experience-‐based knowledge of production workers. (Some concern was expressed about too little time being devoted to this activity). Instructions, in contrast with manuals, may be written up by anyone. After being drafted, there is a validation process for such instructions. A blue collar worker’s instructions may be validated for example by a technician.

At ArcelorMittal Gent, there is an internal learning council where trainers discuss best practices. The members of the council have created a catalogue of problems that have been solved and how they were solved. A consensus has emerged around two points. The first is that important gains in productivity can be achieved through improvements in on-the-job-training. It is estimated that 50% of training is on-the-job-training. The second point pertains to the quality of this training. Much of the current on-the-job-training is conducted by people who were never taught how to train another person. Consequently, the council has concluded that the greatest impact on improving training (and therefore on productivity) can be achieved by training the individuals who provide on-the-job-training. A centralized training system is currently being instituted in which each employee is listed along with what training he or she has received and the training that is required or relevant for his or her occupation

This information on local issues needs to be put in the context of ArcelorMittal’s broader learning and development benchmarking exercise across facilities. Both the age of facility and the product stage are important qualifiers when applying benchmarks. The company’s approach to benchmarking distinguishes three business objectives: operations, continuous improvement, and cost reduction.

Standardization of processes is viewed as having a significant impact on continuous improvement. Automation of plant process systems are a related priority.

The company recognizes that the shop floor culture is seen as an important factor in the success of continuous improvement. Positive employee relationships and employee engagement are particularly

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important in fast changing environments. Change management practices are critical to motivation, engagement and sustaining performance. Cross functional teams are encouraged both for leadership and organizational development.

Opportunities to share between plants include: communications practices with employees, change management strategies, the implementation of continuous improvement, administrative practices, standardization of procedures, and the use of e-learning for training.

Training and Knowledge Transfer at TenarisDalmine:

The knowledge transfer issue is being addressed at TenarisDalmine in a different manner than ArcelorMittal Gent. Tenaris is engaged in a comprehensive, global knowledge management programme that strategically integrates, aligns and disseminates knowledge and expertise uniformly across the company. It has designed job-‐specific Curricula for professional, technical and clerical positions and Development Plans for “workers” (i.e., skilled trades, operators, production workers, material handlers, etc.). This is the basis of a global academic structure that ensures employees receive the same high quality training regardless of their geographical location, as well as the specific skills and competencies necessary for their jobs. In the case of “workers”, Tenaris’ comprehensive knowledge management strategy revolves around highly structured on-‐the-‐job training which encompasses both tacit skills and formal skills. This is examined in more detail in Part III which focuses on TenarisUniversity and its role in developing and managing workplace skills.

The hub of this knowledge management system in Tenaris is TenarisUniversity which is described in Part III. Standardization of all jobs is seen as a direct contributor to the company objectives of ‘0-‐0-‐100’, i.e., zero defects, zero accidents and 100% on-‐time delivery, and having “one industrial system”.

Part III:

TenarisUniversity

The first corporate university was General Motors Institute (GMI), founded in 1919 as the School of Automotive Trades. GMI provided certification in automotive engineering and also offered degrees in applied sciences and in management tailored to the automotive industry (Bronner & Kaliski, 2007; Morin & Renaud, 2004; Wang et al, 2010). In 1982 GMI became a private and independent college. In 1997 GMI changed its name to Kettering University (Morin & Renaud, 2004).

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Over the past twenty years, there is evidence of a significant acceleration of the corporate university phenomenon. In 1988, there were 400 corporate training institutions in North America. By 2007, on a world-wide basis, there were approximately 4,000 corporate universities (Bronner & Kaliski, 2007).

Corporate universities (also termed academies, institutes, learning centres, or colleges) are established by companies to design and deliver advanced training to their employees and sometimes to their suppliers or users of their products (Prince & Beaver, 2001). The substantial investment that goes into these institutions ensures that management is continually aligning training to both the current and long-term human capital needs of the company.

Rapid growth through mergers and acquisitions created a need to standardize and consolidate operations. The Tenaris strategy is to transform individual companies into a single industrial system to ensure conformity of process and products on a worldwide basis. Virtually all of Tenaris’ customers are global. They require pipe that is produced to strict international standards. Standardized products also enable the company to shift production from one location to another without affecting product quality. The primary organizational consequence of the requirement for standardized products is the need to standardize the manufacturing processes that produce those products. In turn, the need to standardize manufacturing processes creates a need to standardize jobs and skills. TenarisUniversity plays a key role in this overall strategy. TenarisUniversity also plays a key role in the company’s overall knowledge management strategy.

TenarisUniversity consists of six schools – Industrial, Commercial, Finance and Administration, Management, IT, and Technical.

Explicit Knowledge, Tacit Knowledge and Knowledge Management

A key distinction in the research literature on learning is the contrast between ‘explicit knowledge’ and ‘tacit knowledge’. Explicit knowledge is acquired through a formal and structured process of knowledge acquisition. Formal knowledge is codified. It is typically communicated through a curriculum, study materials, or some other structured communications. Tacit knowledge consists of ‘know-how’ that is acquired through experience (Clinton et al, 2009; McLaughlin & Paton, 2008). Many individuals have difficulty describing this ‘know-how’, though its absence is often painfully apparent. In many cases, tacit knowledge operates at a semi-intuitive level. Proficiency in most occupations requires both explicit knowledge and tacit knowledge. In ‘blue collar’ occupations, tacit knowledge is especially important and often dominates explicit knowledge. The apprenticeship system, which puts as much or more emphasis on on-the-job learning as it does on in-school learning, is an unambiguous recognition of the importance of tacit knowledge in trade skills.

All organizations engage in activities to create and share knowledge to serve their organizational purposes. ‘Knowledge management’ refers to an organization’s articulated strategy for systematically creating, capturing, sharing and leveraging the knowledge that it needs to create value.

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TenarisUniversity

“TenarisUniversity is really one of the core tools of Tenaris. This is a key differentiator for us.”

-‐ Paolo Rocca, CEO of Tenaris

TenarisUniversity opened in 2005 with five schools: Industrial, Commercial, Finance and Administration, Information Technology, and Management. In 2008, a sixth school was added, the Technical School for mill operators. Each of the six schools has a dean. The School of Management provides cross-cutting courses for all the schools, across the entire TenarisUniversity curriculum. The School of IT is responsible for proprietary IT.

TenarisUniversity received an Exemplary Practice Award from the Corporate University Xchange in 2008.

There are ten regional offices around the world with dedicated Academic Buildings located in Italy, Argentina, and Mexico. Additional campuses are being developed in Brazil, Indonesia, Romania and the United States. TenarisUniversity delivers training to 25,000 employees globally, including 18,000 “workers”. The training for “workers” is available in eight languages. Some training is delivered on-line. There is a personalized online platform through which employees manage their training. Employees can access their training plan, see when courses are offered and register for courses. TenarisUniversity offers more than 1,500 courses and over one million training hours per year. Also, each year, approximately 900 internal employees who are content experts take time from their primary job to share their knowledge as instructors and content developers. Roughly two-thirds of these courses are classroom-based on Tenaris specific contents. The other 500 are e-learning courses that are an almost equal mix of proprietary content and generic materials purchases from international experts in corporate learning. TenarisUniversity also has been opening its courses to suppliers and customers.

In addition to classroom training, live training is also offered through group webinars. During webinars, there is a TenarisUniversity representative in each classroom around the world. The TenarisUniversity representative remains in direct contact with the main course instructor and assists learners with their questions. There may be three or four classrooms worldwide, all following the same course at once. Many webinars are taught by university professors appointed to various institutions with which TenarisUniversity has partnerships. These include:

• IAE Business School (Universidad Austral) • Universidad Austral • ITBA (Instituto Tecnologico de Buenos Aires) • Università degli Studi di Bergamo • Universidad de San Andres • Lone Star Corporate College • Arkansas North Eastern College

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In Canada, Tenaris has developed a strong relationship with Sault College (Sault Ste Marie) and is also developing a relationship with the Southern Alberta Institute of Technology (SAIT) in Calgary. There are further relationships in the works between Tenaris and other Canadian educational institutions, including a number of Canadian universities to recruit graduates into its Global Trainee Program25. Tenaris-University has also worked with training consultants such as Accenture and Ernst & Young, and purchased e-learning training from Gobal English, Skill Soft and Pure Safety. TenarisUniversity also holds two invited lecture series: one which is academically oriented, the other focusing on production and maintenance issues. These may be attended in person or through webinar.

TenarisUniversity encourages selected employees to pursue PhD programmes. This is geared almost exclusively to engineers. An international committee assesses applications for PhD studies. Approximately 100 applications are made each year. Currently TenarisUniversity is funding 60-80 PhDs around the world.

TenarisUniversity Technical School

TenarisUniversity’s Technical school is unique in that only a small minority of corporate universities offer trades, operator and technical training to their workers. Training plans are organized around job families. Each job family has five development levels which represent different levels of skill and experience.

25 The Global Trainee Program is the main entranceway to a professional career in Tenaris. The Global Training Program is a 2-‐year development program for recent university graduates that includes a combination of classroom training, e-‐learning courses and practical on-‐the-‐job experience.

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Figure No. E-5

Technical Job Families

TenarisUniversity

Operations:

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Maintenance:

Operations Support:

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In addition to its courses, Tenaris also delivers highly structured on-the-job training. On-the-job training is the cornerstone of the inter-generational knowledge transfer strategy. On-the-job training is purposefully structured to transfer knowledge through experience. The strategy includes training experienced workers to be tutors.

A new employee will go through three stages of on-the-job training:

1. Job-shadowing an experienced worker. The time spent shadowing varies, depending on the complexity of the job, safety considerations, and risks to quality.

2. Performing job under full supervision, 100% of the time. Supervision is given either by a trainer or by a knowledgeable mentor assigned to the new worker.

3. Performing job with part-time supervision. The trainees are identified by a band or sticker so everyone on the floor knows who is in training.

TenarisUniveristy Training Plan Creation:

Development plans for production and maintenance employees and curricula for professional, technical and clerical employees are developed by TenarisUniversity trainers and experts, using validated best practices as a starting point. Best practices are then distilled into courses and training plans. The figure below illustrates this process for the Technical School (production and maintenance employees):

Further validation occurs through feedback on courses. After every course, attendees complete an evaluation survey. In some cases, TenarisUniversity also brings together the supervisors of employees who attended courses to evaluate the impact of the courses on participants’ job and performance. These supervisors are asked what changes were observed in the workplace (whether behavioural, technical, or involving efficiency gains or better awareness around safety). These focus group results serve to further modify and improve future courses

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On-Site Programmes in Argentina “Many corporate universities are moving toward a model where they don’t

have a physical building and where they can be more flexible and be lean and offer training where needed. In our case we decided to invest in this campus in Argentina... because we really wanted a place people could come back to every two or three years, from all over the world... People come from very far away, from Singapore, from China or from Canada and they can meet with top management, feel at home and feel that they are part of something much bigger and they can see the spirit of the company.”

-‐ Fabio Tonolini, Director of TenarisUniversity Corporate University Xchange, 2008

TenarisUniversity has a number of events which take place on-site at TenarisUniversity in Argentina. These include the Induction Camp for Global Trainees, the Management Development Programme for Coordinators, the Advanced Management Programme for managers, and various global workshops. Global workshops bring together groups of employees who perform the same functions to discuss best practices and common challenges. The on-site programmes in Argentina last from one to four weeks.

Expertise Communities

TenarisUniversity fosters the development of ‘expertise communities’. The knowledge management literature refers to these as ‘communities of practice’. The purpose of ‘communities of practice’ is to refine knowledge and accelerate its transfer. Tenaris’ ‘expertise communities’ are an adaptation of similar networks introduced by Caterpillar University (APQC, 2006). IBM also uses ‘communities of practice’ as part of its knowledge management strategy (Gongla & Rizzuto, 2001; McLaughlin & Paton, 2008). Both Caterpillar and IBM open their communities of practice to suppliers. The following table offers a comparison of some key aspects of communities of practice in the three organizations.

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Comparison of Communities of Practice:

Caterpillar, IBM and Tenaris Caterpillar

(As described by APQC, 2006)

IBM

(Various sources, as cited)

Tenaris

(Various internal Tenaris sources)

Around the turn of the new millennium, Caterpillar creates its Knowledge Network (KN), which is made up of “Communities of Practice” (CoPs).

In 2001, Caterpillar University is created and becomes owner of the Caterpillar’s Knowledge Network; “its primary collaboration tool” is henceforth owned by Caterpillar University.

2002: Caterpillar opens its KN to members of its external value chain. CoPs become a way for Caterpillar employees to connect with the organization’s global partners and customers in a virtual environment. Retirees are also participants in Caterpillar’s CoPs.

In 1995, IBM established a knowledge management programme which had a strong focus on the formation and development of CoPs, in order to benefit both individuals and the organization. The network of CoPs has included members of the supply chain for over a decade (Gongla & Rizzuto, 2001).

Tenaris’ “Expertise Communities” are currently only open to select employees. At present, these communities exist and are in use for technical assistance in oil fields – a remote environment where a worker may have few or no colleagues to turn to for troubleshooting. This was cited as a success. The new areas where Tenaris is looking to expand expertise communities are: maintenance and health, safety and environment.

At the same time, Tenaris wants to expand carefully around this as the communities can be difficult to coach to success.

The expertise communities refer back to training plans but also provide contact for a network of people who are experts on the areas under discussion.

Definitions of Communities of Practice

CoPs are a way for Caterpillar employees to connect with the organization’s global partners, customers, or teams in a virtual environment.

IBM: CoPs commonly called “knowledge networks” are “institutionalized, informal networks of professionals managing domains of knowledge” (Gongla & Rizutto, 2001).

Tenaris: CoPs are groups of experts that share a common virtual space. This virtual space is intranet based. It is housed on the intranet system, with some internal sites dedicated to those communities.

Number of Communities of Practice and

Penetration within Organization’s Employees

Caterpillar had 4000 CoPs in 2006. There were 60 CoPs within IBM Global Services in 2001 (Gongla & Rizutto, 2001) andover 300 CoPs in IBM in 2007 (Mahar, 2007).

It is unclear how many expertise communities there currently are at Tenaris, however they tend to be organized around TenarisUniversity curricula and training plans.

79% of salaried employees within Caterpillar in 2006.

In 2000, 76000 IBM employees had access and 20000 participated in some community activity (Gongla & Rizutto, 2001).

It is still limited to a small group of Tenaris employees that know about and participate in the communities.

Tenaris is seeking to expand its ‘expertise communities’ in three areas: maintenance and health and safety, and the environment.

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TenarisUniversity and TenarisDalmine

The unions at TenarisDalmine expressed general satisfaction with the activities of TenarisUniversity at the TenarisDamine facilities. The unions were particularly happy that workers who received training through TenarisUniveristy could receive credit for that training from colleges and other public training institutions.

The unions reported that they received regular and detailed information on training activities and training plans. (It as noted by the unions companies are required to share information on training and to consult with the unions. See Annex 1 for a list of the principal European Community directives on information, consultation and participation.)

Tenaris’ Canadian Operations

Human resources management practices at Tenaris’ Canadian operations pose challenges for Tenaris’ knowledge management strategy. At TenarisPrudential (Calgary), there is a high degree of seasonality to the work force and consequently a high rate of turnover. This contrasts with Tenaris’ operations in Italy (for example) where the company has limited ability to lay workers off and where the labour force is therefore comparatively stable. Wage levels in Tenaris’ Canadian operations are substantially higher than in the company’s South American mills. Consequently the hourly cost of training in Canada is higher. These considerations must be factored into the training investment calculus.

To the extent that Tenaris’ Canadian operations implement the global development model, the company must decide to offer training during peak production periods, thereby losing productivity, paying workers overtime to take training, or retaining workers during slow periods so that they can be trained. Also, Tenaris’ development model supports a compensation structure that ties higher wages to more complex tasks and competencies. However, in Tenaris’ Canadian operations wages rates are set in the collective agreement, which makes it a challenge to tie the wages to the development plan, in particular, in the Prudential mill where wage rates are tied solely to job duties. To address these challenges at the Prudential mill, Tenaris has negotiated training bonuses for completion of voluntary training plans. The company has also reduced the scale of its seasonal lay-offs, thereby converting a larger proportion of the work force into permanent employees.

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Study Tour Itinerary

Tuesday, March 15, 2011 ArcelorMittal Gent:

Morning visit/presentations/questions with:

• Guy Bontinck, HR Director, Member of the Management Committee

• Gilbert Lippens, Administration Manager, Human Resources

• Christian Martien, Training and Development

• Kristel Neerinckx, Head of HR Department

Lunch with members of union

Afternoon: Travel to Italy.

Wednesday, March 16, 2011 TenarisDalmine:

Morning visit/presentations/questions with:

• Members of Union

• Patrizia Bonometti, HR Regional Director Europe

• Ricardo Dovera, Safety Manager

• Maurizio Rondi, Maintenance and Service Manager

• Antonella Ferrara, TenarisUniversity Regional Manager (Italy) • Danelle Lepage, Staffing and TenarisUniversity Manager, Canada

Lunch with HR

Afternoon visit/presentations/questions with:

• Raul Topolevsky, Dean of TenarisUniversity Industrial School (via conference call from Argentina)

• Marcello Romani, TenarisUniversity Technical School Training Director (via conference call from Argentina)

Thursday, March 17, 2011 Travel back to Brussels for Eurofer Seminar

Friday, March 18, 2011 Eurofer Seminar, with presentations of preliminary research results by Eurofer and presentations by various steel industry delegates from across Europe.

Presentation material from the seminar is available at: http://www.emf-‐fem.org/Projects/European-‐steel-‐council/Interim-‐seminar-‐18-‐March-‐2011

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References

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Bronner, M., & Kaliski, B. S. (2007). New opportunities-‐-‐implications and recommendations for business education's role in non-‐traditional and organizational settings. Delta Pi Epsilon Journal, 49(1), 32-‐37.

Clinton, M. S., Merritt, K. L., & Murray, S. R. (2009). Using corporate universities to facilitate knowledge transfer and achieve competitive advantage: An exploratory model based on media richness and type of knowledge to be transferred. International Journal of Knowledge Management, 5(4), 43-‐59.

Corporate University Xchange. Interview with Fabio Tonolini, Director of TenarisUniversity. Recorded April 2008 (http://corpu.com/research/tenaris-‐-‐culture/).

Den Hertog, F., Van Iterson, A., & Mari, C. (2010). Does HRM really matter in bringing about strategic change? comparative action research in ten european steel firms. European Management Journal, 28(1), 14.

Gongla, P. & Rizzuto, C. R. (2001). Evolving communities of practice: IBM global services experience. IBM Systems Journal, 40(4), 842-‐862.

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Stroud, D., & Fairbrother, P. (2009). Labour union strategies in the european union steel sector. In G. Gall (Ed.), The future of union organising (pp. 114-‐115-‐129). London: Palgrave Macmillan.

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Other Studies Reviewed

Adebanjo, D., Abbas, A., & Mann, R. (2010). An investigation of the adoption and implementation of benchmarking. International Journal of Operations and Production Management, 30(11), 1140-‐1169.

Ammons, D. N. (1999). A proper mentality for benchmarking. Public Administration Review, 59(2), pp. 105-‐109.

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Annex 1

EU Framework for Information, Consultation and Participation Rights

Four European Commission Directives establish minimum rights to information, consultation, and participation in respect of human resources management. These are:

1. European Works Councils (EWC) (94/45 EC)

2. Employee Involvement in the European Company (SE) (2001/86/EC)

3. European Cooperative Society (SCE) (2003/72/EC)

4. European Framework Directive on Information and Consultation (2002/14/EC)

The European Works Councils directive and the Employee Involvement and European Co-operative Society Directives apply to companies that operate at the Community scale, which is defined as a minimum of 1,000 employees and at least 150 employees in each of two European Community member states. The European Framework Directive applies to all companies with 50 or more employees.

The full test of these directives can be found at:

European Works Councils http://eur-‐lex.europa.eu/LexUriServ/ LexUriServ.do?uri=CELEX:31994L0045:EN:NOT

Employee Involvement in the European Company (SE) (2001/86/EC)

http://eur-‐lex.europa.eu/LexUriServ/ LexUriServ.do?uri=CELEX:32001L0086:EN:HTML

European Cooperative Society (SCE) (2003/72/EC) http://eur-‐lex.europa.eu/LexUriServ/ LexUriServ.do?uri=CELEX:32003L0072:EN:HTML

European Framework Directive on Information and

Consultation (2002/14/EC)

http://eur-‐lex.europa.eu/LexUriServ/

LexUriServ.do?uri=CELEX:32002L0014:EN:HTML

2010 sector study_report_english

Documents

broader steel sector

steel sector strategy

sector level

successful sector strategy

bolstering human resources

human resources goals

human resources requirements

human resources manager