October 1, 2014 - It would be hard to find an adult in Northern Ontario who hasn’t heard of the Ring of Fire or doesn’t know what it promises for the North’s future. Most believe that long term prosperity for workers, industry and First Nations people is at their doorstep.
That dream extends beyond the basics. Many northerners suffer a sense of loss with every trainload of raw ore they see heading down the tracks and out of Northern Ontario. There’s a long-held belief that full value is not being retained for those resources.
With the discovery of chromite in the Ring of Fire several years ago, it didn’t take long for the value-added dream to be dreamt again. The North now has all the ingredients in their backyard to make stainless steel, a uniqueness not found anywhere else in the world. How incredulous would it be for Canada to be the only G8 country not to have a stainless steel industry when the chromite, nickel and iron are all in one place?
Although the timeline for the eventual development of the Ring of Fire may be unknown, few would believe that $60-billion of known mineral wealth will stay in the ground for very long.
One way to accelerate that extraction and to start generating wealth on three fronts, would be for our governments to invest in the development of a stainless steel industry. A stainless steel manufacturing plant would be a catalyst for accelerating investment in the Ring of Fire chromite development by providing a local market for the product. It would also ensure that the middle step of smelting chromite into ferrochrome would be done locally. An industrial hat-trick if you will.
Incentives to industry for the development of a stainless steel industry, or one created through private public partnership, would not be precedent-setting. Although mining is no longer one of the federal government’s core responsibilities, federal dollars have been spent on mega projects in the name of creating or reviving Canadian industries. Two that come to mind are east coast oil and the more recent shipbuilding contracts for Canada’s naval needs.
In 1992, Gulf Canada nearly doomed the development of Hibernia by pulling out of the Hibernia project just when it was about to be realized. (The similarity of Cliffs Natural Resources pulling out of the Ring of Fire is not lost here).
In the absence of Gulf, Prime Minister Brian Mulroney jumped in with government money. Mulroney took the risk of investing more than $290-million in Hibernia. Billions of dollars were also put up in loan guarantees to private partners (but were never needed due to Hibernia’s success).
Thousands of jobs were created and spinoffs from construction and oil production have been enormous. Canadian taxpayers still own 8.5% of Hibernia and the feds are getting annual interest payments as a partner. That interest, along with dividends from the government’s share in the project, amounts to billions of dollars. Added to that are the federal and provincial taxes collected from all the companies and employees involved.
Still, many think governments shouldn’t be involved in private industry. But if industry isn’t interested or able without incentives, does that principle still apply? It didn’t for Finland. The Finnish government saw the potential of a stainless industry and made it happen. Once it was off the ground, they sold most of it to private industry. Finland has since grown into a world leader in the manufacture of stainless steel and related technologies.
The federal government has been quite focused on its war with the national deficit but some powerful voices have asked for a temporary ceasefire. The C.D. Howe Institute published a paper recently by McMaster Economics Professor William Scarth that suggested the federal government should take advantage of low interest rates and invest stimulus money to create jobs. (“User Discretion Advised: Fiscal Consolidation and the Recovery” July 2014)
Scarth wasn’t endorsing a stainless steel industry of course but he was advocating government stimulus to get our economy out of the doldrums. And it’s not as if the current federal government doesn’t believe in massive industrial investment. In 2011, Canadian shipyards were given contracts of $33-billion for the construction of government ships. Those vessels could have been purchased from other countries, just like the North’s chromite could be sent to smelters and stainless steel mills in China or Korea. But where’s the value in that?
Back at the Ring of Fire, the provincial and federal governments are engaged in some version of a shotgun wedding with respect to infrastructure funding. Northerners are looking forward to the nuptials but would they be asking too much of the marriage if it also bore the offspring of a stainless steel industry?
Authored by Rick Millette, Senior Executive Director for the Ring of Fire at Northern Policy Institute
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