LNG Canada will use Chinese steel for Kitimat expansion, citing lack of Canadian fabrication capacity
The company says no Canadian yard can build the massive modules, which must be shipped by sea to the B.C. site.
KITIMAT — LNG Canada will use Chinese steel for the massive modules required in the Phase 2 expansion of its liquefied natural gas facility in Kitimat, B.C.
"The challenge is not a preference for offshore steel, but the specialized fabrication capability required for modules of this scale and complexity," a company spokesperson said in a statement to CTV News.
"There are no fabrication yards in Canada that can manufacture and deliver the additional modules required for Phase 2."
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The joint venture announced this week it is proceeding with the $33 billion expansion, which will double the plant's capacity to 28 million tonnes per year by the early 2030s.
Prime Minister Mark Carney called the investment nation-building and said peak construction could support up to 4,000 jobs at the site.
The company said marine access is essential, as the modules cannot be transported by road and must be built at a facility with direct access to tidewater and shipped by sea to Kitimat.
CBC News reported the joint venture will buy large modules from China Offshore Oil Engineering Co., a unit of state-owned CNOOC, which also fabricated modules for the project's first phase.
LNG Canada spokesperson Paul Hagel said only five yards worldwide meet the requirements for space, quality systems and marine access.
The company added that the majority of steel for a pipeline compressor project will be Canadian-sourced, with Coastal GasLink targeting nearly 15,000 tonnes from Canadian suppliers.
The federal Conservative Party criticized the decision, saying it goes against the prime minister's promise to "buy Canadian."
"The fact that the steel fabrication cannot be done in Canada is another failure of Mr. Carney's government to create the environment for steelmaking here at home," Conservative MP Ned Kuruc said in a statement.
Kuruc also pointed to the partial shutdown of steel manufacturer Stelco's plant in Hamilton, which is affecting hundreds of workers.
When asked at the announcement whether Phase 2 would use Canadian or Chinese steel, Carney said it was "a great question for the proponents" and that "there will be full opportunities to buy Canadian steel," while adding that the choice was theirs.
Steel sector under pressure
The decision comes as Canadian primary steel producers face layoffs and idled operations.
U.S. Section 232 tariffs on steel reached 50 percent in 2025, and the Bank of Canada noted steel exports have fallen by about half.
In December 2025, Algoma Steel issued approximately 1,000 layoff notices tied to an accelerated shutdown of operations in Sault Ste. Marie.
On Sept. 28, 2026, Stelco said it would indefinitely idle cold-rolled and coated operations at Hamilton Works, affecting up to 500 employees.
Carney called the Stelco move a betrayal of workers and pointed to employment-maintenance conditions attached to the takeover approval.
Broader manufacturing payroll employment fell by 40,600 between December 2024 and December 2025, according to Statistics Canada.
Canada has responded with tighter tariff-rate quotas and other trade measures, which have reduced some import volumes but have not restored the lost U.S. market.
The Phase 2 expansion will add two new processing units, a new LNG storage tank, a condensation tank, a loading berth and expanded processing systems.
LNG Canada is a joint venture between Shell, PetroChina, Malaysia's Petronas, Japan's Mitsubishi Corp. and South Korea's KOGAS.
With files from BNN Bloomberg