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LNG Canada will once again use Chinese steel for the “specialized fabrication capability” it says it requires for its $33-billion Phase 2 expansion project in Kitimat, B.C.
When the proposed expansion led the list of early projects referred to the new federal Major Projects Office in September 2025, Prime Minister Mark Carney told reporters these ambitious building projects would be “at the heart of our new, comprehensive Buy Canadian policy.”
In fact, LNG Canada will buy more components from the state-owned China Offshore Oil Engineering Co., Ltd. (COOEC), which also manufactured its first two liquified natural gas processing units, known as trains, now in operation.
The private consortium of five international energy companies announced the expansion on Tuesday. LNG Canada is adding two more trains for a total of four on the site, increasing its production from 14 to 28 megatonnes per year once Phase 2 construction is complete, likely in the early 2030s.
At the event marking the final investment decision, CBC News asked the prime minister if the expansion would be built with Canadian or Chinese steel.
“It’s a great question for the proponents of Phase 2,” Carney said. “I’ll leave it to them.”
“There will be full opportunities to buy Canadian steel, and we’ll continue to invest in the Canadian steel industry to make sure that’s the case. But it will be for them to decide,” the prime minister said.
Asked by the CBC on Sept. 29 whether the multibillion-dollar Phase 2 expansion of LNG Canada’s project in Kitimat, B.C. will use Chinese steel, Prime Minister Mark Carney said it will be up to the proponent but noted there will be ‘full opportunities to buy Canadian steel.’
Accordingly, CBC News asked LNG Canada where it intends to source steel for its expansion.
“For the plant construction in Kitimat, the challenge is not a preference for offshore steel, but the specialized fabrication capability required for modules of this scale and complexity,” LNG Canada spokesperson Paul Hagel wrote in an email.
“There are no fabrication yards in Canada that can manufacture and deliver the additional modules required for Phase 2. Only five fabrication yards globally have the combination of space, capacity, quality systems and marine access required for this scope of work, including COOEC in China, which successfully fabricated modules for LNG Canada’s Phase 1.”
A spokesperson for Finance Minister François-Philippe Champagne said this expansion will patronize Canadian suppliers in other ways.
“Put together, these modules represent a singular part of a bigger project whose combined components stand to benefit Canadian manufacturers and made-in-Canada products writ large,” the spokesperson, John Fragos, wrote to CBC News.
“This project, once operational, will change Canada’s energy status, drastically increase capacity, grow the economy and support Canadian producers and jobs alike.”
Chinese state-owned producer holds 15% stake
Shell Canada Energy is the majority operator and project leader in Kitimat, holding a 40 per cent stake in LNG Canada.
State-owned PetroChina, the largest oil and gas producer, supplier and global investor in China, is a 15 per cent shareholder. The other three partners in the joint venture are Malaysia’s Petronas (25 per cent), Japan’s Mitsubishi Corporation (15 per cent) and the Korea Gas Corporation, or KOGAS (five per cent).
LNG exported from Kitimat is distributed by these five energy giants to Asian markets, based on their relative stake in the project.
Prior to a final investment decision for Phase 1 of the Kitimat facility in 2018, the joint venture sought and received an exemption from steep anti-dumping and countervailing duties that had been levied on fabricated industrial steel from China to protect Canada’s steel industry.
Canada is among many countries that implement safeguards based on threats identified by its domestic steel producers. State-subsidized Chinese steelmakers produce more than China’s domestic economy requires. The surplus ships overseas, undermining the cost-competitiveness of steel manufactured in countries like Canada that have higher-paid, unionized workers and higher environmental standards.
The value of the concession the federal government made to LNG Canada for Phase 1 was estimated at $1 billion.
The 2019 remission order published in the Canada Gazette said that LNG Canada, as well as the Singapore investors behind the Woodfibre LNG project in Squamish, B.C., (slated to come online in 2027), had told the finance department there was no Canadian capacity to produce what they needed.
They also framed the cost impact of these duties as having a “negative impact on investment decisions.”
In other words: without it, the deal may not have gone ahead.
However, the duties in effect when the use of Chinese steel first drew negative attention in 2018 expired after five years and have not been renewed.
LNG Canada told CBC News there are no tariffs now on importing steel components from its Chinese supplier.
Champagne’s office told told CBC News that the Canada Border Services Agency determines whether additional levies are required on Chinese steel to avoid predatory dumping. In this case, the measures were dropped and Canadian producers have not objected, because these particular components don’t directly compete with what they make.
In 2024, other surtaxes and tariff rate quotas (volume restrictions) were placed on a list of specific Chinese steel products that could threaten the viability of Canada’s domestic industry. That list, however, does not include what LNG Canada is importing.
Compressor stations target 70% Canadian steel
Other aspects of the Kitimat expansion may, however, use Canadian steel. For example, in order to expand storage and production at the export terminal, Coastal GasLink needs to expand the volume of gas moving in its pipeline network to Kitimat.
The new compression stations required along the pipeline will be “targeting almost 15,000 tonnes of steel from Canadian suppliers or mills, representing approximately 70 per cent of the steel required for that work,” the LNG Canada spokesperson wrote.
Champagne’s spokesperson added that this should be seen as a “floor, not a ceiling,” and it speaks to how much Canadian steel has been used building and maintaining the pipeline network.
That apparent prioritization of Canadian supply chains would be more consistent with the assurances the prime minister gave in September 2025, when LNG Canada’s Phase 2 expansion led the first list of priority referrals to the new federal Major Projects Office.
With new U.S. tariffs taking effect on Canadian goods, Prime Minister Mark Carney and LNG Canada announced a $33-billion investment to roughly double production capacity at the Kitimat, B.C., liquefied natural gas facility to serve Asian and European markets.
“These major projects will be at the heart of our new, comprehensive Buy Canadian policy,” Carney said in his remarks a year ago. “To strengthen Canada’s independence, resilience and security, we will build with Canadian steel, lumber, aluminum, and by Canadian engineers and tradespeople. We will be our own best customer.”
Unlike public purchasing contracts now subject to the federal government’s Buy Canadian procurement guidelines, the supply chains used by private sector energy companies are, as Carney noted Tuesday, up to them to decide.
Could Canadians do the work?
Members of the Canadian Institute of Steel Construction (CISC) dispute the suggestion that Canadian steel fabricators aren’t capable of building modules for Kitimat. LNG Canada hasn’t reached out to them, but they now want to know more about the specifications, scope of work and project schedule before an assessment is made about what’s really possible.
“The next phase of the LNG project represents a significant opportunity for Canada’s steel sector. Through collaboration across the industry, we are confident that Canadian fabricators can deliver a substantial portion of the work, including the modules required for Phase 2,” said spokesperson Rita Rahmati in an emailed statement.
“We look forward to engaging with LNG in the coming weeks to better understand the project requirements and explore how Canada’s steel fabrication sector can contribute to this important project.”
Blair Dickerson, the president and and CEO of the Canadian Steel Producers Association, acknowledged to CBC News that ultimately procurement decisions are made by the builders and proponents of a project like this.
“Our message is clear: when we’re building major projects in Canada, we should be looking to Canadian suppliers and Canadian steel wherever possible,” he said. “Buying Canadian to build Canada will maximize the economic benefits of public investments to Canadian workers, manufacturers and communities, while reinforcing the long-term competitiveness and resilience of Canada’s steel industry.”
Eight years ago when the use of Chinese steel first sparked alarm, LNG Canada’s Phase 1 was somewhat of a bespoke project. Phase 2, however, may come onstream alongside at least three other export terminals in B.C. alone over the next five years or so: Woodfibre LNG in Squamish, Cedar LNG in Kitimat, and Ksi Lisims in Gingolx.
Additional projects are also at the development stage, suggesting strong future demand for the steel products LNG terminal construction requires.
“After saying his major projects would ensure that Canada was ‘our own best customer,’ the prime minister is now telling suffering steelworkers that it’s up to proponents ‘to decide’ whether Buy Canadian applies,” said Hamilton Conservative MP Ned Kuruc in a statement on Friday.
“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.”
Shipping issues also in play
LNG Canada told CBC News that difficult transportation logistics were part of its market rationale for continuing to buy steel modules offshore.
“Marine access is essential,” the spokesperson wrote. “Modules of this scale cannot be transported to Kitimat by road; they must be fabricated at a facility with direct access to tidewater and shipped by sea. Once in Kitimat, they can be received through LNG Canada’s existing module offloading facility, moved into position and integrated into the plant.”
The federal finance minister’s office also echoed this reasoning, in its explanation to CBC News of why this decision by LNG Canada shouldn’t be seen as contradicting or undermining the federal government’s Buy Canadian efforts.
But the CISC says it’s not true that a Canadian steel fabricator wouldn’t be able to deliver modules to Kitimat’s marine facility.
While road access for large components may be unfeasible, Canada does have rail networks to West Coast port facilities, where steel could be loaded onto ships for transport to Kitimat’s offloading facility.
But a frequent complaint shared by Canadian manufacturers and exporters, labour unions and provincial governments, has been that Canada’s rail and port infrastructure struggles with frequent backlogs and needs upgrades and expansion to meet the evolving needs of domestic supply chains.
