NIALL MCGEEMINING REPORTER
SAULT STE. MARIE, ONT.
Algoma Steel is Canada’s last remaining independent steelmaker.
Algoma Steel Group Inc. is pivoting early to a full rollout of its electric arc furnace
technology after securing a crucial $500-million government financing, as it continues
to fight U.S. tariffs.
Canada’s last independent steelmaker is currently producing far more steel than it
can sell, both because of the evaporation of its U.S. business, and because its blast
furnace is designed to operate at full tilt.
On Monday, the Sault Ste. Marie, Ont.-based company said it is shutting down the
blast furnace earlier than planned and accelerating the rollout of its electric arc
furnaces. The move will give Algoma far more flexibility to produce less steel during
the trade war, give it more options to sell different kinds of steel, and dramatically
lower its costs. Electric furnaces operate on a batch basis and can be powered on and
off with relative ease.
With both the government financing in place and a new aggressive trade war
strategy, Algoma chief executive officer Michael Garcia said he’s confident the
company can tough it out over the long term – even if U.S. tariffs remain in place
indefinitely.
“We see a future for Algoma being a bedrock of the Canadian steel industry,” Mr.
Garcia told The Globe and Mail in Sault Ste. Marie. “And we see that future even if the
50-per-cent tariff remains as a permanent or long-term feature of the trading
relationship.”
The federal Department of Finance announced on Monday that it is advancing
Algoma $400-million in low-interest loans as part of Ottawa’s $10-billion Large
Enterprise Tariff Loan program. The Ontario government is providing an additional
$100-million in funding to the Canadian steelmaker.
Algoma employs about 2,800 people and is Canada’s sole manufacturer of steel
plate used in the military.
The U.S. market used to account for up to 60 per cent of Algoma’s production. But
after U.S. President Donald Trump imposed 25-per-cent tariffs on Canadian steel
imports in March, Algoma’s order book started to bleed. When he doubled the levy
to 50 per cent in June, the company was effectively shut out of the market entirely.
The funding by the federal government isn’t the first time Ottawa has provided
substantial financial assistance to Algoma.
Ottawa lent the company $200-million in 2021 to build its electric furnaces. The loan
is forgivable if Algoma meets certain emissions standards over time. In addition, the
company received a government loan of $130-million to modernize its plate mill.
Mr. Garcia is well aware of both the responsibility of accepting taxpayer funds and the
need to repay it.
“I completely understand and respect the fact that this is public money,” he said.
“With that comes a higher level of scrutiny and a higher demand for 100-per-cent
transparency and making sure that this is an investment that works for the country of
Canada and for Algoma.”
Speaking at Algoma’s headquarters on Monday, Federal Minister of Jobs and
Families Patty Hajdu said that Ottawa’s investment into Algoma strengthens Canada’s
economic security because of its strategic importance to the defence sector.
“This is us working together to pull out all stops to ensure that we can save Algoma
Steel, and save Canadian-made steel,” she said.
“Ultimately, the work that we’re doing today is about the sovereignty of Canada.”
Despite multiple rounds of talks with the U.S. over many months, Prime Minister Mark
Carney’s government has been unable to secure tariff relief on steel for Canada.
Mr. Garcia said that if he could even get the Trump administration to reduce the steel
tariff to between 10 per cent and 15 per cent, the company would have a shot again
at re-entering the U.S. market.
During the trade war, the federal government has gone to considerable lengths to
help the Canadian steel industry writ large.
Ottawa announced two crackdowns on cheap steel imports. New tariff quotas rolled
out in the summer make domestic mills more competitive against their foreign
competition.
International steel companies that don’t have free-trade agreements with Canada,
including those from China and Turkey, currently face Canadian tariffs of 50 per
cent if they ship above a certain level. And even countries with FTAs with Canada are
facing import quotas and potential tariffs.