Algoma Steel's yard in Sault Ste. Marie, Ont., in July. The company is Canada's last remaining independent steelmaker.Nick Iwanyshyn/The Canadian Press
Algoma Steel Group Inc. ASTL-T 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.
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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.
A worker at Algoma Steel in Sault Ste. Marie, Ont., in April.Sean Kilpatrick/The Canadian Press
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.