Carney government gives itself option to buy into Algoma Steel with loan to save it from Trump's tariffs

The loan matures in seven years, carries a low interest rate and come with 6.77 million stock warrants. The warrants are proportionate to the amount of the $400 million the company actually uses and gives the federal government the right to purchase company’s shares at $11.08, more than twice what the company was trading at on Wednesday.

The loan was the first under the government’s $10 billion Large Enterprise Tariff Loan program and, in a statement, the department of finance said other loans will come with the same terms.

“All public companies participating in the program will be required to issue warrants,” the department said. 

The government will have 10 years to decide whether to exercise its warrants, allowing it to potentially profit from a turnaround in the company, which was trading above $11.08 share before punishing U.S. tariffs hit the Canadian steel industry.  

Prime Minister Mark Carney announced the loan program earlier this year as a tool to help large companies adapt to Trump’s tariffs.

The finance department said the price for the warrants was negotiated with the company, and was based on the value of the firm before U.S. tariffs were brought in. U.S. President Donald Trump has hit non-U.S. steelmakers with aggressive tariffs that started at 25 per cent earlier this year before rising to 50 per cent. Ottawa has responded with 25 per cent tariffs on U.S. steel.

Prior to the introduction of tariffs much of the steel produced in Canada was sent to the U.S. 

Algoma CEO Michael Garcia said the government loans will give the company flexibility as they try to diversify to new products and new markets.

“Obviously 60 per cent of our historical business and market has been the U.S. that market is pretty much closed to us now with the 50 per cent tariffs, so we have to pivot our business model,” he said.

Garcia said that could include making more steel plate and structural steel. He said they would also complete a planned conversion to electric arc furnaces from coal, which will give the company more flexibility and cut emissions. 

“All of this takes time and so that’s why this loan is so important to us,” he said.

Garcia said he is confident Algoma can regain the value it had before tariffs were brought in, but said they will need the government to follow through on “Buy Canadian” pledges.

“If everything the government is working on to diversify the Canadian economy, to grow the Canadian economy and reduce the reliance on its trading relationship with the U.S., then I think there’s a bright future for Canada’s only independent steel mill,” he said.

Algoma currently has 2,500 full-time employees.

Sault Ste. Marie—Algoma MP Terry Sheehan said the loan makes sense to prevent the U.S. tariffs from destroying a Canadian company.

“The 50 per cent tariffs were meant to wipe Algoma Steel off the map. That’s one of the plans, to decimate the steel industry around the world and that’s what Trump was setting to do,” he said, ahead of the Liberal caucus meeting in Ottawa.

Sheehan said 35 per cent of the steel used in Canada today is Canadian and even doubling that would mean an enormous amount to the industry. He said 8,000 pensioners in his community rely on Algoma.

“People just don’t lose their job. They lose the equity in their home. They lose everything,” he said.