Most of the Carney government’s nation-building projects are still on the drawing boards. But one that is underway and of significance to Canada’s manufacturing prowess is the government bailout of Algoma Steel.
Algoma is Canada’s last independent steelmaker.
It has been an economic mainstay of Sault Ste. Marie (population 72,000) almost since its inception in 1901.
Algoma went into survival mode in June when U.S. President Donald Trump doubled to 50 per cent his initial tariffs on U.S. steel imports from all countries in March.
Algoma’s U.S. market, which has accounted for as much as 60 per cent of its revenues, soon evaporated, putting the jobs of Algoma’s 2,500 full-time employees at risk.
Like the auto sector, the North American steel industry is highly integrated.
The U.S. buys certain types of steel from Canada that are not available in the U.S. at the right price or quantity.
Canada buys steel from the U.S. on the same basis, in a system dating from the continent-wide steel slump of the 1970s and 1980s.
Trump has thrown a wrench into the carefully restructured industry, which evolved from decades of rationalization and specialization.
In extending $400 million in low-interest loans to Algoma late last month to see it through the tariff crisis, Ottawa described the funding as a means of protecting Canadian sovereignty.
Ontario, taking the same view, has topped up the federal assistance with an additional $100 million in funding for Algoma.
Ottawa earlier provided Algoma with $200 million in loans in 2021 to help it get started on transitioning to electric arc steel production from than traditional coal-fired furnaces.
The Carney government has provided an additional $70 million in job training and income supports for as many as 10,000 steel workers across the industry who are affected by the tariffs.
Carney has also imposed tariffs and quotas on steel dumped in Canada below cost that undercuts Canadian steelmakers.
“This is us working together to pull out all stops to ensure that we can save Algoma Steel, and save Canadian-made steel,” Patty Hajdu, the federal minister for jobs and families, said during a visit to the Soo last month.
The importance that governments attach to Algoma is merited.
Algoma is one of the largest manufacturing enterprises in Ontario’s Near North.
It is a leader among the world’s major steelmakers in converting to “green steel” made with electric arc technology.
Algoma is bringing its new electric arc furnaces online ahead of schedule. They produce steel in batches, which enables Algoma to better match production volumes with demand for its varied products and to reduce costs.
Algoma also expects its clean steel transition to reduce its CO2 emissions by about 70 per cent.
“Despite the uncertainty that the trade war has unleashed, this achievement reinforces our confidence in our transformation strategy,” Algoma CEO Michael Garcia said in an August earnings call.
Algoma is Canada’s only maker of steel plate, used in construction, mining, defence products, shipbuilding and infrastructure projects.
Algoma also makes sheet steel for the auto sector, and pipe and tubing products.
Garcia believes that with lower U.S. tariffs of 10 per cent or 15 per cent, Algoma could recapture much of its U.S. market.
As recently as 2022, Algoma posted record revenues of $3.8 billion and profits of $858 million. Algoma expects to post a loss of about $215 million in the first three quarters of 2025.
Green steel commands a premium price that steel buyers outside of the auto industry have been resistant to pay.
A planned green steel initiative at Hamilton, Ont.’s ArcelorMittal Dofasco, also supported with federal funds, is proceeding more slowly than expected.
And some clean steel projects in the U.S. and Europe have been put on hold until steel prices strengthen.
Those conditions appear to give Algoma a “first mover” advantage. And steel orders from government projects will provide a bridge to the 2030s when green steel is expected to be more economically viable.
Government promotion of green steel abroad will intensify as countries struggle to make more progress on meeting their greenhouse gas reduction targets. Steel production is estimated to account for about eight per cent of total global carbon emissions.
Carney wants to expand the domestic market for Canadian steel.
Canada imports almost two-thirds of its steel consumption, compared with less than one-third for the U.S. and one-sixth for the European Union.
Carney said the federal government will prioritize Canadian steel for projects including “millions of homes, ports, bridges, energy infrastructure and our security and defence capabilities.”
“We have the potential to be our own best customer for steel,” Carney said.
No one would wish for the tariff war. But as they innovate and drive down their costs in response to it, Canadian steelmakers should emerge stronger from the current disruption.
