Algoma Steel is cutting 1,000 jobs. So why did it receive millions from the government?

Back in September, the federal government boasted it was acting “to protect Canadian steel jobs,” with its announcement of $400 million in loans to northern Ontario-based Algoma Steel.

The money would help it "adapt operations, stay competitive and most importantly protect the jobs and the workers who drive this industry,” Finance Minister François-Philippe Champagne said in a statement at the time. 

At the same time, the Ontario government said it would be kicking in $100 million of its own, meaning the steel producer would be receiving half a billion dollars in government money.

But on Tuesday, just over two months after those announcements, Algoma Steel said it was issuing 1,000 layoff notices to workers at its plant in Sault Ste. Marie, Ont. This raised questions as to why the steel company was receiving millions of taxpayer dollars.

Yet some industry experts suggest that the funding is going to important leading-edge technology that will drastically reduce greenhouse gas emissions. And it's all part of the cost of Canada maintaining its steel industry, in the wake of punishing tariffs.

"Steel is a it is a strategic industry. It's something that we want to make at home, but it's something that every country wants to make at home," said Colin Mang, an assistant professor of economics at McMaster University in Hamilton, who is an expert on the Canadian steel industry.

The $500 million was needed to keep the company afloat in the wake of the 50 per cent tariffs imposed on Canadian steel by U.S. President Donald Trump, Mang says.

"In the short term, because we've had this one-time massive disruption to the industry," he said. "I think the government does need to support them and help them to manage that transition as best as they can."

"The company is experiencing cash-flow problems as a result of the tariffs, but they've still got all these expenses they're trying to cover in the short term," he said.

"That's what that money was for … to kind of tide them over until they can readjust their production process so they can be cash-flow positive."

Still, Bill Slater, president of the office and professional union at Algoma Steel Local 2724, says the loans should have been tied to maintaining employment levels.

"Because if you offer a company that amount of money, but say you have to maintain this level of employees to get it, they're going look for ways that they can use those employees ... and still make money," he said.

"But our government keeps giving money out to companies without having employment levels tied to the the loans or the grants."

Indeed, the $500 million in loan guarantees was in addition to the $420 million Algoma received in 2021.