Algoma Steel submarine commitment ‘exciting news’ for the Sault, says defence expert

A major financial deal that could allow Algoma Steel in Sault Ste. Marie, Ont., to build a new steel beam mill and hire up to hundreds of employees is being touted as a pivotal opportunity.

The mill announced Monday it signed a memorandum of understanding with the shipbuilder Hanwha Ocean, a South Korean-based company eyeing a bid to build 12 submarines for Canada’s expanding defence efforts.

If its bid is successful and approved by the Canadian government, Hanwha Ocean has committed to giving Algoma Steel $345 million for the creation of a structural steel beam mill in the Sault, as well as the purchase of Algoma products.

The feds have previously said the establishment of a new mill in the Sault could re-hire up to 500 of the 1,000 steelworkers losing their jobs this March. 

Karl Skogstad, a professor at Lakehead University who specializes in the economics of national defence, said the deal would provide some much needed economic relief to the Algoma region. 

“It’s exciting news for Sault Ste. Marie,” he said. “It shows just how serious Hanwha Ocean is in getting the submarine contract here in Canada.”

According to Skogstad, the Canadian government works to make sure it’s receiving the best economic package domestically when spending large amounts overseas on defence projects.

He noted the Korean shipbuilding company was very calculated in choosing Algoma Steel for the deal.

“Not only are they purchasing steel from a Canadian factory, but they’re investing in the facility itself in the hopes of getting a return for themselves,” he said. “It was very strategic of them to do this.”

“They clearly identified the layoffs at Algoma Steel were on the Government of Canada’s radar, and I believe their choice to support that company at this specific time is really hoping to tilt the scales in their favour in order to get the submarine contract overall.”

Included in the agreement is that Algoma Steel would make annual payments to Hanwha Ocean for ten years if and when the beam facility opens — equal to three per cent of the net sales of the facility.

Another company, German-based ThyssenKrupp Marine Systems, is also bidding to win the submarine project. 

Skogstad noted there isn’t a clear frontrunner and that both companies will put forward competitive bids. The winner will likely be chosen by the end of 2026, he said. 

“I know one of Hanwha’s greatest elements of their application is the speed at which the submarines will get out to Canada,” he said. “They’re proposing a very fast timeline having them out in the early 2030s potentially, which is quite quick.”