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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.
A handout from Hanwha Ocean shows the KS-III military submarine. (Submitted by Hanwha Ocean)
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.
During a visit to South Korea by Mark Carney last year, Hanwha Ocean said it could deliver the subs faster than the competition. (Adrian Wyld/The Canadian Press)
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.”
“It’ll be interesting to see if that plays a role, because the military has said this is a priority to get these [submarines] replaced soon.”
Of the $345 million in commitments from Hanwha Ocean, an estimated $275 million would go towards the development of the structural steel beam mill itself, while the remaining dollars would cover Algoma products, according to the steel plant.
During a media availability in Ottawa on Tuesday, Federal Jobs Minister Patty Hajdu was asked whether the deal would help support Canadian jobs.
“If you lose your workforce during an impact in your industry, it can be really hard to re-attract those workers. It can be really hard to ensure that their skills are kept current for the kinds of industries that you’re trying to service,” she said.
“But it’s good news [that] Algoma Steel has the capacity to be able to do these things.”
Federal Jobs Minister Patty Hajdu was in Sault Ste. Marie in September 2025 to announce a $500 million loan to support Algoma Steel. (Alex Flood/CBC)
As for the submarines themselves, Skogstad said a Navy admiral once described their abilities as the best way to control a piece of the ocean.
“There’s no better weapons system to do that than a submarine,” he said. “The big area we’re looking to secure would be the Arctic Ocean.”
“With the potential for more travel by shipping companies through there, we want to make sure we can maintain control of that area.”