Steelmaker Algoma says U.S. tariffs on steel are pushing it to accelerate its transition to electric steelmaking.
Prime Minister Mark Carney met with U.S. President Donald Trump this week in an effort to get some relief from the 50 per cent U.S. tariff Canadian steelmakers have been struggling under since June, along with low global steel prices due to oversupply that’s blamed on China.
Algoma, in a news release last week announcing it had secured $500 million in government loans, said the tariffs have made operating its blast furnace and coke oven unsustainable, and it will exit those operations as it “accelerates its transition” to electric steelmaking.
Meanwhile, other Canadian steelmakers face similar economic pressures and pressure to decarbonize.
Here’s why decarbonizing steel is such a big deal, how it’s being done in Canada and what’s needed for a successful transition in challenging times.
Globally, steel production generates about seven to nine per cent of global greenhouse gas emissions that cause climate change.
In Canada, steel produced about 13.1 megatonnes of CO2 or in 2023 — equivalent to the emissions of about three million gas-powered cars, or two per cent of Canada’s emissions.
Canada’s steel industry is centred in Ontario, and the three biggest industrial emitters of CO2 in the province are all steel plants. Together, they generate 40 per cent of industrial greenhouse gas (GHG) emissions in the province, more than the refinery, forestry, mining and chemical sectors combined.
The federal and provincial governments have invested $2 billion to convert Ontario plants to lower-carbon sources of energy.
Algoma Steel to get $500M in tariff-relief loans
The emissions come from two main sources:
Ross Linden-Fraser is a research lead at the Canadian Climate Institute. He said in Canada, steelmakers are using the “two most popular routes” to decarbonize.
Algoma is cutting out the CO2-generating chemical reaction part of the equation altogether by not making steel from iron ore at all at its Sault Ste. Marie, Ont., plant — it’s shutting down the blast furnace and coke oven used to do that.
Instead, it’s switching entirely to “secondary” steelmaking, which recycles scrap steel or relies on refined iron instead of iron ore. That still needs to be heated to very high temperatures, but that can be done with an electric arc furnace (EAF), without fossil fuels.
Algoma announced this past July that it had achieved its first steel production with this technique.
CEO Michael Garcia told CBC’s Up North that is expected to reduce the plant’s carbon emissions by up to 70 per cent while allowing it to increase its production by a third. It also requires fewer workers than running the blast furnace and coke oven, Garcia said.
Last week, the company estimated that the final cost of the EAF project would be $987 million.
Electric arc furnace technology has existed since the 1960s, but has made huge advances, Garcia said. Initially, it could only produce low quality steel such as construction rebar. Now, “really, you can make any grade of steel that you want to make,” he said, and 70 per cent of U.S. steel is produced this way.
The one kind of steel that is “very challenging” is extremely clean steel, Garcia said, as it requires very clean scrap or virgin iron as a raw material.
Of course, secondary steelmaking is limited by access to enough raw materials such as scrap. Linden-Fraser said it also depends on whether a plant’s customers are able to work exclusively with secondary steelmaking products.
How low-carbon emissions steel is made
University of Alberta researcher Mohd Adnan Khan said not all steel demand can be met through secondary steelmaking alone.
One way to continue primary steelmaking from raw materials with a reduced carbon footprint is to replace coal and coke with hydrogen.
Like coke, hydrogen can react chemically with iron ore to generate pure iron. This process is called direct reduced iron (DRI). It’s already been successfully used in Europe to produce thousands of tonnes of pure iron without fossil fuels since 2021.
This is the technology ArcelorMittal Dofasco’s Hamilton plant is counting on.
Khan is co-author of a 2023 report from the on decarbonizing steel with hydrogen commissioned by the Canadian Steel Producers Association and the Transition Accelerator, a non-profit focused on decarbonization strategies.
He said initially, the Hamilton plant would have trouble getting enough affordable green hydrogen. But a “hydrogen-ready” plant can also use natural gas or methane — just with a higher carbon footprint. And hydrogen could be gradually blended in with the natural gas.
“Once you have the right economics in place,” Khan said, “you can switch to 100 per cent hydrogen.”
(In fact, a tiny amount of natural gas would always be needed to add the 0.05 to 0.5 per cent carbon needed to strengthen steel.)
Originally, ArcelorMittal Dofasco aimed to demolish its coke plant to make room for a DRI plant in 2023. The DRI plant would produce iron to feed into electric arc furnaces, which would also be installed. That would allow it to phase out coal and cut emissions by 60 per cent or three million tonnes a year by 2028 — equivalent to taking 725,000 gas cars off the road, the company estimated.
The project was expected to cost $1.8 billion, and the Ontario and federal governments committed to covering half.
However, as of late August 2024, the coke plant was still standing, and necessary natural gas supply to the plant had not yet been approved. CBC News has reached out to ArcelorMittal Dofasco for an update, but as of publication, had not yet received one.
Ontario also has a third large steel plant, run by Stelco (bought by U.S.-based Cleveland-Cliffs in 2024) in Haldimand County. Linden-Fraser said it has not yet picked a decarbonization strategy.
Linden-Fraser said so far the government continues to balance its short-term support for the industry in challenging times with the long-term focus on decarbonizing the steel industry.
He said industrial carbon pricing has incentivized these green steel projects, and the federal and provincial governments have both offered financial support.
In addition, this year, the federal government updated its green procurement standards for construction projects to prefer steel produced with low emissions.
“This is a huge step,” Linden-Fraser said, given that the federal government is the largest buyer of goods and services in Canada.
“It seems pretty clear that the future of competitive steel is green,” he said. “And so having policies in place that keep the industry pointed at that long term goal is really important.”
