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.”
‘Am I going to be on the layoff list?’: Union leader on anxiety facing Algoma Steel workers
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.
In June of that year, then-prime minister Justin Trudeau said the steel producer would be receiving up to $420 million in federal funding to help it purchase equipment to phase out its coal-fired plants and transition to the cleaner technology of electric-arc furnace production.
“The government support has been generous,” said Peter Warrian, an economist with the Munk School of Global Affairs and Public Policy at the University of Toronto. “But at the end of the day you get a a major environmental improvement.”
“There’s a long-range plan,” he said, adding that it was the right thing for Ottawa to do.
With the new technology, the plant was expected to cut greenhouse gas emissions by 70 to 80 per cent.
“The government gave them the money to incentivize them to try the technology,” Mang said.
However, operating electric-arc furnaces, because they use more efficient technology, is much less labour intensive, meaning a plant requires fewer jobs, Mang says.
“If you can undercut everyone because you’re producing so much cheaper than they are, then who would not want to buy from you?” Mang said.
“That was the thinking that this would help to just really drive productivity in the Canadian steel industry.”
Still, there would be job losses. In March, Michael Garcia, the CEO of Algoma Steel, acknowledged in an interview with Village Media, that the newer technology would mean 1,000 fewer employees when both electric furnaces were up and running, around 2029.
But the punishing impact of the tariffs caused the company to close the blast furnace and coke-making operations roughly a year earlier than originally foreseen, which led to the layoffs announced on Monday, Garcia said.
WATCH | Algoma Steel CEO talks about layoffs:
“They can produce everything they need to do to satisfy the orders they’re getting now just with the new furnace,” Mang added.
Warrian said had Algoma been able to stretch out the time period of scuttling the blast furnaces, it would have made the layoffs more manageable. But because the company is in a cash crunch, “now they have to do it under the barrel of a gun.”
In an interview with CBC’s John Paul Tasker on Power & Politics, Garcia was aked whether the governments knew Algoma was considering major layoffs when they gave the loans in September.
“I don’t think anybody would loan us $500 million without understanding the business plan for the company, without understanding what the tariff impact was on the company,” Garcia said.
He added that everybody at Algoma Steel, “and certainly the government,” have understood since 2022 that they would be shuttering their blast furnace and coke oven operations when they transitioned to electric-arc furnace production.
In an email statement, John Fragos, press secretary to Champagne, said that the government has worked “in close and continuous collaboration with partners like Algoma.”
He said the support provided earlier this year will go toward supporting Algoma through this transitionary period and toward scaling up their new electric arc furnace.
