Why Canada's Government Is Betting $500M on Steel Jobs Despite Layoffs

Jobs and Families Minister Patty Hajdu is defending the federal government's controversial decision to provide Algoma Steel with nearly half a billion dollars in loans, even as the company prepares to issue layoff notices to about 1,000 workers.

A Strategic Move to Save Canada's Steel Sector

In an interview with CTV Question Period, Hajdu explained that the government entered this agreement "eyes wide open," fully aware of the impending disruption. "At the end of the day, we have to save this sector," she stated. "We are determined to maintain a sovereign Canadian steel sector."

The loan is intended to give Algoma Steel the "breathing room" needed to pivot to new products and markets. This comes as the company transitions to Electric Arc Furnace (EAF) steelmaking, a more cost-effective and flexible process that is also less labour-intensive, leading to the shutdown of its current blast furnace and coke oven operations.

Transparency and Timing Concerns

Criticism has mounted after Algoma Steel CEO Michael Garcia revealed that both the federal and Ontario governments were aware of the company's business plan, which included retooling its Sault Ste. Marie plant and resulting layoffs. Garcia emphasized that he had been "very open" with both the government and employees about the company's direction.

The layoffs, effective in March, affect roughly 1,000 of Algoma's 2,700 employees in northern Ontario. This move comes less than a month after the company secured $500 million in financing agreements, with the federal government providing a $400 million loan and Ontario contributing $100 million.

The Impact of U.S. Tariffs

Hajdu described the loan as "saving the furniture in the steel industry," ensuring the steel mill's survival in the coming months and years. The urgency is partly driven by U.S. President Donald Trump's 50% tariff on steel imports, which accelerated Algoma's transition timeline from 2027 to the present.

According to the federal government, 90% of Canada's steel exports went to the U.S. in 2024, making the sector highly vulnerable to American tariffs. In response, Prime Minister Mark Carney recently announced new measures to support the steel industry, including further limiting foreign steel imports from countries without a free trade agreement with Canada.

Future Support and Worker Protections

When asked about job guarantees in future loans, Hajdu did not commit directly but highlighted other protective measures, such as the extension of temporary employment insurance (EI) measures introduced earlier this year to support workers affected by tariffs.

"Early on in the summer, when we saw the potential for wide job loss in sectors like auto, steel, aluminum, or forestry, we immediately worked to ensure there were protections for layoffs," Hajdu explained.

She also declined to speculate on whether the federal government would provide additional funds if more job cuts occur, stating that such conversations would need to happen "one at a time." However, she emphasized that there needs to be "some evidence" that Algoma Steel is using the loan effectively to pivot to new processes and markets.

The Bigger Picture

This situation underscores the delicate balance between preserving a critical industry and managing workforce transitions. As Canada's last remaining independent steel producer, Algoma Steel's survival is seen as vital for maintaining domestic steel production capabilities amidst global trade pressures.