Algoma Steel faces scrutiny after announcing 1,000 layoffs despite $500M in loans, with experts pointing to tariffs and its transition to electric-arc furnaces.
Algoma Steel Layoffs Spark Questions Over Massive Government Loans
Layoff Announcement Triggers Public Concern
Algoma Steel’s decision Tuesday to issue 1,000 layoff notices at its Sault Ste. Marie plant has prompted scrutiny over why the company received $500 million in government loans just weeks earlier. The layoffs arrive only two months after Ottawa and Ontario pledged major financial support, raising concerns among workers and taxpayers about how the money is being used.
Government Framed Loans as Job Protection Effort
In September, the federal government announced $400 million in loans to help Algoma “adapt operations, stay competitive and most importantly protect the jobs” driving the industry. Ontario committed another $100 million. Officials said the support aimed to stabilize the northern Ontario steelmaker as it modernized operations and confronted market pressures.
Experts Point to Tariffs and Cash-Flow Crisis
Economists say the financial challenges facing Algoma were intensified by 50 per cent tariffs imposed on Canadian steel under former U.S. president Donald Trump. Colin Mang, a McMaster University economist, said the disruption created severe cash-flow issues that pushed Algoma to seek emergency support. The loans, he said, were intended to help the company stay afloat while it adjusted production and attempted to regain profitability.
Union Leaders Argue Loans Should Have Included Job Guarantees
While experts see strategic value in the funding, labour leaders are frustrated. Bill Slater, president of Algoma Steel Local 2724’s professional union, said the government should have linked its financial support to employment levels. Without conditions, he argued, public money risks flowing to companies even as they reduce their workforce.
Loans Sequel to Earlier $420M Backing for Cleaner Technology
This latest round of financing follows $420 million in 2021 federal funding to help Algoma replace coal-fired operations with electric-arc furnaces, a shift expected to cut emissions by as much as 80 per cent. Economists such as Peter Warrian of the Munk School say the investment will produce major environmental benefits, though the transition has deep effects on staffing.
New Furnace Technology Means Fewer Jobs Long-Term
Electric-arc furnaces require far fewer workers than blast furnaces, a change Algoma acknowledged earlier this year. CEO Michael Garcia said the technology shift was expected to eliminate about 1,000 positions by 2029. Tariff-driven financial pressures, he told media this week, forced the company to close its blast furnace and coke-making operations roughly a year ahead of schedule — accelerating the layoffs.
Productivity Gains Drive Down Workforce Needs
Mang said that once electric furnaces are operating, Algoma can produce all its current orders with fewer employees, a consequence of more efficient technology. He added that the modernization is intended to boost productivity and strengthen Canada’s steel competitiveness, even if it results in deep staffing cuts.
Condensed Timeline Creates Harsher Impacts
Warrian said Algoma could have managed the workforce transition more gradually if not for the cash crunch tied to tariffs. Instead, he said, the company had to shut down older operations “under the barrel of a gun,” compressing the process and amplifying its impact on workers.
Governments Were Aware of Transition Plans, CEO Says
Garcia said federal and provincial officials understood Algoma’s long-term plan to retire blast furnaces when they approved the September loans. He said no one would extend $500 million in financing without reviewing the business model and the effects of tariffs. According to Garcia, Ottawa has known since 2022 that electric-arc technology would ultimately replace older facilities.
Federal Response Emphasizes Transition Support
John Fragos, press secretary to Finance Minister François-Philippe Champagne, said Ottawa has been in “close and continuous collaboration” with Algoma. He said the federal support is intended to help the company navigate its transition to cleaner technology and scale up its electric-arc furnace production, not to directly control staffing decisions.
