Korean Shipbuilder Secures $345M Submarine Contract with Algoma Steel

A South Korean shipbuilder has secured a significant memorandum of understanding with Algoma Steel. This collaborative agreement could enhance the Canadian steel industry while impacting the country’s naval capabilities. The potential deal is valued at $345 million and emphasizes the importance of Canadian manufacturing.

Korean Shipbuilder and Algoma Steel Partnership

The memorandum, established between Hanwha Ocean and Algoma Steel, will focus on the development of a structural steel beam mill in Sault Ste. Marie, Ontario. This project is contingent upon Hanwha securing a contract to build a new fleet of submarines for the Canadian military, a bid estimated at over $12 billion.

Details of the Agreement

• The agreement aims to establish a structural steel beam mill with a funding of $275 million from Hanwha.
• The total value of the agreement could reach $345 million, including product purchases for submarine production.
• Hanwha would use the steel from Algoma for the Canadian Patrol Submarine Project and related infrastructure needs.

Boosting Canada’s Industrial Base

Ontario Trade Minister Vic Fedeli highlighted that this partnership aims to strengthen Canada’s domestic industrial base and ensure the long-term operational requirements of the Royal Canadian Navy. Algoma Steel’s involvement is also expected to create new skilled jobs within the Canadian workforce.

Strategic Importance of the Deal

If successfully executed, Algoma would commit to payments to Hanwha for ten years, based on a percentage of net sales from the mill. Hee Cheul Kim, president and CEO of Hanwha Ocean, emphasized the significance of collaboration with Algoma to build a sustainable future.

Algoma Steel has faced challenges, including high tariffs on steel exports to the United States. The new agreement represents a strategic move towards diversification and a sustainable steel production process.

Hanwha Ocean’s Expertise

Hanwha Ocean has a rich history, having built over 1,400 vessels since its inception in 1973. Their facilities cover approximately five million square meters and employ around 31,000 personnel, producing 45 commercial and naval vessels annually. The partnership with Algoma reflects a commitment to bolstering Canada’s industrial capabilities in defense and infrastructure.

With the potential of this $345 million submarine contract, Algoma Steel is poised for a new chapter, focusing on electric arc furnace steelmaking and modern production techniques. This collaboration is seen as vital for reinforcing Canada’s defense and industrial ambitions.