Algoma Steel Pledges 3% Beam Mill Sales to Korean Submarine Builder

Algoma Steel has made a significant commitment by pledging 3% of net sales from its new beam mill to Hanwha Ocean, a South Korean shipbuilder. This agreement is part of a larger $345 million deal that hinges on Hanwha securing a contract to supply the Royal Canadian Navy with up to twelve submarines. Despite the beam mill not yet being built, Algoma is already bound to these annual payments for a decade, dependent on its financial performance.

Details of the Agreement

The memorandum of understanding (MOU) between Algoma Steel and Hanwha Ocean outlines several key points:

• A cash contribution of approximately $275 million towards the development of the structural beam mill.
• Projected purchases of Algoma products totaling up to US$50 million for use in the Canadian Patrol Submarine Project (CPSP).
• This MOU is contingent upon Hanwha Ocean being awarded the CPSP contract and entering into definitive agreements with Algoma.

Job Creation and Economic Impact

Federal Industry Minister Mélanie Joly announced that Algoma is poised to create around 500 jobs through the construction of two new facilities. These facilities will focus on manufacturing structural beams and producing enhanced plate products. This initiative aims to strengthen domestic supply chains for defense procurement.

About Hanwha Ocean

Hanwha Ocean is recognized as a leading global shipbuilder with over four decades of experience in naval and commercial shipbuilding. The company’s large-scale shipyard in Geoje, South Korea, operates across an area of approximately 5 million m² and employs around 31,000 individuals. Annually, Hanwha Ocean builds approximately 45 ships, which include both commercial and naval vessels.

Submarine Production Capabilities

Since its establishment in 1973, Hanwha has delivered over 1,400 vessels, building a strong reputation in submarine construction. Currently, the company has three active KSS-III Batch-I submarines in service with the Republic of Korea Navy and is in the process of constructing three KSS-III Batch-II submarines. The first of these is expected to launch in October 2025.

Future Prospects

Hanwha Ocean plans to deliver submarines under the CPSP contract within a timeline that could see the first unit arrive in Canada by 2032, assuming the contract is awarded in 2026. This pipeline includes plans to deliver subsequent submarines on an annual basis, effectively supporting the Royal Canadian Navy’s goal of replacing its Victoria Class fleet.

The KSS-III Canadian Patrol Submarine is designed for advanced operational capabilities, including anti-submarine warfare and reconnaissance, using technologies such as lithium-ion batteries and air-independent propulsion systems.

Competition in the Submarine Market

Hanwha Ocean’s main competitor for the CPSP contract is Germany’s ThyssenKrupp Marine Systems. Both companies are vying to fulfill the Royal Canadian Navy’s urgent need for new submarine capacity.