Defence expert says German submarine deal 'unfortunate' for Algoma Steel, Sault region

Defence expert says German submarine deal 'unfortunate' for Algoma Steel, Sault region

German shipbuilder wins bid over Hanwha Ocean, which would have provided $345M for new Sault mill and products

The bid for a major federal submarine contract that could have provided Algoma Steel in Sault Ste. Marie, Ont., with additional infrastructure and hundreds of new jobs was unsuccessful.

Prime Minister Mark Carney is expected to announce this afternoon that German shipbuilder ThyssenKrupp Marine Systems (TKMS) has won the right to build a multibillion-dollar fleet of 12 submarines for Canada’s defence.

The government has chosen TKMS over South Korean competitor Hanwha Ocean to construct a fleet that will replace the Royal Canadian Navy's aging Victoria-Class boats.

As part of its bid to the feds, Hanwha signed a memorandum of understanding in January to give Algoma Steel $345 million for the creation of a structural steel beam mill in Sault Ste. Marie and the purchase of Algoma products.

Hanwha signed an additional memorandum last month with the mill, along with Canada's Automotive Parts Manufacturers Association, to use Canadian steel in armoured vehicle manufacturing in southern Ontario.

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The deals were expected to have provided much needed economic relief to the Algoma region after 1,000 steelworkers lost their jobs this year due to U.S. tariffs and the company’s transition to electric steelmaking.

With hopes for a future mill, Ottawa previously said up to 500 laid off employees could be rehired by the end of 2026.

Hanwha was “very calculated” in choosing the mill as part of its deal, according to Karl Skogstad, a professor at Lakehead University who specializes in the economics of national defence.

From a regional perspective, Skogstad said the government’s decision is disappointing but not surprising.

“The Hanwha bid had a clear northern Ontario benefit to it in terms of the money that was going to go to Algoma Steel. That’s unfortunate for the region for sure,” he said.

“South Korea was a bit of an underdog, but they put in a lot of effort to try to win the bid.”

In an email to CBC, Algoma Steel says it will not comment on the decision until an official announcement comes from Prime Minister Mark Carney this afternoon.

Industry experts say the German company leaned heavily on its status as North Atlantic Treaty Organization (NATO) allies alongside Canada.

The choice to negotiate with TKMS is expected to pull Canada into a closer European orbit when the U.S. is pulling away from NATO.

“All procurement is political when it comes to defence,” Skogstad said. “The politics of it just made it more appealing to go with a NATO country in terms of procurement at this moment.”

A College of Sports Media grad, Alex joined CBC News in his hometown of Sault Ste. Marie in 2025. When he's not reporting, you'll find Alex cheering on the Canucks, playing piano and watching Schitt's Creek for the millionth time.

With files from Murray Brewster