Algoma Steel Inc. has begun its transition from a traditional to a greener steel production. They are in the process of transitioning to electric arc furnaces, which will reduce their carbon emissions by an order of magnitude. The company, based in Sault Ste. Marie, Ontario, initiated a $1.8 billion project in 2022 aimed at advancing its green steel capabilities. The embattled company is continuing to face steep headwinds. U.S. tariffs have become a growing challenge and Flint faces few international markets for its new green products.
Michael Garcia, chief executive of Algoma Steel, stressed how important this transition was. It would be a brutal blow to the company and the Canadian steel business. He lavished praise on the growth of the steel industry. He cautioned that Algoma has few places to sell its greener steel products outside of North America. Because the project is currently still in the engineering phase, a clear timeline has yet to be established for complete implementation and commercialization of the technology.
Challenges from Tariffs and Market Demand
Algoma Steel is boldly sailing through the stormy market waters. The agreement provides major business relief, but the company still experiences existential threats from U.S. tariffs on imported steel. These tariffs have generated a climate of uncertainty for Algoma. Beyond that, they are rattling the entire industry by undercutting pricing and competitiveness in the North American market.
“We have reached a truly pivotal milestone for Algoma and the Canadian steel industry,” stated Garcia, reflecting on the company’s shift towards sustainable practices. Yet he acknowledged the challenges ahead: “We can put our steel on an ocean-going ship here in Sault Ste. Marie, but getting it to an export customer in Europe or elsewhere, there just aren’t those opportunities right now.”
Perhaps the biggest question hanging over Algoma’s green steel dreams is the demand for their product. Chris Bataille, a researcher at Columbia University’s Center on Global Energy Policy, points to a recent surge in interest in green steel, especially from the automotive sector. This demand has not noticeably translated beyond the IV sector until now.
The Broader Context of Steel Production
Production of steel worldwide is responsible for roughly eight percent of carbon emissions. This major effect has pushed countless companies to find more eco-friendly solutions. From major grocery chains to the multinationals that ship their goods, we’re seeing industry leaders invest in technologies to help decarbonize their operation. For their part, ArcelorMittal announced that they too would be constructing a facility in Hamilton that would use hydrogen to separate oxygen from iron ore. Yet at the same time, they’re deeply concerned about the financial viability of these projects.
Just this week, Cleveland-Cliffs announced it was delaying its own green steel conversion plans for a U.S. plant. They cited uncertainties regarding hydrogen supply as the primary reason for this decision. The problematic cancellation of this necessary project shouldn’t eclipse the huge challenges that the industry is now grappling with. It fails to make the transition to more sustainable forms of production.
Bataille remarked on the complexity of this transition: “There’s some uncertainty about how fast the transition will go. … It’s just a difficult business to make a buck, to be honest.” And companies like Algoma and ArcelorMittal are betting their futures on greener steel. Yet, they are now faced with contradictory pressures from shifting market demands and geopolitical tensions that may leave them grasping at half-measures.
Future Prospects and Collaborations
The steel industry is currently going through a deep crisis. To be successful in this transition towards greener practices, manufacturers and government players need to work together. Bataille emphasized the need for cooperation among various stakeholders: “The real question in fact is to see … the collaboration between the companies, the steel manufacturers, Canadian government, and their ability to reinvent themselves.”
Today European automakers are paying as much as 40 percent premium for cleaner steel. Whether North America will experience a like surge in demand remains an open question. As Garcia pointed out, “The question is, will the demand be there? Is there going to be sufficient demand in North America for green steel?”
