Algoma Steel Transitions to Electric Arc Furnaces Amid Layoffs

The transition to electric arc furnace (EAF) steelmaking at Algoma Steel has led to significant job losses that will reshape the landscape of Sault Ste. Marie. On December 1, 2023, the company issued 1,000 layoff notices, effective March 23, 2024. This shift marks a dramatic change for a facility long defined by its traditional steelmaking processes.

Transition to Electric Arc Furnaces

The move to EAF technology, announced in 2021, aims to replace the outdated blast furnaces that have been in operation for over a century. The decision comes in response to economic pressures and the need for a more sustainable production method. The $987 million project will replace Algoma’s blast furnaces with two new EAFs, representing the largest construction initiative in Sault Ste. Marie’s history.

Federal Industry Minister Melanie Joly and Sault-Algoma MP Terry Sheehan have been actively involved in discussions with union officials and company executives to mitigate the impact of these layoffs. They have since announced plans to upgrade the existing plate mill and establish a new structural beam plant, which could bring back 500 jobs by the end of 2026.

Despite these efforts, the transition has been accelerated, leaving many workers uncertain about their futures. The layoffs, announced just before the holiday season, have heightened tensions in a community that has relied on Algoma Steel for generations.

Financial Support and Environmental Impact

The financial implications of the transition are notable. In 2021, Algoma received $420 million from the federal government through the Strategic Innovation Fund to support its transformation. This funding underscores the significance of the project, especially as the company faces the looming end of its blast furnace operations, which would require costly relining at over $100 million for only a limited lifespan.

Environmental considerations also played a crucial role in the transition. Algoma Steel has faced scrutiny for breaching environmental regulations in recent years. The new EAF technology is expected to reduce carbon emissions by up to 70 percent, aligning with the company’s commitment to achieve carbon neutrality by 2050.

According to the Ontario Ministry of Environment, Conservation and Parks, the shift to EAF will facilitate cleaner production methods, addressing both regulatory concerns and the company’s long-term viability. The first production from the EAF is anticipated to commence in July 2025, marking a key milestone in the transformation.

Algoma has also partnered with Triple M Metals to secure a steady supply of the recycled scrap metal essential for the EAF process. This collaboration aims to keep valuable resources within North America, contributing to a more sustainable production model.

As Algoma Steel navigates these changes, the potential for future growth exists. The transition to EAF technology is projected to increase production capacity by 700 kilotonnes of finished steel, enhancing Algoma’s competitive position in the market.

While the transformation has not been without challenges—rising labor costs and worker shortages exacerbated by the pandemic have complicated the process—the company remains optimistic about its future. Outgoing CEO Michael Garcia emphasized the strategic importance of this transition in a recent statement, highlighting the effort and planning that have gone into making EAF steel production a reality.

As Sault Ste. Marie grapples with the immediate impact of job losses, the long-term vision for Algoma Steel focuses on diversifying its product offerings and enhancing its market presence. With government backing and a commitment to innovation, Algoma Steel aims to emerge from this difficult period stronger and more sustainable, ensuring its place in the future of steelmaking.