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Algoma Steel figures to be a scrappy bunch in 2025

Sault Ste. Marie steel producer primed to source scrap metal from southern Ontario to feed its new electric arc furnaces
Construction of Algoma Steel's electric arc furnace complex (Screen grab of Algoma Steel video)

Since 1902, the primary raw materials for making steel at the Sault has been taconite iron ore, coal, limestone and a mix of other metallic inputs. 

Come 2025, when Algoma Steel begins its graduation from blast furnace steelmaking to modern electric arc furnace technology (EAF), the Sault Ste. Marie steel producer will be in hot pursuit of metallic scrap. 

Algoma CEO Mike Garcia talked about the progress of construction and explained his company’s raw materials strategy in a Nov.29 web chat with Michael Cowden of Steel Market Update.

The construction of the $800-million twin furnace complex has changed the Sault’s skyline. With the structural framework of the main building done, Garcia said they are ready to apply the roof panels and cladding on the path towards installing equipment by the end of 2024. 

Commissioning of the EAF begins at the next year with 2025 being the ramp-up year, according to Garcia.

When it comes to sourcing scrap, geography works in Algoma’s favour, Garcia said. Algoma expects to tap into plenty of prime scrap generated by the auto assembly plants in the Toronto-area, much of which usually heads to the U.S.

“There isn’t a lot of demand for it in Canada.”

As well, there are other sources of prime and obsolete scrap to access in the U.S. Midwestern states of Ohio, Michigan, Illinois, Minnesota and Wisconsin. 

Obsolete scrap comes from end-of-life used products. Prime, or new scrap, is generated by the manufacturing process, in the form of metal clippings and turnings.

To enable the flow of scrap, at the outset of the EAF project, Algoma formed a joint venture with Triple M Metals, the largest scrap processor in Ontario. That arrangement will be responsible for sourcing all of the metallics needed.

Garcia said Algoma did its homework to understand the dynamics and players in that market.

“We feel confident that when it’s time to start getting into the market, procuring scrap and getting it floating (by barge) to Sault Ste. Marie for that 2025 startup period, that we’ll be able to do that.”

During the startup phase, Garcia said they’ll be using a combination of prime scrap and “virgin metallics,” mentioning DRI (direct reduced iron), HBI (hot briquetted iron) and hot pig iron, the latter coming from Algoma’s own blast furnace before it’s permanently shuttered at the end of the decade.

The prime scrap market is tight and there will be competition. But Garcia said scrap has a way of going to the “logical buyer” that needs it most, based on the recipe for the type of steel product being made.

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“We feel confident about our metallic strategy.”

As world leaders gather in Dubai this week for the COP28 world climate action summit, Garcia said the EAF stands as a “very high visibility project” in Canada. 

While positioning Algoma as a North American industry leader in ‘green’ steel production, for workers and locals, it will provide a cleaner and quieter workplace.

Greenhouse gas emissions will be cut by 70 per cent. Steel making capacity will be boosted by 30 per cent to 3.7 million liquid tons.

When Canadian politicians discuss their decarbonization plans, Garcia said, the steel industry is always front and centre in those talks.

He called the EAF the country's "the single biggest project" that moves Canada towards its 2030 emission cutting targets.

To that extent, he said, the EAF project has generated a lot of support for a larger and more robust energy grid to power those furnaces.

During the initial years of production, Algoma will be alternating between the two furnaces and steel production will stay largely the same at 2.3 to 2.4 million tons annually. 

From 2026 to the end of the decade, as new power capacity comes online with a new 230-kilovolt powerline extending into the Sault, there will be enough energy by 2029-30 to reach its three million-ton mark and decommission Algoma’s one remaining blast furnace and coke ovens.

Heading into 2024, Garcia said the furnace equipment is being staged on site with deliveries arriving by ocean-going ships from its EAF supplier’s – Danieli – workshops in Italy and Asia. Garcia said they’ve unloaded several vessels this year with more ships arriving before the Seaways shuts down for the winter.

“The bulk of the steel-making equipment and the new steel shop is sitting here in Sault Ste. Marie awaiting installation for the next year.”

Barring any unforeseen circumstances, the capital expenditure to build the EAF is expected to cost between $825 million to $875 million. 

Garcia said Algoma has largely avoided the huge inflationary spikes that’s rocked other major industrial builds by locking in its equipment costs, dating back to October 2021 and the first contract signed with Danieli. Building in the middle of a brownfield site that integrates well with the existing steel works with all the  transportation infrastructure already in place certainly helps, he said.