By Robb M. Stewart

Algoma Steel has positioned itself to supply one of the two companies vying to secure a Canadian government order for navy submarines.

The Canadian steel company said Monday it signed a binding memorandum of understanding with Korean shipbuilder Hanwha Ocean potentially worth US$250 million in all.

The value is based on a cash contribution of US$200 million toward the potential development of a structural steel beam mill in Sault Ste. Marie, Ontario, plus anticipated purchases of Algoma products worth as much as $50 million related to the Canadian patrol-submarine project.

The memorandum is subject to Hanwha securing the order for up to 12 submarines for the Royal Canadian Navy. Ottawa last year selected Hanwha and Germany's Thyssen Krupp as qualified suppliers for the project.

The agreement with Hanwha provides that Algoma will be required to make annual payments to the company for 10 years following the commencement of operations of the beam facility equal to 3% of the net sales of the beam mill facility, subject to its financial performance.

"By anchoring steel production, infrastructure and long-term sustainment in Canada, we are committed to strengthening Canada's industrial resilience and supporting a submarine capability that Canadians can rely on today and for generations," Hanwha President and Chief Executive Hee Cheul Kim said.

Canada's government is seeking submarines capable of patrolling the country's massive coastline that stretches along three oceans, equipped with advanced underwater surveillance capabilities.

The Royal Canadian Navy's current submarine fleet is set to remain operational until the mid-to-late 2030s. Those Victoria-class subs were purchased from the Royal Navy in 1998, and began entering service in 2000.

Algoma Steel has been squeezed by the Trump administration's tariffs on imports into the U.S., and has moved to cut about 1,000 jobs as its shutters operations that became financially unsustainable and as it transitions to electric arc furnace steelmaking and a modernized plate mill. In September, the Canadian and Ontario governments agreed to lend Algoma about 500 million Canadian dollars (US$365 million) to help withstand the financial hit from tariffs and provide stability while the company reorients its strategy.

Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

January 26, 2026 13:09 ET (18:09 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.