Korean shipbuilder bidding for submarine contract agrees to $345M deal with Algoma Steel

Hanwha Ocean signed a binding memorandum of understanding to provide up to $345 million to Algoma Steel to develop a structural steel beam mill, and the agreement is contingent on South Korean firms winning Canada’s submarine contract.

Hanwha Ocean, a major South Korean shipbuilder, has signed a binding memorandum of understanding with Algoma Steel to support a structural steel beam mill in Sault Ste. Marie. The agreement would see Hanwha provide $275 million to develop the mill and purchase additional products, bringing the deal value to as much as $345 million. The arrangement is linked to the Canadian Patrol Submarine Project and is contingent on South Korean firms winning the contract to build new submarines. Officials from South Korea are visiting Canada this week to support the bid. Key details: - Hanwha would provide $275 million to develop a structural steel beam mill in Sault Ste. Marie and pledge purchases that raise the total deal value to $345 million. - The steel purchases are described as intended for use in connection with the Canadian Patrol Submarine Project, including submarine construction and the development of maintenance, repair and overhaul infrastructure in Canada. - The agreement is contingent on South Korean businesses winning the submarine contract, which is valued at more than $12 billion and is competing with German firms. - If the project proceeds, Algoma would make payments to Hanwha equal to three per cent of the beam mill facility’s net sales for 10 years. - Hanwha Ocean has built more than 1,400 vessels since 1973, operates large shipyards, employs around 31,000 people and builds about 45 ships a year. - Algoma has been affected by U.S. tariffs on steel and aluminum and recently announced plans to reduce its workforce by about 1,000. Summary: If the arrangement proceeds, Algoma would receive up to $345 million to build the beam mill and would supply steel for the submarine program while making scheduled payments to Hanwha over a decade. The deal is conditional on the award of Canada’s submarine contract, and South Korean officials are in Canada this week to support their bid. Undetermined at this time.