Algoma Steel signs MOU with Hanwha Ocean

Executive Summary

• Algoma Steel Inc. entered into a binding MOU with Hanwha Ocean Co. Ltd. for a long-term strategic arrangement with an aggregate potential value of $250 million USD (~$345 million CAD).
• The arrangement includes a $200 million USD cash contribution toward developing a structural steel beam mill in Sault Ste. Marie, Ontario, and anticipated product purchases of up to $50 million USD for Hanwha's Canadian Patrol Submarine Project (CPSP).
• The deal is designed to satisfy Hanwha's industrial and technological benefits (ITB) obligations, strengthen Canada's domestic industrial base, and features a 10-year performance-based payment structure from Algoma to Hanwha.

Key Details

• Transaction Type: Binding Memorandum of Understanding (MOU) for a long-term strategic arrangement.
• Counterparties: Algoma Steel Inc. (wholly owned subsidiary of Algoma Steel Group Inc.) and Hanwha Ocean Co. Ltd.
• Aggregate Potential Value: $250 million USD (~$345 million CAD).
• Cash Contribution: $200 million USD (~$275 million CAD) directed toward the potential development of a structural steel beam mill in Sault Ste. Marie, Ontario.
• Product Purchases: Anticipated purchases of Algoma steel products up to $50 million USD for CPSP-related commitments, including submarine construction and maintenance, repair, and overhaul (MRO) infrastructure.
• Strategic Purpose: Supports Hanwha Ocean's Industrial and Technological Benefits (ITB) obligations for the CPSP; reinforces Canada's "Buy Canadian" policy, domestic supply chain resilience, and defence/infrastructure nation-building priorities.
• Conditions Precedent: Contingent upon Hanwha Ocean being awarded and entering into an effective contract under the CPSP, and the execution of definitive agreements with Algoma.
• Payment Structure: Algoma will make annual payments to Hanwha Ocean for 10 years following the commencement of beam mill operations, equal to 3.0% of the facility's net sales, subject to financial performance.
• Operational Impact: Projected to create new skilled, long-term Canadian jobs and anchor steel production, infrastructure, and long-term sustainment within Canada.

Notable Quotes

• Hee Cheul Kim, President & CEO, Hanwha Ocean: "This partnership is about working side by side with Algoma as a leading Canadian steelmaker to build something lasting. 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."
• Rajat Marwah, CEO, Algoma Steel: "As we usher in a new era for Algoma with electric arc furnace steelmaking and modernized finishing capabilities, this strategic arrangement with Hanwha Ocean represents a foundational step forward in our diversification strategy. It reinforces our focus on becoming Canada's leading sustainable steelmaker, aligned with the country's nation-building priorities in defence and infrastructure."