The M&E DISPATCH // 191

The Steel We Can't Make

July 10, 2026

The Tuesday Dispatch

Canada just committed to up to twelve submarines, and not one gram of the pressure hull will be rolled in this country. That fact has been reported as an insult to Algoma Steel. It isn't. It's a specification problem, and the specification is worth understanding before anyone writes another angry letter to Ottawa.

What amagnetic steel actually is

The 212CD hull is austenitic stainless steel. Austenite is a face-centred cubic crystal structure, and steel that holds it is essentially non-magnetic. You get there by loading the alloy with austenite stabilisers: nickel, manganese and nitrogen, in quantities well past anything in a structural grade. Then you cold-work it, because austenitic alloys are not hardenable by heat treatment, and cold-working is the only way to get the yield strength a pressure hull needs. It costs more. That's the trade.

The point of all this is that a magnetic anomaly detector cannot see the boat and an influence mine will not fire under it. Everything non-magnetic that can be, is. Fixtures, fittings, the lot.

There is no mill in Canada that makes this plate. There is no mill in Canada that has ever made this plate.

The nickel we mine and the steel we don't

Read the ingredient list again. Nickel and manganese.

Canada holds roughly 2.2 million tonnes of nickel reserves, concentrated in Ontario and Manitoba. We are one of the world's serious nickel jurisdictions. Manganese, we produce commercially at zero. It sits on NATO's list of twelve defence-critical raw materials and it is one of the two on that list Canada does not supply.

So the alloy that keeps a Canadian submarine invisible is built partly out of a metal we dig up in Sudbury and Thompson, shipped out, combined with a metal we don't produce at all, and rolled into plate in Germany. Then we buy the boat.

That is the Canadian resource sector in a single supply chain.

Correcting the Algoma story

Most of this week's coverage has it backwards.

Hanwha's pledge to Algoma, worth $345 million all-in with roughly US$200 million against the mill itself, was for a structural steel beam mill in Sault Ste. Marie plus purchases of Algoma product. It was never a submarine hull contract. Sault MP Terry Sheehan confirmed it directly after the announcement: nobody in Canada made the steel for the submarine itself, and Hanwha would have used its own steel too. Algoma CEO Rajat Marwah told him the in-boat Canadian steel content under Hanwha was a smaller amount, very similar to what the German program offers.

Ottawa said a Sault beam mill could have brought back around 500 of the roughly 1,000 workers Algoma laid off in March. Losing that hurts, and it should be said out loud. But it was a beam mill tied to a bid, not a hull order, and TKMS was back on the phone with Algoma the night after it won. Sheehan set up a second meeting the following day.

The steel Canada does get

Here is where the tonnage actually lives.

TKMS's submission projects roughly 15,000 short-term jobs from constructing new submarine maintenance facilities in Halifax and Esquimalt. EllisDon has the agreement to build the maintenance and training facilities. Seaspan is standing up a maintenance, repair and overhaul enterprise on both coasts. Marmen in Trois-Rivières produces selected segments of the boats in Canada.

Jetties, dry docks, dockside cranes, module halls, training centres, ammunition and support infrastructure, on two coasts, over decades. That is structural steel, plate, beam, rebar and fabricated assemblies, and it is the kind of steel Canada is very good at making.

Two policy levers point directly at it. Ottawa's December 2025 Policy on Prioritizing Canadian Materials in Federal Procurements mandates Canadian steel, aluminum and wood in federal defence procurements valued at $25 million or more. The Defence Industrial Strategy targets 70 percent of federal defence contracts going to Canadian firms within a decade, and commits Ottawa to helping steel and aluminum producers pivot and retool to make the grades the defence sector needs. Sheehan is already invoking buy-Canadian on the submarine docks specifically.

None of that requires a beam mill in the Sault. All of it makes one easier to justify.

What TKMS still owes

A federal official told CTV that TKMS will invest in the Canadian steel industry another way. Four days on, there are no details. TKMS has said several partnerships in its confidential bid remain unannounced, and that it signed agreements with steel companies for materials other than the hull.

That's the gap. TKMS is contractually on the hook for economic benefits equal to 100 percent of Ottawa's investment, contracting is meant to close by the end of 2027, and the steel component of that obligation is currently a sentence with no number attached to it.

What to watch

Does Algoma get a defence-grade line, or a construction contract? Those are different things. A construction contract is a good year. A specialty plate capability, backed by the retool commitment in the Defence Industrial Strategy, is a decade.

Do the Halifax and Esquimalt facility packages carry Canadian steel conditions? They clear the $25 million threshold by a wide margin. Watch how the tender language is written.

Does anyone in Ottawa say the word manganese out loud? We cannot build amagnetic plate without it and we do not have it. Every conversation about a domestic defence steel capability runs into that wall eventually.

Canada is going to build a great deal of steel around these submarines. Docks, halls, jetties, cranes. What it will not build, unless something changes in the next eighteen months, is the steel that goes in the water.

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Wrapping this edition up with 1 minute to spare.
If you leave everything until the last minute, it only takes a minute.

Have a great weekend all!

Lee