South Korea’s Hanwha to use Algoma Steel material to build military vehicles in Canada

Amid U.S. tariffs, a new Canada–South Korea partnership aims to strengthen auto manufacturing and boost domestic production. Judy Trinh reports.

South Korean defense company, Hanwha, has announced that it will use steel made at Algoma’s Sault Ste. Marie plant to build armoured weaponized military vehicles in Canada. The deal is contingent on Hanwha winning the lucrative bid to build Canada’s next generation submarine fleet.

The prime minister says the winner will be announced by the end of June. It will take place ahead of the start of the Canada-U.S.-Mexico (CUSMA) trade agreement review which begins July 1.

Today’s announcement by Hanwha builds on an April memorandum of understanding signed with the Automotive Parts Manufacturing Association (APMA). The two entities announced that they will work together to build five types of military vehicles in Canada including:

• The K-9 Thunder self-propelled Howitzer
• The K-10 Ammunition Resupply Vehicle
• Redbank Infantry Fighting Vehicle
• Chunmoo Multiple Launch Rocket System
• Drone ground vehicles.

READ MORE: Inside Hanwha’s pitch for Canada’s lucrative submarine deal

The MOU created a consortium called Project Arrow Defense, which would have 51 per cent Canadian ownership.

“The economic activity that comes from that deal is the equivalent of one new car plant here. That means 15,000 direct jobs through the supply chain and another 15,000 indirect,” said APMA President Flavio Volpe after Monday’s announcement in Vaughn, Ont.

“At a time when we’re down 30 per cent (in auto manufacturing) in this country because of tariffs from Washington - that’s very important,” Volpe said.

The Canadian Armed Forces needs 250 armoured vehicles for use in the Arctic and to meet its NATO obligation.

Under the MOU, Project Arrow Defence would build those vehicles in its plants and could potentially help manufacture weapon systems for its other global customers.

Hanwha officials say they currently have thousands of orders for armoured vehicles from six other NATO countries.

Prior to this announcement, Hanwha also announced that it had also signed an MOU with Algoma Steel to buy its steel products and provide the company with a low interest loan to convert its Sault. Ste. Marie plant into one that can make steel beams.

Algoma’s vice-president strategy John Naccarato told reporters that it’s the only steel producer in Canada that can make ballistic-grade steel for defence applications.

“It’s a great opportunity to be part of a consortium that will respond to Canada’s national priorities around defence spending,” Naccarato said.

The federal government has been clear to both the German submarine bidder Thyssenkrupp Marine System (TKMS) and Hanwha that it wanted measures to bolster the domestic automotive, steel and aluminum industries that have been hard hit by U.S tariffs.

Although there is no auto component in the German bid, TKMS has also announced multiple non-binding agreements with other Canadian companies in the defense and energy sector.

Germany announced last week that it would buy one million tonnes of liquefied natural gas (LNG) from Canada. Prior to the start of the war on Ukraine in 2022, Russia was Europe’s primary supplier of LNG. Germany then turned to the Middle East to increase its gas supply, only to have the U.S – Israel war with Iran, choke off supply routes in the Strait of Hormuz.

READ MORE: What Germany and South Korea are offering in their bids

While in Ottawa for a defence conference last week, German defence minister Boris Pistorius told reporters that the package of economic benefits TKMS had submitted with its bid would increase Canada’s GDP by more than $86 billion dollars over the lifespan of the submarines.

The bid for the submarines includes the building of maintenance and sustainment facilities on both the east and west coat of Canada for the next 30-40 years.

CTV News requested from TKMS how it arrived its cost benefit analysis.

South Korea has also announced that it would import 3.4 billion tons of LNG annually, more than five times the current amount the country is currently buying from Canada.

Despite the economic benefits being touted in both bids, Defence Minister David McGuinty says that it’s the government’s preference not to split the procurement of 12 submarines between both competitors. However, McGuinty is refusing to rule out the option.

“I don’t know if you can categorize the safe decision being splitting it down the middle. I think what we’re looking at here is making sure we have a fleet that is interoperable, that is international and that can be serviced appropriately.”

McGuinty said billions of dollars are being invested in bases in Esquimault and Halifax to retrofit submarine bases and that splitting the fleet would make it more challenging.

“Splitting the fleet would make it more complicated… but it’s not impossible.” McGuinty says he doesn’t have all the details in the bids and will leave it to the professionals at the Defence Investment Agency to do the analysis and advise the government.