For decades, Canadian steelmakers relied on American customers to keep production lines running and workers employed. Now, that longstanding business relationship is undergoing a dramatic transformation.
U.S. President Donald Trump’s 50% tariffs on most Canadian steel have severely restricted access to the American market, with shipments falling nearly 60% compared with pre-trade-war levels, according to industry representatives.
However, Canadian producers are beginning to find opportunities closer to home. New demand from energy projects, construction, mining and artificial intelligence infrastructure is helping some manufacturers recover lost business.
The shift is already visible in Canadian steel consumption, with domestically produced steel gaining market share. Yet the recovery remains uneven. While some companies are expanding production, others are laying off hundreds of workers.
Canada’s steel industry is increasingly being forced to answer a difficult question: Can its domestic market replace enough lost American business to sustain its mills?
Trump’s 50% Tariffs Have Transformed the Canadian Steel Industry
The disruption began accelerating in June 2025, when the Trump administration increased tariffs on imported steel and aluminum from 25% to 50%. The higher duties took effect on June 4 under Section 232 of the U.S. Trade Expansion Act, which allows Washington to restrict imports considered a threat to national security. American officials argued that stronger tariffs would help domestic manufacturers compete against foreign producers and increase industrial capacity. For Canadian steelmakers, however, the decision made selling products to their largest export market dramatically more expensive.
The consequences extended beyond the initial tariff increase. During 2026, Washington revised its metal-tariff rules, leaving different rates for certain steel-containing products and specialized derivatives. Most primary Canadian steel shipments continued facing the 50% rate. Previous research by Statistics Canada found that American importers absorbed the full tariff cost through higher prices during the 2018–2019 steel dispute, although those findings cannot establish exactly how costs are being distributed today. For manufacturers operating across the border, the combination of higher duties and changing regulations has made production planning considerably more difficult.
Canadian Steel Shipments to the United States Have Fallen Nearly 60%
The scale of the disruption became clearer during testimony before a Canadian Senate committee in October 2026. John Cuddihy, vice-president of climate and environment at the Canadian Steel Producers Association, said shipments from Canada to the United States during the first half of 2026 were almost 60% below their 2024 comparison level. Historically, Canadian producers shipped approximately six million tonnes of steel annually to American buyers, representing about half of Canada’s steel production. The United States previously accounted for roughly 90% of Canadian steel exports.
Those figures illustrate how deeply the two countries’ manufacturing systems have been connected. Canadian steel moves through supply chains serving automobile manufacturers, construction companies, energy producers and industrial equipment makers. When tariffs make those transactions commercially unattractive, the disruption affects more than a single shipment. Companies must reconsider customer relationships, production schedules and future investment. The Bank of Canada reported in April that steel exports had already fallen by approximately half, accompanied by declines in production and employment. The newer industry figures suggest that the trade disruption has remained severe, even as some producers find alternative customers.
Canadian-Made Steel Is Capturing a Bigger Share of Domestic Demand
One of the clearest indications of the industry’s changing direction is emerging in Canadian steel consumption. According to calculations by United Steelworkers, the proportion of steel used in Canada that was produced domestically increased from 41% in 2024 to 51% in 2025. During the same period, imported steel’s estimated market share declined from 59% to 49%. The union developed these estimates using international steel data and Canadian import statistics, rather than a separate government survey of purchasing decisions.
For Canadian mills, this ten-percentage-point shift represents an encouraging change in a market historically supplied by both domestic and international manufacturers. More Canadian businesses are competing to provide materials for projects taking place within the country. However, increasing market share does not automatically mean that every steelmaker is producing more or earning higher profits. A producer can gain market share while overall sales remain weak, particularly when demand changes or competitors reduce shipments. The OECD estimates Canadian steel demand increased approximately 2.7% in 2025 but projects growth of only 0.9% in 2026. That suggests domestic opportunities are improving, although the overall market is expanding relatively slowly.
Western Canada’s Energy and AI Projects Are Creating New Steel Demand
Western Canada is emerging as an important source of new business for steel manufacturers. Investments in mining, oil and gas infrastructure, industrial construction and artificial intelligence facilities are increasing demand for specialized pipes, structural components and fabricated steel. Alberta-based Supreme Steel, which manufactures structural steel products, has observed stronger competition among Canadian companies seeking domestic contracts. Its representatives have expressed optimism that upcoming projects could provide enough work to support additional manufacturing activity.
A particularly visible example is Bell Canada’s artificial intelligence data-centre development in Saskatchewan. The project’s first 300-megawatt campus was under construction in October 2026, with more than 500 people working on site. Saskatchewan officials confirmed that structural steel was being milled in Regina, while Prairie Steel was manufacturing building components at its Clavet facility. Bell has also outlined a potential expansion that could eventually bring the development to 1.2 gigawatts, although that larger project remains conditional rather than completed construction. For Canadian steelmakers, such investments demonstrate how new domestic infrastructure can create customers without depending on access to American markets.
Tenaris Is Expanding Ontario Production to Serve Canadian Energy Companies
Tenaris provides one of the clearest examples of a manufacturer building its strategy around Canadian demand. The international steel-pipe producer announced a C$306-million modernization and expansion project at its Sault Ste. Marie Industrial Centre in May 2026. The investment includes C$76.2 million in federal support through the Strategic Response Fund, alongside provincial assistance. Ontario officials said the expansion could create up to 200 additional jobs, building on approximately 800 existing positions at the facility. The improvements are intended to increase production efficiency and expand manufacturing capabilities for Canadian energy customers.
The company’s domestic strategy became more visible in October when Tenaris announced Canadian production of its proprietary TN 95EY steel grade. Manufactured in Sault Ste. Marie, the specialized pipe material is designed for demanding oil and gas applications, including high-pressure and high-temperature conditions in Western Canada’s Montney and Duvernay regions. Producing these products locally gives energy companies another Canadian manufacturing option while helping Tenaris reduce reliance on tariff-exposed exports. The company says its focus on Canadian customers limits its exposure to U.S. steel duties. Although the investment does not guarantee future employment or sales, it demonstrates how domestic industrial demand can support modernization during a difficult trade environment.
Algoma Steel Is Shifting Toward Canadian Customers After Major Layoffs
The transition has been considerably more painful for Algoma Steel, another major employer in Sault Ste. Marie. The company issued layoff notices to approximately 1,000 unionized workers in December 2025, with the reductions taking effect in March 2026. At the same time, Algoma accelerated the closure of its traditional blast-furnace and coke-making operations, completing the shutdown in January. The company linked its decisions to the disruption caused by American tariffs, alongside the broader transformation of its manufacturing operations. For a community built around generations of steel production, the changes represent a significant economic and industrial adjustment.
Algoma is now concentrating on steel plate products rather than maintaining its previous emphasis on coil production for American customers. The company reported a second consecutive quarter of record plate sales in its July 2026 financial results, supported by demand from Canadian infrastructure, construction and defence industries. Direct tariff expenses declined to C$18.7 million in the second quarter, compared with C$64.1 million a year earlier, partly reflecting fewer American shipments. However, overall shipments also fell sharply during the transition to electric-arc-furnace production. The figures show both sides of the recovery: domestic plate demand is strengthening, but restructuring costs and employment losses remain substantial.
Stelco’s Planned 500 Job Cuts Show the Recovery Is Far From Universal
The difficulties facing Stelco reveal how uneven Canada’s steel recovery remains. The company, owned by American producer Cleveland-Cliffs since 2024, announced plans to lay off up to 500 workers at its Hamilton Works and Lake Erie Works facilities in Ontario. In an October 9 letter to Industry Minister Mélanie Joly, Stelco president Paul Simon argued that American tariffs, declining exports and competition from imported steel had made its Hamilton finishing operations financially unsustainable. The company’s planned reductions have triggered a dispute with Ottawa over employment commitments made during the acquisition.
Stelco also cited figures showing Canadian exports of cold-rolled and coated steel to the United States fell 58% in the second quarter of 2026 compared with the 2024 quarterly average. That decline refers to those particular products, not all Canadian steel exports. The company said the Canadian market for its products remained under pressure from foreign imports despite government protections. Joly has warned that Cleveland-Cliffs could face legal consequences if it fails to honour its acquisition commitments, including potential court action and financial penalties. The company maintains that it is complying with its obligations. No final legal determination has been announced, leaving workers facing uncertainty while the dispute continues.
Ottawa Is Using Loans, Import Quotas and Buy Canadian Rules to Protect Mills
The federal government has introduced several measures designed to help Canadian steelmakers survive the collapse in American demand. In May 2026, Ottawa announced a financing program providing up to C$1 billion in loans through the Business Development Bank of Canada for tariff-affected steel, aluminum and copper businesses. The support is intended to help companies manage cash-flow difficulties, maintain operations and develop new markets. Because the program provides financing rather than unrestricted grants, participating companies remain responsible for repayment under the applicable terms.
Canada has also tightened restrictions on certain foreign steel imports. Under its tariff-rate quota system, covered steel shipments from countries without a Canadian free-trade agreement face a 50% surtax once imports exceed 20% of their 2024 levels. For most other free-trade agreement partners, the corresponding threshold is 75%, with the United States and Mexico exempt from these particular quotas. Ottawa’s Buy Canadian procurement rules create another potential source of demand, requiring Canadian-produced steel in qualifying federal construction and defence contracts worth at least C$25 million, subject to material-value thresholds, availability and exceptions. Together, these measures are intended to give Canadian mills more opportunities to supply their own market.
Foreign Steel Competition Remains a Major Challenge for Canadian Producers
Even with American shipments declining, Canadian steelmakers cannot automatically replace lost exports by selling domestically. Imported products continue competing for orders, and global steel markets are struggling with substantial excess production capacity. The OECD estimates worldwide steelmaking capacity exceeded demand by approximately 640 million tonnes in 2025 and projects that gap could reach 745 million tonnes by 2028. China alone exported a record 131 million tonnes of steel in 2025, illustrating the scale of international competition facing relatively small producers such as Canada.
This imbalance helps explain why Canadian industry representatives are calling for stronger protection against unfairly traded products. The Canadian Steel Producers Association argues that companies need more effective trade enforcement and greater opportunities to supply domestic manufacturing customers. United Steelworkers leaders have similarly urged Ottawa to tighten import quotas and expand protections for Canadian-made steel. However, import restrictions also require careful design. Some Canadian manufacturers depend on specialized foreign materials, and higher input costs can make finished products less competitive. The challenge is protecting domestic production without unnecessarily raising costs for businesses that transform steel into vehicles, equipment, buildings and other goods.
Canada’s Steel Recovery Depends on More Than Replacing American Buyers
There are encouraging signs that Canadian steel companies can rebuild part of their business around domestic demand. The increase in Canadian-made steel’s share of national consumption, Tenaris’s expansion and Algoma’s growing plate sales all point toward opportunities that were previously overshadowed by exports to the United States. The Bank of Canada has also observed that government measures and business adaptation are helping support domestic production, despite the severe contraction in steel exports. Nevertheless, the central challenge remains the enormous volume of business Canadian mills historically conducted across the border.
Domestic demand growth alone is unlikely to replace six million tonnes of annual U.S.-bound shipments quickly. The OECD’s projected 0.9% increase in Canadian steel demand during 2026 suggests expansion will remain gradual, while industry representatives continue warning about import competition, uncertain contracts and the possibility of further production cuts. A durable trade agreement could restore some American opportunities, but no removal of the broad 50% steel tariff has been announced. Canada’s emerging strategy therefore depends on more than government protection. Steelmakers must develop products Canadian customers need, strengthen supply relationships and compete for new infrastructure projects. For workers in Ontario’s steel communities, the success of that transition will ultimately be measured in stable jobs and sustained production, not simply a larger share of a smaller market.
