OTTAWA — The federal government has committed $125 million to help fund the expansion of ArcelorMittal’s Quebec pellet plant, The Logic has learned. 

The federal contribution will flow from the government’s $5-billion Strategic Response Fund (SRF), which supports large private-sector projects in priority sectors, including those impacted by U.S. tariffs. The program replaced the government’s long-standing Strategic Innovation Fund last year. 

ArcelorMittal Mining Canada, a subsidiary of one of the world’s largest steelmakers and iron ore producers, first announced its plans for a $205-million expansion of the plant on the sidelines of the UN Climate Change Conference in 2021. 

When complete, the company said the Port-Cartier, Que. plant will be one of the world’s largest producers of a key component of low-emission steel production—direct-reduced iron pellets, also known as sponge iron. ArcelorMittal has said it expects to produce up to 10 million tonnes of the iron concentrate at the site per year.

The company’s Canadian mining branch did not respond to The Logic’s request for comment. Innovation, Science and Economic Development Canada (ISED) would not comment on whether the company will need to repay the money. 

“Canada’s iron and steel sector is essential to our economic strength and our industrial future,” said Riyadh Nazerally, a spokesperson for ISED. 

The project includes a flotation system designed to reduce the silica in the iron concentrate. The process requires less energy, and is expected to eventually lower greenhouse gas emissions by 200,000 tonnes per year, according to the company. 

In 2024, the Quebec government called it the province’s biggest emissions reduction project to date, and promised $50 million in support from the province’s “Défi GES,” or GHG Challenge program. It also previously committed up to $80 million in electricity rebates for the project. 

Steelmakers can also use the pellets produced at the plant to upgrade to furnaces with lower emissions, the company said in a 2024 press release. 

The company started construction on the project in 2024, and it is expected to finish in early 2029. 

Government disclosure documents say the plant will strengthen Canada’s minerals value chain and reduce emissions. 

Though Canada’s steel industry has been hammered by U.S. tariffs for more than a year, Ottawa’s contribution to the project is not part of the SRF’s tariff response. It instead falls under the fund’s mandate to encourage growth and research and development.

In the company’s earnings call last week, Daniel Fairclough, ArcelorMittal’s head of investor relations, told analysts that the metals and mining giant is focused on local production that meets local demand, but has advocated for ways to reduce the impact of U.S. tariffs on its North American businesses.