The federal government is pledging $400 million for ArcelorMittal Dofasco, a Canadian subsidiary of the Luxembourg-based commodity giant, to convert its Hamilton, Ont. plant away from using coal to produce steel. The $1.76-billion project will install new equipment furnaces by 2028 initially using natural gas and eventually hydrogen, which the firm estimates will reduce its carbon-dioxide emissions by three million tonnes, or 60 per cent. 

Ottawa’s conditionally repayable award comes from the Strategic Innovation Fund’s (SIF) new Net Zero Accelerator, an $8-billion program to decarbonize heavy industry. The project is conditional on the Ontario government chipping in funding; negotiations are underway.

The award is the second largest from the SIF, and comes a day after Dofasco parent ArcelorMittal announced its best quarterly results in 13 years. The company posted a US$5.1-billion profit for the second quarter and committed US$2.2 billion to a share buyback program this year, funded in part by recent asset sales. 

Given those lofty figures, The Logic asked executives and ministers at the announcement why the company needed Canada’s cash. Their answers constituted as clear a defence of industrial policy as the Liberal government has made to date. 

Responses have been edited for length and clarity.

ArcelorMittal CEO Aditya Mittal: “In terms of why partnership is important, I think fundamentally there’s a shared goal, which is to decarbonize the steel business. If you look at the capital costs—and here we spoke about $1.8 billion—[they] are significant. And today there’s very limited return on these investments. Instead, when you convert away from coal and you start using natural gas, your costs actually rise. Therefore if we do want to accelerate decarbonization, there has to be a shared goal, a shared understanding, so that steel companies like us and others can be motivated to make that capital investment. 

“We saw this in the renewable sector, at least in Europe, where governments motivated [the] private sector to bring in investments. As those investments materialized, you see that the cost curve comes down and technology develops, and there’s an appropriate marketplace. So I think as we transition to decarbonizing the world, such types of partnerships are the way to go. Otherwise, it’s very difficult to actually get a highly-cyclical, capital-intensive business like steel to actually make those first steps.”

Finance Minister Chrystia Freeland: “In June and July, I attended [the] G7 Finance Ministers’ meeting in London, and the G20 Finance Ministers’ meeting in Italy. I came back from those meetings more aware than ever of how competitive the global economy is, and of the fact that there is a race on in the world right now to be first and fastest in the green transition. 

“The green transition is absolutely essential for the future of the Canadian economy and jobs, and to ensure that Canada is competitive. We are seeing major investments by the European Union [and] the Biden administration directly in supporting the green transition. [The Canadian government] recognizes that we have a role to play, too, in supporting that green transition.

“Aditya, he has a choice of where he’s going to make investments around the world. One of the reasons he’s making investments here in Hamilton, is because the workers are fantastic. But the government recognizes we need to support that green transition, too.”

Innovation Minister François-Philippe Champagne: “We are in competition with other jurisdictions. I want to address this question head-on. [It’s] a question we get often. Aditya in [a] text message reminded me that other jurisdictions want to attract this type of investment. As in all investments we’re doing, obviously we’re protecting the interests of the workers, of Canadians, of the industry. But there’s a role for government in the equation—whether it’s the federal government [or] the provincial government—to make sure that we gain these investments in our country.”