South Korea’s Defense Giant Chooses a Small Canadian Steel Town for NATO’s Next Generation of War Machines

A major South Korean defense company has unveiled plans that could reshape Canada’s military manufacturing industry and bring thousands of jobs to one of the country’s historic steel-producing regions.

The announcement centers on Hanwha Aerospace, one of South Korea’s largest defense contractors, and a steel mill located in the northern Ontario city of Sault Ste. Marie.

While the city may not be widely known outside Canada, it has suddenly become a key player in a multi-billion-dollar defense competition.

Hanwha confirmed that it intends to use steel produced by Algoma Steel to manufacture armored military vehicles in Canada if it secures a major defense contract from Ottawa.

The contract at stake is one of the most significant military procurement programs in Canadian history: the bid to build Canada’s future submarine fleet.

Although the steel agreement is not directly tied to a final contract award, many observers see it as a strategic move designed to strengthen Hanwha’s position in the competition.

At the center of the story is Algoma Steel, a company with a unique capability that few Canadians are aware of.

According to company officials, Algoma is currently the only steel producer in Canada capable of manufacturing ballistic-grade steel for military applications.

This specialized steel is used to protect soldiers and military equipment from enemy fire and is considered essential for modern armored vehicles.

For years, the Sault Ste. Marie facility primarily supplied steel for commercial construction and industrial projects.

Now, the plant could become a cornerstone of Canada’s growing defense manufacturing sector.

The foundation for this transformation was laid earlier this year when Hanwha signed a memorandum of understanding with the Automotive Parts Manufacturers’ Association (APMA).

Together, the partners proposed producing five different military systems in Canada, including self-propelled artillery, infantry fighting vehicles, ammunition resupply vehicles, rocket launch systems, and unmanned ground vehicles.

The initiative was later organized under a new consortium known as Project Arrow Defense.

One of the most significant aspects of the project is its ownership structure.

Under the proposal, 51 percent of the consortium would remain under Canadian control, ensuring that key decisions, jobs, and industrial benefits stay within the country.

Hanwha has also signed a separate agreement with Algoma Steel that includes purchasing steel products and providing financial support for facility upgrades.

Such arrangements are uncommon in the defense sector, where foreign contractors rarely invest directly in modernizing domestic manufacturing facilities.

Industry leaders believe the economic impact could be substantial.

APMA President Flavio Volpe estimated that the project could generate economic activity comparable to building an entirely new automotive manufacturing plant.

According to those projections, the initiative could create approximately 15,000 direct jobs and another 15,000 indirect jobs across Canada’s supply chain.

The timing is particularly significant because Canada’s manufacturing sector has faced growing challenges in recent years.

Automotive production has declined, while trade disputes and tariffs have increased pressure on key industrial regions, especially in Ontario.

Ottawa appears to be using the submarine competition as more than just a military procurement process.

Government officials have signaled that bidders must demonstrate meaningful investments in Canadian industries, including steel, aluminum, automotive manufacturing, and advanced technologies.

In effect, defense spending is being transformed into a broader industrial strategy designed to strengthen domestic production capacity.

Canada’s military requirements further increase the importance of the project.

The Canadian Armed Forces are expected to need approximately 250 armored vehicles capable of operating in harsh Arctic environments while supporting NATO missions abroad.

Under Hanwha’s proposal, many of those vehicles would be built by Canadian workers using Canadian-made steel.

The opportunity extends beyond Canada’s borders as well.

Hanwha already supplies military equipment to several NATO members and holds thousands of vehicle orders from allied nations.

If production facilities are established in Canada, they could eventually serve export markets throughout Europe and other allied regions.

However, Hanwha is not alone in the competition.

German shipbuilding giant ThyssenKrupp Marine Systems, commonly known as TKMS, has submitted its own ambitious proposal.

German officials claim their package could contribute more than $86 billion to Canada’s economy over the lifetime of the submarine program.

The German proposal also includes long-term submarine maintenance facilities on both Canada’s Atlantic and Pacific coasts, creating decades of economic activity.

At the same time, both Germany and South Korea are strengthening their broader economic relationships with Canada, including growing interest in Canadian energy exports and critical resources.

As Ottawa prepares to announce a decision, potentially by the end of June, both bidders continue offering new incentives to strengthen their cases.

Yet regardless of which company ultimately wins, one outcome already appears increasingly likely.

A steel mill once known primarily for commercial production is emerging as a strategic asset in Canada’s defense future.

For Sault Ste. Marie, the opportunity could mark the beginning of a manufacturing revival.

For Canada, it represents a broader shift toward producing more of its own defense equipment rather than relying heavily on foreign suppliers.

And for NATO allies watching closely, it signals that Canada may be positioning itself not only as a customer in the global defense market, but increasingly as a builder.