Canadian Steelmakers Shift Toward Domestic Demand as Tariffs Reshape Market

Canadian steel producers are relying more heavily on domestic customers as U.S. tariffs restrict their traditional export market. Mining, energy, infrastructure and AI data-centre projects are supporting demand, while federal financing, procurement rules and import controls are helping mills adjust. The improvement, however, remains uneven across companies and regions.

MONTREAL (Scrap Monster): Canada's steel industry is beginning to show signs of adjustment after U.S. tariffs sharply reduced access to its largest export market, with producers increasingly competing for domestic business tied to mining, energy, infrastructure and data-centre investment.

The shift has not produced an even recovery. Some mills and fabricators are reporting improved conditions, while other operations continue to face layoffs, weak product-specific demand and production disruptions.

The change follows the increase in U.S. Section 232 steel tariffs to 50% in 2025, which forced Canadian producers to rethink a market structure that had historically depended heavily on sales south of the border.

Canadian Steel Producers Turn Toward the Home Market

Canada previously sent roughly 90% of its steel exports to the United States, according to the Canadian Steel Producers Association. Reuters reported that those shipments fell sharply in 2025 as tariff barriers increased.

At the same time, Canadian producers captured a larger share of their domestic market.

United Steelworkers estimates that Canadian-produced steel accounted for approximately 51% of steel consumed domestically in 2025, up from 41% in 2024. The estimated import share fell from 59% to 49%.

The union derived those figures from international steel-market data and Canadian import statistics rather than from an official Statistics Canada market-share series.

Mining, Energy and Data Centres Support Demand

The strongest signs of improvement are emerging in parts of western Canada, where mining, energy and major infrastructure projects are generating demand for fabricated and structural steel.

Large-scale AI infrastructure is becoming another potential demand source. A planned Saskatchewan data-centre development is expected to reach approximately 1.2 gigawatts of capacity.

Pipeline, energy and resource-development projects could also increase demand for Canadian-made plate, pipe and structural steel.

The OECD estimates that Canadian steel demand increased approximately 2.7% in 2025 and projects a further 0.9% increase in 2026.

Import Controls Give Domestic Mills More Room

Canada has tightened steel import controls as policymakers respond to global excess capacity and the risk that material displaced from the U.S. market could be redirected into Canada.

Under the current tariff-rate quota system, steel imports from non-CUSMA free-trade partners are generally limited to 75% of 2024 volumes, while imports from countries without a free-trade agreement are generally limited to 20% of 2024 volumes.

Imports above those quota levels face a 50% surtax.

Steel originating in the United States and Mexico is exempt from this specific TRQ system, although separate tariff measures may apply.

Federal Financing Supports Tariff-Affected Companies

The federal government has also expanded financial support for businesses affected by steel, aluminum and copper tariffs.

A C$1 billion Business Development Bank of Canada financing program provides working-capital support to eligible companies affected by tariff pressures.

Ottawa also added another C$500 million to the Regional Tariff Response Initiative, including funding aimed at manufacturers and businesses affected by metals tariffs.

Federal procurement policy is also placing greater emphasis on Canadian steel and aluminum in publicly funded infrastructure projects.

Tenaris Expands Canadian Production

Tenaris is one example of a producer increasing its exposure to the domestic market.

The company announced a roughly C$306 million joint investment with the federal and Ontario governments to modernize and expand its manufacturing capabilities in Sault Ste. Marie.

The investment is intended to increase production, broaden the company's product range and strengthen its ability to supply Canadian energy-sector customers.

Tenaris has also begun producing additional proprietary steel grades in Canada, giving energy operators another domestically manufactured option.

Stelco Posts Strongest Quarter Since Cleveland-Cliffs Acquisition

Cleveland-Cliffs' latest results provide more recent evidence that some parts of Canada's steel market are improving.

On October 19, the company said Stelco delivered its strongest quarter since Cleveland-Cliffs acquired the business two years ago.

Cleveland-Cliffs said the Canadian hot-rolled market improved substantially during the third quarter, turning Stelco into a positive contributor to adjusted EBITDA.

The company remains less positive about galvanized steel, however, arguing that the Canadian market is oversupplied.

Cleveland-Cliffs has decided to indefinitely idle Stelco's galvanizing lines while concentrating production on hot-rolled products. The company said total production tonnage would be maintained and approximately 2,000 Canadian jobs preserved.

Algoma's Transition Creates a Different Picture

Conditions are more difficult at Algoma Steel in Sault Ste. Marie.

The company expects third-quarter steel shipments of approximately 145,000 tons following production disruptions connected to an outage at its Lake Superior Power facility and the broader transition to electric arc furnace steelmaking.

Algoma has since installed a replacement turbine and restored full power.

The company's longer-term strategy remains focused on the Canadian market, particularly steel plate used in infrastructure, construction and defence applications.

Canada's Steel Recovery Remains Uneven

The domestic-market shift is therefore producing different results across the sector.

Fabricators serving western Canadian industrial projects are seeing stronger project pipelines. Hot-rolled steel conditions have also improved, according to Cleveland-Cliffs.

Other parts of the market continue to struggle with product-specific oversupply, reduced U.S. access, operational disruptions and workforce reductions.

This makes Canada's steel adjustment less a broad-based recovery than a rebalancing of where domestic mills sell their production and which steel products are benefiting most from current investment.

Courtesy: Reuters