In laser cladding, the interaction of the substrate material, the laser beam and the powder stream play important roles in determining how the material is deposited. Previous models of the coaxial powder stream have concentrated either on mass flow dynamics or stream heating, neglecting the effect of the substrate. In this work, a comprehensive numerical model that considers the important parameters of the powder stream, the laser beam and the substrate material, is developed. It is clear from the work that the full three-way interaction of these elements, as in real processing situations, is necessary to accurately and reliably predict particle heating and effective fusion into the melt pool.