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Greater plate production is Algoma Steel's answer to U.S. tariffs

Sault Ste. Marie steelmaker expects to flip the switch on electric arc production in the second quarter
algoma-steel-plate-company-photo
Algoma Steel plate (Company photo)

With a U.S. trade and tariff war raging, Algoma Steel is concentrating on ramping up plate shipments this year to feed Canadian customers. 

Algoma said it intends to capitalize on its position as Canada’s only steel plate producer as the Sault Ste. Marie steelmaker is set to mark a new chapter in its historic 110-year run by making the switch to cleaner and modern electric arc furnace production, albeit a few months later than expected.

CEO Michael Garcia projected confidence in the company’s immediate future in an April 30 conference call with steel analysts as the company posted its first quarter financial and production results..

Soft steel demand and the impact of a 25 per cent U.S. tariff on Canadian steel factored in Algoma racking up an expected net loss of $24.5 million for the quarter, a flip of the script from the same period last year when Algoma posted a $28-million profit. 

The loss from operations amounted to $139.9 million for the quarter compared to $3.1 million in income from the same period in 2024.

Since Algoma is classified as an importer of record in the U.S., it’s responsible for paying the 25 per cent tariff on all the plate and coiled steel it ships to the U.S. So far, that amounted to $10.5 million in the first quarter.

Beginning in the middle of 2024, slumping North American steel markets have been a bad mix of interest rate concerns and uncertainty over the U.S. election. That's now culminated in tariffs on Canadian steel and aluminum that’s causing supply chain disruptions and is influencing the U.S. dollar exchange rate which hurts Algoma’s competitive pricing position and drives up the cost of the raw materials it buys from the U.S.

Amid the economic volatility, Garcia said he’s encouraged by Ottawa’s renewed focus on infrastructure project spending, particularly in the energy field, along with boosting investment in military procurement and shipbuilding, which should boost Canadian demand for Algoma plate.

Garcia said Ottawa acknowledges and understands the strategic importance of a strong domestic steel industry, especially in plate.

Algoma has joined a coalition of major Canadian manufacturers called Team Vigilance to strengthen its position in Canadian shipbuilding and the defence supply chain.

Algoma plans to ramp up production at its upgraded plate mill, a $135-million modernization project.

During the first quarter, plate shipments reached 91,000 tonnes, up from 82,000 tons during the same quarter last year. 

Garcia anticipates they will be approaching 100,000 tons by the next quarter in tracking toward a run-rate capacity of more than 650,000 tons.

He said Algoma’s share of the Canadian steel market has almost doubled since the plate mill was finished.

Despite Algoma being Canada’s only plate producer, Garcia said they still face competition on the domestic front from offshore producers, namely Taiwan, Turkey, Italy, France, South Korea and the U.S.

“We expect that there’s still room to grow,” said Garcia, as Canadian consumption of plate has shrunk in recent years.

More than 50 per cent of the plate consumed in Canada is serviced by off-shore producers that Algoma contends is being dumped on the market and is driving down prices.

“We’re having active discussions with the Canadian government around what’s the right trade policies that they should be putting in place to protect the strength of the domestic Canadian steel industry, a vitally strategic part of the Canadian economy.”

As Algoma makes its historic switch away from its antiquated blast furnace and basic oxygen steelmaking process, management revealed during the webcall that first production from its electric arc furnace project being pushed back to the second quarter.

Earlier this year, Algoma was aiming for an April startup of the first of its two $880-million electric furnaces. 

The company is attributing the delay to severe winter conditions during the past quarter with heavy snowfall in March and cold temperatures as hampering their ability to commission critical systems, including at a water treatment plant. 

But that shouldn’t jack up the EAF’s overall project costs, said Garcia, nor their production expectations. He said Algoma is well funded to finish the job with more than $226 million in cash and a total liquidity of $587 million.

The second furnace will be fired up at year’s end.

Once both furnaces are up and running, Algoma expects steady steel production of 3 million tons annually. The startup plan involves normal blast furnace production during the year while ramping up the EAF throughout the year followed by a complete transition over to EAF production in 2026.

Part of reaching that milestone involves permanently shutting down its No. 7 coke battery, Algoma’s least efficient, at its cokemaking facility.