Algoma Steel Earnings Call: Tariff Pain, EAF Pivot

Algoma Steel Group Inc. ((TSE:ASTL)) has held its Q4 earnings call. Read on for the main highlights of the call.

Algoma Steel’s earnings call painted a mixed picture, with heavy near-term pain but a clearer long-term roadmap. Management detailed deep financial losses and tariff-driven market disruption, yet stressed progress on its electric-arc furnace transition, solid liquidity, and a strategic tilt toward higher-margin plate and defense-linked demand.

EAF Ramp-Up and Capital Spend

Algoma’s first electric-arc furnace is now running 24/7, delivering stable quality across plate and hot-rolled coil grades. The company has invested about C$920 million into the EAF project through December 2025, with roughly C$67 million left to reach the projected total cost of about C$987 million.

Pivot to Canadian Plate and Value-Add

With blast furnace and coke oven operations wound down, Algoma is pivoting toward the Canadian market and higher-value plate and selected coil products. As the only producer of discrete plate in Canada, the company sees healthy demand from infrastructure, construction, and defense, and expects plate volumes to rise into 2026.

Government-Backed Liquidity Runway

Management emphasized a sizeable liquidity cushion anchored by C$500 million in government-backed support and an asset-based lending facility. At quarter end, Algoma reported C$77 million in cash, C$195 million in revolver availability, and C$417 million remaining under a large tariff loan facility to back its transformation.

Hanwha MOU Signals Strategic Optionality

In January 2026, Algoma signed a binding memorandum of understanding with Hanwha Ocean worth up to US$250 million. The framework includes US$200 million aimed at a potential structural beam mill and up to US$50 million in product purchases tied to a major submarine program, underscoring emerging defense and shipbuilding demand.

Working Capital Release Eases Cash Burn

A sharp inventory drawdown provided meaningful cash relief in the quarter and over the year. Inventories fell to C$569 million at fiscal year-end from C$790 million in Q3 and C$879 million in 2024, turning cash used in operations in Q4 to just C$3 million versus C$77 million a year earlier.

Improved Realizations from Product Mix

Despite weaker volumes, Algoma lifted net sales realizations through a richer mix of value-added products. Average net sales rose to C$1,077 per ton in Q4 from C$976 a year earlier, and management noted plate prices have held up materially better than sheet and hot-rolled coil.

Shipment Outlook and Mix Shift

For 2026, management guided to shipments of 1.0 to 1.2 million tonnes as EAF capacity ramps. The product slate is expected to be roughly half plate and half sheet, with plate volumes building sequentially through the year as the new footprint stabilizes.

Tariffs and Structural Market Shock

The 50% U.S. Section 232 tariff has effectively closed off the U.S. market and pushed excess steel into Canada. Algoma absorbed about C$225 million in tariff costs over the year, while Canadian prices in many categories traded as much as 40% below comparable U.S. levels, severely pressuring margins.

Deep Adjusted EBITDA Losses

The financial hit was stark, with Q4 adjusted EBITDA at a loss of C$95.2 million, a margin of minus 20.9%. For fiscal 2025, adjusted EBITDA swung to a loss of C$261.4 million, a minus 12.5% margin, compared with a modest positive result of C$22.4 million in 2024.

Volumes and Revenue Under Pressure

Shipments and sales followed the same downward path as tariffs and weak demand bit into operations. Q4 shipments dropped 31% to 378,000 net tons and full-year shipments fell 15% to 1.7 million tonnes, driving a 23.9% year-over-year decline in Q4 steel revenue and a 13.6% drop for the full year.

Rising Costs and Fixed Charge Drag

Costs climbed sharply, amplifying the earnings squeeze as volumes receded. Q4 cost per ton jumped about 29% to C$1,332, with full-year cost per ton up roughly 15% to C$1,216, largely due to tariff expenses, accelerated depreciation on legacy assets, and weak fixed cost absorption.

Negative Cash Flow and Legal Overhang

For 2025, Algoma moved from cash generation to cash consumption at the operating level. Operating activities used C$66 million in cash versus generating C$82 million the prior year, while management also acknowledged ongoing litigation and arbitration related to legacy steelmaking and raw material supply.

Workforce Reductions and Social Impact

The accelerated closure of blast furnace and coke operations has had heavy human consequences in Sault Ste. Marie. Around 1,000 employees received layoff notices, with management working alongside unions and government programs to help mitigate the social and economic fallout.

Sheet Pricing Slump Hits Margins

Beyond tariffs, sheet and hot-rolled coil pricing remained a key earnings headwind during the year. Management described sheet prices as roughly 40% below prior index levels, dragging on overall realizations even as plate pricing showed relative resilience.

Near-Term Shipment Weakness

Despite the ramping EAF footprint, Algoma warned that the immediate operating environment remains tough. Management expects Q1 2026 shipments to come in sequentially lower than Q4 2025, reflecting ongoing demand softness before any meaningful recovery in volumes.

Forward Guidance and Transformation Path

Looking ahead, Algoma is targeting 2026 shipments of 1.0 to 1.2 million tonnes with a balanced plate and sheet mix and rising plate output through the year. The company expects EAF ramp progress, lower sustaining capital near C$80 million annually, further inventory releases, and a strong liquidity buffer to gradually improve adjusted EBITDA from the deeply negative Q4 base.

Algoma Steel’s call set out a clear contrast between current pain and future potential. Heavy tariff costs, lower shipments, and rising unit costs have pushed earnings and cash flow into the red, while layoffs highlight the human cost of restructuring. Yet the EAF transition, plate-focused strategy, ample liquidity, and new strategic partnerships give investors a tangible, if challenging, path toward recovery.