Algoma Steel Group: Hold Rating Amid Tariff Challenges and Strategic Transformation

Algoma Steel Group (ASTL – Research Report), the Basic Materials sector company, was revisited by a Wall Street analyst today. Analyst Katja Jancic from BMO Capital downgraded the rating on the stock to a Hold and gave it a C$8.00 price target.

Katja Jancic has given her Hold rating due to a combination of factors impacting Algoma Steel Group. The recent increase in U.S. import tariffs to 50% significantly affects Algoma’s earnings potential, as a substantial portion of its shipments are directed to the U.S. market. This tariff hike, coupled with an oversupplied Canadian market, limits Algoma’s ability to redirect its volume, creating a challenging environment for the company.
Despite these challenges, Algoma has sufficient liquidity to continue its transformation to Electric Arc Furnace (EAF) production, which is expected to lower costs and improve margins in the long term. The company has over C$600 million in liquidity, which is deemed adequate to complete the transformation. Additionally, the Canadian government has shown willingness to support businesses affected by tariffs, providing Algoma with additional options if needed. However, due to the current uncertainties and the early stages of the EAF ramp-up, the stock’s upside potential remains limited, justifying the Hold rating.

According to TipRanks, Jancic is a 4-star analyst with an average return of 9.2% and a 61.33% success rate. Jancic covers the Basic Materials sector, focusing on stocks such as Nucor, Algoma Steel Group, and Steel Dynamics.