Algoma Steel Group (NASDAQ:ASTL) executives said the company is reshaping its business around Canada as the 50% U.S. Section 232 tariff has “effectively closed” the American market to its products, driving lower shipments, higher costs, and pressure on realized pricing during the fourth quarter and full year 2025.
On the company’s fourth quarter 2025 earnings call, CEO Rajat Marwah and CFO Mike Moraca—both in their first earnings call in their new roles—described an accelerated operational shift away from blast furnace steelmaking, a ramp-up of electric arc furnace (EAF) production, and liquidity actions intended to support the transition. Management also highlighted a recently announced binding memorandum of understanding (MOU) with Hanwha Ocean tied to potential beam mill development and anticipated product purchases related to Canada’s defense supply chain.
Tariffs drive strategic pivot and market dislocation
For the full year, management said Algoma absorbed CAD 225 million in direct tariff costs. Marwah characterized the shift as structural rather than cyclical, saying it required a “structural response,” including exiting primary blast furnace and coke oven operations, pivoting commercial strategy to Canada, and restructuring the cost base.
The company said its plate business remains a competitive advantage in this environment. Marwah emphasized that Algoma is Canada’s only producer of discrete plate and said it is “not subject to the same oversupply dynamics that are compressing coil pricing.” He said demand for plate across infrastructure, construction, and defense remained healthy, and management expects plate production to increase sequentially as the EAF ramp continues through 2026.
EAF ramp progresses; total project cost outlook reaffirmed
Marwah said ramp-up activities for the EAF transformation are progressing in line with expectations, with the furnace and melt shop assets performing as designed and stable quality across a broad range of plate and hot-rolled coil grades. He added that critical process components, including the power system, are operating reliably on a 24-hour-per-day schedule.
As of December 31, 2025, cumulative investment in the EAF project was CAD 920 million, and management reiterated an expectation for a final aggregate cost of approximately CAD 987 million.
In response to an analyst question on capital spending, Moraca said the company does not expect any change in the total project budget and expects remaining project capital costs to be incurred in the first half of 2026. He also said sustaining capital spending should be “significantly lower” after exiting blast furnace and coke-making facilities, referencing prior commentary of approximately CAD 80 million a year.
Fourth-quarter results: lower shipments and higher costs, working capital release supports cash flow
Moraca reported fourth-quarter Adjusted EBITDA of a loss of CAD 95.2 million, representing an adjusted EBITDA margin of -20.9%. Cash used in operating activities was CAD 3 million in the quarter.
Algoma shipped 378,000 net tons in the quarter, down 31% versus the prior-year period. Moraca attributed the decline largely to the impact of U.S. tariffs. He said shipments to the U.S. were approximately 30% lower than average U.S. sales over the prior three quarters as the company began exiting that market.
Net sales realizations averaged CAD 1,077 per ton, up from CAD 976 per ton in the prior year quarter, which Moraca said reflected improvements in value-added product mix, partially offset by weaker market conditions. Despite higher realizations, steel revenue fell to CAD 408 million, down 23.9%, as lower volume more than offset pricing.
Costs increased sharply. Cost per ton of steel products sold averaged CAD 1,332 per ton, compared with CAD 1,032 per ton a year earlier, which Moraca attributed primarily to tariff costs and worse fixed-cost absorption from lower production volumes. He also noted that accelerated depreciation of blast furnace and basic oxygen steelmaking assets, as well as stranded inventory tied to the accelerated blast furnace closure, was captured in cost of sales during the quarter.
Moraca highlighted a “meaningful release of working capital” as a key driver of improved operating cash flow versus the prior year. Inventories ended the year at CAD 569 million, down from CAD 790 million at the end of the third quarter, a reduction of approximately CAD 221 million in the quarter. The decline reflected winding down raw material inventories associated with blast furnace operations and continued shipments of finished goods. Accounts receivable also fell in line with lower revenue.
Full-year 2025: Adjusted EBITDA loss and lower shipments
For the full year 2025, Algoma shipped 1.7 million net tons, down from 2.0 million in calendar 2024. Net sales realizations averaged CAD 1,080 per ton, compared with CAD 1,107 per ton in the prior year, which management said reflected softer market conditions on average, partially offset by value-added mix.
Steel revenue was CAD 1.9 billion versus CAD 2.2 billion in the prior year. Cost of steel products sold averaged CAD 1,216 per ton, up from CAD 1,054 per ton, driven primarily by tariff costs and fixed-cost absorption impacts.
Adjusted EBITDA for the year was a loss of CAD 261.4 million (adjusted EBITDA margin -12.5%), compared with an adjusted EBITDA gain of CAD 22.4 million (margin 0.9%) in 2024. Cash flow used in operating activities totaled CAD 66 million in 2025 versus cash generated of CAD 82 million in 2024.
Liquidity, outlook, and operational updates
Moraca said the company ended the quarter with CAD 77 million of cash, CAD 195 million of availability under its revolving credit facility, and CAD 417 million available under the Large Enterprise Tariff Loan facility. Marwah also pointed to “CAD 500 million in government-backed liquidity support,” alongside the asset-based lending facility, as runway to advance the transformation and reduce cash burn.
Looking to early 2026, Moraca said that due to persistently weak market demand, the company expects first-quarter shipments to be sequentially lower than the fourth quarter. However, management expects better pricing and cost performance and said Adjusted EBITDA should be “directionally better” than in the fourth quarter.
On the commercial outlook, Moraca told analysts the company expects total shipments of between 1.0 million and 1.2 million tons over the course of 2026, with a ramp through the year as EAF capacity builds. He also said the expected product mix is “roughly 50/50” between plate and sheet based on current visibility.
Asked about energy exposure, Moraca said Algoma both generates power via its natural gas-fired power plant and consumes power from the Ontario grid, which is subject to spot pricing. He also cited participation in the Northern Energy Advantage Program, which he said provides a CAD 20 per MW advantage on power pricing. On natural gas, he said the company generally fixes prices for the most volatile months (traditionally winter) and is on spot pricing in other periods.
On Canadian plate pricing, management said it has held up better than sheet. In response to a question, the company said sheet pricing was down about 40% versus the index, while plate was down less—“ranging anywhere between 15%–20%.” Management also said government measures are helping and described inbound interest from customers and prospective new customers as encouraging.
Marwah said the accelerated transition has had workforce consequences, including layoff notices to approximately 1,000 employees effective later in the month. He said the company has worked with unions and government resources on mitigation programs and is exploring product diversification initiatives.
Marwah also pointed to defense-related demand, saying the company is shipping to Davie Shipbuilding for the Polar Icebreaker program. In addition, he highlighted a binding MOU with Hanwha Ocean announced in January 2026, describing it as a long-term strategic arrangement with an aggregate potential value of $250 million, including a $200 million contribution toward potential development of a structural steel beam mill and up to $50 million in anticipated product purchases connected to the Canadian Patrol Submarine Project.
Moraca briefly noted the company is aware of pending litigation with U.S. Steel in Ontario and arbitration in the U.S. regarding an iron ore supply agreement, but said Algoma was not in a position to comment further because the matter is in litigation.
About Algoma Steel Group (NASDAQ:ASTL)
Algoma Steel Group Inc is a North American steel producer headquartered in Sault Ste. Marie, Ontario. The company operates a modern electric arc furnace (EAF) complex and an integrated rolling mill, enabling it to transform scrap and direct reduced iron into a wide range of steel products. Algoma Steel Group returned to public markets in 2021 with listings on both the Toronto Stock Exchange and the Nasdaq under the symbol ASTL.
Founded in 1901 as Algoma Steel Corporation, the company grew to become one of Canada’s leading steelmakers before undergoing restructuring in the early 2000s.
