Workers at Algoma Steel's cokemaking facilities in in Sault Ste. Marie, Ont. in June, 2024. Algoma Steel is one of the big three steelmakers in Canada that's reacting to steep tariffs imposed by the U.S.Deborah Baic/The Globe and Mail
Algoma Steel Group Inc. ASTL-T is still making money despite newly imposed U.S. tariffs on Canadian steel imports, and the company’s chief executive says a Buy Canadian mandate from the federal government could provide an important boost.
U.S. President Donald Trump on Wednesday levelled a 25-per-cent tariff on Canadian imports of steel and aluminum, in an attempt to make American steelmakers more competitive and to try to resuscitate the domestic manufacturing sector. Canada quickly already fired back with 25-per-cent levies on about $30-billion in U.S. products that took effect Thursday.
Algoma, based in Sault Ste. Marie, Ont., is one of the big three steelmakers in Canada alongside Dofasco, which is owned by Luxembourg-based ArcelorMittal, and Stelco, which was recently acquired by U.S.-based Cleveland-Cliffs.
To offset damage from the U.S. tariffs, Algoma is trying to boost its Canadian order book. About half the steel sold to Canadian consumers is foreign-sourced, so there is ample opportunity for domestic steelmakers to make inroads at home.
In a Thursday conference call with analysts after the release of Algoma’s quarterly earnings, chief executive officer Michael Garcia said that, in the past 24 hours, the company had discussions with steel plate buyers in Edmonton, as well as individuals connected to two Canadian icebreaker ships.
Chantier Davie Canada Inc. and Seaspan Corp. both won contracts amounting to more than $6-billion to build the icebreakers.
“We’ve made lots of marine plate in Algoma’s history. We’ve made armour plate,” Mr. Garcia said in the call. “So to the extent that defence spending and shipbuilding starts to ramp up in the Canadian market, we see that as a great opportunity, especially if the government implements a buy Canadian requirement for that build.”
Industry Minister François-Philippe Champagne on Thursday said he instructed his department to prioritize funding of projects that use Canadian steel and aluminum. He said his directive was in response to the “unfair and unjustified” U.S. tariffs on both metals.
It’s unclear whether the announcement from Mr. Champagne would cover the contracts for building the icebreakers.
Catherine Cobden, CEO of the Canadian Steel Producers Association, in a Wednesday statement pushed for all levels of government, including municipalities and provinces, to prioritize Canadian steel in all their publicly funded infrastructure projects.
“This would be a strong and timely show of support for Canada’s steel industry, and the workers and communities that depend on it. We are long overdue for ensuring that Canadian-made steel is being prioritized for domestic projects,” she said.
The tariffs have introduced even more uncertainty into what was already difficult steel market for Algoma. In the last few months of 2024, the steelmaker had been grappling with soft demand and skittish customers, among other challenges.
One bright spot for the steel industry in recent weeks has been sharply higher prices for the commodity.
Algoma chief financial officer Rajat Marwah said in the call on Thursday that steel coils are selling for about US$950 per ton, a level that means the company can make some money. It’s a similar story in the steel plate market, with prices recently jumping by up to 35 per cent, according to Mr. Garcia.
Even without the huge uncertainty caused by the tariffs, Algoma is undergoing a fundamental shift in its operations with the impending rollout of its electric arc furnaces technology, a cleaner steelmaking process that will replace blast furnaces.
The company has invested $740-million in the project, and next month, the first of two EAFs will come online. Blast furnaces use iron ore and highly polluting coke, while EAFs use scrap metal and electricity.
Mr. Garcia said that, while the tariffs are a significant challenge for Algoma, the transition to EAFs should make the company more efficient.
Shares in Algoma Steel rose Thursday by 7.1 per cent on the Toronto Stock Exchange closing at $9 apiece.