The chief executive of Algoma Steel says the company is ramping up its pivot to the Canadian market as headwinds from U.S. tariffs constrain its shipments south of the border.
Rajat Marwah says the steelmaker incurred $18.7 million in direct tariff costs in the second quarter, down from $64.1 million a year ago, as it reduced its exports to the U.S.
“The 50 percent U.S. Section 232 tariff on steel imports from Canada continues to define the operating landscape,” he said during a second-quarter earnings call on Thursday.
The Sault Ste. Marie-based company reported its shipments during the quarter were approximately 181,500 tons, down 62 percent year-over-year. Shipments to the U.S. represented 23 percent, down from 54 percent last year and lower than its historical range of 45 to 55 percent.
Algoma shares ended about 10 percent lower on Thursday, closing at $5.35 on the Toronto Stock Exchange.
The company said its continuing its transition to electric arc furnace steelmaking and its pivot to making steel plates while reducing emphasis on steel coil, which remains in excess supply in Canada.
Marwah said plate shipments in the second quarter were about 125,000 tons in the second quarter, up from 116,000 tons in the first quarter.
“We expect plate production to continue to increase as our ramp-up progresses through 2026,” he said.
Algoma has been ramping up steel plate production as it repositions itself as a crucial steel player in the Canadian defence supply chain.
However, its memorandum of understanding with Hanwha Ocean Co., Ltd. for the country’s upcoming submarine program was suspended earlier this month, after the federal government picked Thyssenkrupp Marine Systems as its preferred supplier to begin negotiations for Canada’s next sub fleet.
Still, Marwah said that wouldn’t change Algoma’s plans for structural steel beams.
“Our strategy to pivot into beams is not changing because that market is there and it’s available and we will be working toward getting that initiated,” he said.
Algoma is also viewing its recent partnership with defence manufacturer Roshel Inc. to form Roshel Algoma Defence as a “strategic pillar” of Canada’s defence supply chain, Marwah said.
Algoma reported a net loss of $96 million during its second quarter, compared with a net loss of $110.6 million during the prior-year quarter.
That amounted to a net loss per diluted share of 88 cents, compared with a net loss of $1.02 per diluted share last year.
