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Algoma Steel Group Inc. (NASDAQ:ASTL), with a market capitalization of $614 million, reported its financial results for the second quarter of 2025, revealing a larger-than-expected loss in earnings per share (EPS). The company posted an EPS of -$1.02, significantly missing the forecasted -$0.57. Despite a revenue beat, the market reacted negatively, with the stock price declining by 7.44% in regular trading and an additional 10.26% in pre-market trading, reflecting investor concerns over the company’s financial health and future prospects. According to InvestingPro data, the stock has already lost 39% year-to-date, with particularly weak performance metrics raising red flags for investors.
Key Takeaways
- Algoma Steel reported a Q2 2025 EPS of -$1.02, missing forecasts by nearly 80%.
- Revenue for the quarter was $589.7 million, surpassing expectations by 5%.
- The company’s stock fell by 7.44% in regular trading, followed by a 10.26% drop in pre-market.
- U.S. tariffs and increased costs have significantly impacted financial performance.
- Algoma is advancing its transition to low-carbon steel production with new EAF technology.
Company Performance
Algoma Steel’s performance in Q2 2025 reflects significant challenges, with a net loss of CAD 110.6 million compared to net income of CAD 6.1 million in the previous year. The company’s adjusted EBITDA showed a loss of $32.4 million, with a negative margin of 5.5%. Steel shipments decreased by 6.2% year-over-year, and net sales dropped by 10.5% to $534 million. These results highlight the adverse effects of U.S. steel tariffs and increased production costs. InvestingPro analysis reveals concerning fundamentals, including a negative gross profit margin of -11.15% and rapidly depleting cash reserves. The platform’s comprehensive analysis includes 8 additional key insights available to subscribers.
Financial Highlights
- Revenue: $589.7 million, exceeding forecasts by 5%.
- EPS: -$1.02, significantly missing the expected -$0.57.
- Adjusted EBITDA: Loss of $32.4 million with a -5.5% margin.
- Net loss: CAD 110.6 million, compared to a net income of CAD 6.1 million a year ago.
- Steel shipments: 472,000 net tons, down 6.2% year-over-year.
Earnings vs. Forecast
Algoma Steel reported an EPS of -$1.02, missing the forecasted -$0.57 by a substantial margin of nearly 80%. This miss represents a significant deviation from expectations, emphasizing the financial hurdles the company faces. However, revenue came in at $589.7 million, surpassing the forecast of $561.61 million by 5%.
Market Reaction
Following the earnings announcement, Algoma Steel’s stock fell by 7.44% to $5.41 in regular trading and dropped further by 10.26% in pre-market trading to $5.25. This decline reflects investor concerns over the company’s larger-than-expected EPS loss and ongoing challenges in the steel market. The stock’s performance is also affected by its position within a 52-week range, with a high of $12.14 and a low of $4.17. Despite recent volatility (Beta of 1.65), InvestingPro’s Fair Value analysis suggests the stock is currently undervalued. Subscribers can access the detailed Pro Research Report, part of the platform’s coverage of over 1,400 US equities, for comprehensive valuation insights.
Outlook & Guidance
Looking ahead, Algoma Steel is focusing on maintaining current shipment levels in Q3 2025 and optimizing working capital to generate additional cash. While the company maintains a strong current ratio of 3.1, indicating solid short-term liquidity, revenue has declined by 12% over the last twelve months to $1.63 billion. The company is advancing its transition to low-cost, low-carbon steel production, with its Electric Arc Furnace (EAF) technology expected to lower carbon emissions by up to 70%. The completion of the second EAF unit is anticipated by the end of 2025.
Executive Commentary
Michael Garcia, CEO of Algoma Steel, emphasized the company’s strategic shift, stating, "We are executing with purpose, completing our transition to low-cost, low-carbon steel production." He also highlighted the challenges faced in the market, noting, "The Canadian market, historically, up until the past twelve months, is supplied 66% by foreign steel."
Risks and Challenges
- U.S. tariffs have significantly increased costs, impacting profitability.
- Steel market disruptions and foreign competition pose ongoing challenges.
- The transition to EAF technology involves substantial capital investment.
- Potential volatility in steel demand due to global economic conditions.
- Dependence on government support for tariff relief and financial assistance.
Q&A
During the earnings call, analysts focused on the impact of U.S. tariffs and the company’s strategy to mitigate these effects. Questions also addressed Algoma’s plans to capitalize on domestic market opportunities through infrastructure and defense projects, despite the challenging tariff environment.
Full transcript - Algoma Steel Group Inc (ASTL) Q2 2025:
Conference Operator: Greetings and welcome to the Algoma Steel Group Inc. Second Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this conference call is being recorded.
It is now my pleasure to introduce your host, Michael Moraca, VP, Corporate Development and Treasurer. Thank you. You may begin.
Michael Moraca, VP, Corporate Development and Treasurer, Algoma Steel Group Inc.: Good morning, everyone, and welcome to Algoma Steel Group Inc. Second quarter twenty twenty five earnings conference call. Leading today’s call are Michael Garcia, our Chief Executive Officer and Rajat Marwa, our Chief Financial Officer. As a reminder, this call is being recorded and will be made available for replay later today in the Investors section of Algoma Steel’s corporate website at www.algoma.com. I would like to remind you that comments made on today’s call may contain forward looking statements within the meaning of applicable securities law, which involve assumptions and inherent risks and uncertainties.
Actual results may differ materially from statements made today. In addition, our financial statements are prepared in accordance with IFRS, which differs from U. S. GAAP, and our discussion today includes references to certain non IFRS financial measures. Last evening, we posted an earnings presentation to accompany today’s prepared remarks.
The slides for today’s call can be found in the Investors section of our corporate website. With that in mind, I would ask everyone on today’s call to read the legal disclaimers on Slide two of the accompanying earnings presentation and to also refer to the risks and assumptions outlined in Algoma Steel’s second quarter twenty twenty five management’s discussion and analysis. Please note that our financial statements are prepared using the U. S. Dollar as our functional currency and the Canadian dollar as our presentation currency.
Please note all amounts referred to on today’s call are in Canadian dollars unless otherwise noted. Following our prepared remarks,
Michael Garcia, Chief Executive Officer, Algoma Steel Group Inc.: we will conduct a question and answer session. I would now turn the call over to our Chief Executive Officer, Michael Garcia. Mike? Thank you, Mike, and good morning, everyone. Thank you for joining us to discuss our second quarter twenty twenty five results.
At Algoma Steel, safety continues to be our top priority. I’m proud to share that our lost time injury performance showed marked improvement throughout 2024, and and we sustained this positive trend in the 2025. This is especially important as we ramped Unit 1 of our EAF complex towards First ARC during the quarter and maintained intensive operations leading to full project completions next year. Before diving into the details, I want to highlight three important themes. First, our quarterly results reflect the continued challenging conditions across global steel markets, particularly due to tariff uncertainty, which led to lower realized prices and higher production costs.
Second, we have achieved a major milestone with first steel production from our Unit 1 of our EAF project, with the second unit progressing as planned. And third, our liquidity position ended the quarter at over $400,000,000 and we are working with the Canadian government to further bolster our liquidity. The steel industry is experiencing unprecedented disruption as the tariff situation has significantly deteriorated since our last quarter, with The U. S. Market now effectively closed to Canadian steel producers due to prohibitive 50% tariffs.
These trade disruptions are reverberating globally, creating supply chain dislocations and forcing steel producers worldwide to seek alternative markets, while macroeconomic uncertainty continues to compound the headwinds facing our industry. The combination of trade barriers and broader economic volatility has fundamentally altered market dynamics, with customers across North America adjusting purchasing patterns and supply strategies in response to this unprecedented level of uncertainty and volatility. We recognize that while current conditions are challenging, markets will eventually normalize, and we remain focused on completing our transition to lower cost, lower carbon, green steelmaking. As Canada’s only major independent steel manufacturer, we are a strategic national asset, and we are positioning ourselves to emerge from this cycle as a more competitive and sustainable operator. We continue managing our existing operations to respond to rapidly changing conditions, strategically adjusting our product mix between plate and coil products based on capacity and contractual obligations, while leveraging our value added product advantages to maintain our market position during this unprecedented time of industry restructuring.
Our second quarter performance was in line with our internal expectations across both shipment volumes and adjusted EBITDA metrics. These results reflect the continuation of challenging market conditions that began mid-twenty twenty four that deteriorated further with the implementation of 25% steel import tariffs from Canada in March, which were then increased to 50% in June. Consequently, we experienced lower steel shipments and realized steel pricing as well as elevated cost pressures, resulting in year over year declines in both revenues and adjusted EBITDA. We continue the planned steady ramp of production at our fully modernized plate mill. For the quarter, plate shipments reached approximately 103,000 tons, up from 91,000 tons in 2025 and eighty two thousand tons in 2024, as we strategically focus on our position as Canada’s only discrete plate producer.
Turning to our electric arc furnace project. I’m thrilled that we’ve reached a truly pivotal milestone for Algoma and the Canadian steel industry. In early July, we successfully achieved first arc and first steel production from Unit 1 of our state of the art electric arc furnace complex, a moment that represents the realization of our vision that began when we broke ground in November 2021. This achievement is particularly meaningful as it positions us at the forefront of the largest industrial decarbonization project in Canada, demonstrating our ability to execute on strategic objectives even amid challenging market conditions. The commissioning process has been methodical and thorough.
With over ten days of successful arc testing and comprehensive validation of all nine Q1 transformer modules, While we continue to operate in a difficult industry environment, we’re energized by what this milestone means for our future: the ability to produce green steel with up to 70% lower carbon emissions while maintaining the performance standards our customers depend on. Despite the uncertainty that the trade war has unleashed, this achievement reinforces our confidence in our transformation strategy and our commitment to emerging as a more competitive, sustainable and strategically valuable steel producer. As of 06/30/2025, cumulative investment in the EAF project was $880,500,000 Now let me give an update on our government relations initiatives. We continue to engage directly with the highest levels of both the provincial and federal government and believe that Algoma is being treated as a high priority in ongoing trade discussions. The strategic importance of our operations to Canada’s industrial, environmental, and economic goals is clearly recognized at both the federal and provincial levels.
Algoma has sufficient resources on hand to manage its liquidity over the near term. However, the risk of prolonged U. S. Tariffs present a serious threat to our business model. As such, we are reviewing multiple scenarios, including an environment in which access to The U.
S. Market remains severely constrained for an extended period of time. To support operations under these conditions, we have submitted an application to the federal large enterprise tariff loan facility program for $500,000,000 This support would provide the financial flexibility needed to maintain continuity while we diversify our customer base and adapt to the evolving trade dynamics. We are also pursuing opportunities aligned with domestic demand in defense, infrastructure and clean manufacturing, reinforcing national priorities and our role in Canada’s low carbon industrial future. We remain hopeful that timely, targeted policy support will enable Canadian steelmakers to remain competitive and resilient.
With the right framework in place, Algoma is well positioned to serve as a long term pillar of Canada’s nation building agenda. In conclusion, we have delivered solid execution during one of the most challenging periods in recent steel industry history. The successful production of first steel from our EAF Unit 1 marks a transformative milestone, validating our long term strategy and reaffirming Algoma’s role at the forefront of Canadian industrial decarbonization. We are advancing our evolution into one of North America’s premier low cost, low carbon steel producers. This includes completing the ramp up of our electric arc furnace complex, diversifying our customer base in response to shifting trade dynamics and pursuing opportunities with high priority domestic sectors such as defense, infrastructure and clean manufacturing.
At the same time, we are actively engaging with policymakers to ensure that the strategic importance of Canadian steelmaking is recognized and supported. We believe Algoma is uniquely positioned to contribute to Canada’s economic strength, environmental leadership, and national resilience for decades to come. The production of our first EAF steel is not just an operational achievement. It is a defining moment in our one hundred and twenty year journey. It reflects the execution of a bold transformation vision and our emergence as a more competitive, more sustainable and more strategically valuable enterprise.
I want to thank our entire team for their commitment and contribution to this historic inflection point. Together, we are laying the foundation for enduring stakeholder value as global trade relationships continue to evolve. Now I will pass the call over to Rajat to go over our financial results for the quarter. Rajat?
Rajat Marwa, Chief Financial Officer, Algoma Steel Group Inc.: Thanks, Mike. Good morning, and thank you all for joining the call. As a reminder, all numbers are expressed in Canadian dollars unless otherwise noted. Our second quarter results included adjusted EBITDA that was a loss of $32,400,000 which reflects an adjusted EBITDA margin of negative 5.5% and cash used in operating activities of 37,900,000.0 We finished the quarter with an 82,000,000 in cash and availability of $329,000,000 under our revolving credit facility. Now let me dive into the key drivers of our results.
We shipped 472,000 net ton in the quarter, a decline of 6.2% versus the prior year quarter. Lower steel shipments were the results of weakening market conditions, particularly due to the Section two thirty two tariff, which impacted the company’s export sales and resulted in oversupply of the Canadian market at reduced transactional pricing. Net sales realization averaged $11.32 dollars per tonne compared to $11.87 dollars per tonne in the prior year period. The decrease versus the prior year level reflects weakening market conditions due to the current trade environment. This resulted in steel revenue of $534,000,000 in the quarter, down 10.5% versus the prior year period.
On the cost side, Algoma’s cost per tonne of steel products sold averaged $11.44 in the quarter, up 7% versus the prior year period and relatively flat versus the last quarter. Starting March 12, the company was subject to 25% tariff on outbound steel shipments to The United States, which increased to 50% in June. For the second quarter, direct tariff costs totaled $64,000,000 which was included in cost of sales. Furthermore, the company’s net sales realization for the Canadian sales was up to 40% lower than its US results across various product categories. This is a significantly greater discrepancy than historical averages and additionally resulted in approximately 30,000,000 lower revenue on Canadian sales during the three months ended 06/30/2025.
There was no material tariff related cost in the quarter due to inbound purchases of products or materials from The US. Net loss in the second quarter was CAD110.6 million compared to net income of CAD6.1 million in the prior year quarter. The decrease was driven primarily by lower steel shipment volumes and lower realized pricing in light of the ongoing trade environment. Cash used in operations totaled CAD38 million for the quarter compared to cash generated by operations of $12,000,000 in the prior year period. Inventories ended the quarter at $736,000,000 compared to $800,000,000 during the prior year quarter, with the reduction primarily coming from the release of raw materials.
During the quarter, inventories grew by approximately $42,000,000 attributed to our usual inventory build. We continue to focus on measures to optimize working capital. Liquidity at quarter end was $411,000,000 and as Mike mentioned, we are in active discussions with the Federal Government on support measures in response to the trade environment. I’m pleased to announce that Algoma has also received final approval totaling $21,300,000 related to our EAF investment, qualifying as the inaugural project under Ontario’s emissions performance program.
Unidentified Speaker: I’d now like to turn the call back over to our CEO, Michael Garcia, for closing comments. Mike?
Michael Garcia, Chief Executive Officer, Algoma Steel Group Inc.: Thank you, Rajat. In conclusion, we have executed during one of the most challenging periods in recent steel industry history, Achieving first arc and first steel production from EAF Unit one is a defining milestone, not just for Algoma, but for Canadian industrial transformation. It affirms our ability to advance critical, future focused initiatives even as trade barriers and market volatility reshape the landscape around us. Despite escalating challenges, 2025 remains a pivotal and energizing chapter in our journey. We are executing with purpose, completing our transition to low cost, low carbon steel production, expanding our relevance in strategic domestic sectors and reinforcing our role as Canada’s only independent primary steelmaker.
This transformation is about more than technology. It’s about national leadership, long term competitiveness, and value creation for our stakeholders. While global trade uncertainty may persist, we are building a fundamentally different Algoma, one that is leaner, greener, and better aligned with the needs of the future. I want to sincerely thank every member of the Algoma team for their extraordinary contribution to this effort. Your dedication is laying the groundwork for a stronger company, a stronger industry, and a stronger Canada.
Thank you very much for your continued interest in Algoma Steel. At this point, we would be happy to take your questions. Operator, please give the instructions for the Q and A session.
Conference Operator: Thank you. We will now be conducting a question and answer A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing The first question is from Katja Gencic from BMO Capital Markets. Please go ahead.
Unidentified Speaker: Hi. Thank you for taking my questions. Maybe starting, on the current market. We know the sheet market is weak in Canada. Can you talk a bit about the current plate market?
Michael Garcia, Chief Executive Officer, Algoma Steel Group Inc.: Sure, Katya. This is Mike. I think the plate market in Canada is not as oversupplied as the sheet market. It’s pretty well balanced. In fact, over the past few months with our increased production and well received plate from a quality standpoint and capability standpoint that we’re now producing with our modernized plate mill, We’ve been able to build our market share in the Canadian plate market to over 40%.
So I would characterize the plate market as stable. I can’t say that it’s growing yet, but we do expect it to grow because of the many, what I would call Build Canada Strong projects that are being advanced by the Prime Minister’s government. So it’s an important market for us. It’s better than the sheet market in Canada, and I would characterize it as stable right now.
Unidentified Speaker: And when you look at the pricing relative to The US, how do they stack up?
Michael Garcia, Chief Executive Officer, Algoma Steel Group Inc.: I think the biggest difference in pricing is that the Canadian plate market is more of a spot market. I expect that to change as these infrastructure, energy, and defense projects start to kind of reach that shovel ready or shovel in the ground status and move towards more of a contract market. But right now, it’s a spot market, so the pricing we’re seeing in the Canadian plate market is about 40% lower than in The US plate market.
Unidentified Speaker: And maybe shifting gears to the EIF, how much of CapEx is still left to be spent?
Michael Garcia, Chief Executive Officer, Algoma Steel Group Inc.: We’re not changing our guidance on that. We’ve got our prior guidance was within 5% of the previously disclosed top end of the budget. I think what we’ve done is we’ve de risked the completion of the project by demonstrating the operation of the first unit. When I look at the overall value that this project and this EAF complex and the transformation to green steel making is driving for the company, I don’t see any change in how that value that we’re creating for the company should be evaluated or should be measured based on the budget that it’s taking us to complete it or the schedule that we plan to complete it on and start it up. So no change to our current guidance.
Unidentified Speaker: If the environment stays as it currently is, which is very weak, how should we think about just broadly about CapEx in second half of the year and maybe even into next year?
Rajat Marwa, Chief Financial Officer, Algoma Steel Group Inc.: Hi, Kartra. So the CapEx, if the environment stays the way it is CapEx, probably will be lower. Our maintenance CapEx, we do flex between 80,000,000 to $120,000,000 a year and you tend to go towards the lower end as you go through it. On the EF side, whatever is the balance CapEx remaining will be spent. Most part of it by end of the year, maybe some going into the following year as we do have liabilities that get paid over thirty to sixty days.
Unidentified Speaker: Okay. Thank you.
Conference Operator: The next question is from Ian Gillies from Stifel. Please go ahead.
Ian Gillies, Analyst, Stifel: Good morning, everyone.
Michael Garcia, Chief Executive Officer, Algoma Steel Group Inc.: Hey, Ian. Good morning, Ian.
Ian Gillies, Analyst, Stifel: Outside of existing liquidity and the potential for participation in the LETL program, can you talk about any additional levers that you’re considering to help create and or improve the liquidity profile for the business?
Rajat Marwa, Chief Financial Officer, Algoma Steel Group Inc.: So the short answer is yes. Barring aside all the spending that we do, whether it’s on CapEx or others and cost reduction that we are working on in order to optimize further, is work happening on the working capital as well, on the working capital optimization. You do see some noise in this quarter on the working capital side as it’s gone up because we had some annual shutdowns at least for some build off WIP work in progress and there’s normally a normal build on raw material, but we do expect year over year working capital to be a source of cash rather than a use of cash by end of the year, but we are working on the working capital actively to optimize further and generate more cash for the business as we go through this turbulent or uncertain time.
Ian Gillies, Analyst, Stifel: As we think about shipments in the third and fourth quarter and under the presumption that tariff rates stay where they are, do you expect you’re going to have
David Ocampo, Analyst, Cormark Securities: to
Ian Gillies, Analyst, Stifel: curtail production even more than what we saw in Q2 for the rest of the year?
Rajat Marwa, Chief Financial Officer, Algoma Steel Group Inc.: Short answer is no, I think it should be around that number. There is a lot of uncertainty around the environment currently on what’s going to happen or not happen on the trade discussion that’s happening. And a large part of it gets driven through those, to the outcome of those. So very difficult to model everything, we’re modeling various scenarios to see how it plays out, but things continue, I think that we should be around that number as we go along. As we mentioned, plate is ramping up and doing good and coil definitely is on the weaker side and that’s why you see our shipments being where they are.
Michael Garcia, Chief Executive Officer, Algoma Steel Group Inc.: Yes, think what we’re trying to do, Ian, is there’s so many different moving parts. There’s the tariff, there’s the supply and demand landscape in the Canadian market, there’s the moves by the Canadian government to move the Canadian market towards a more domestically supplied market. The Canadian market, historically, up until the past twelve months, is supplied 66 by foreign steel. There’s no other advanced economy in the top 20 economies in the world that have that type of dynamic in their domestic steel market. Just about every other country, from large producing steel countries to much smaller producing countries, supply the majority of their domestic steel needs by domestic production.
So we’ve advocated strongly as an industry to the government to put measures in place to change this. They’ve begun taking those measures. I think there’s still a lot to go. So the way the Canadian market moves and transitions going forward will be a big part of the scenarios that we prepare ourselves for, as well as just the fundamental commodity index pricing of steel. What we try to do with all of our scenarios is prepare the company to move through any of these scenarios that might transpire as we move into the future.
Ian Gillies, Analyst, Stifel: Understood. On the import side, there’s obviously the absolute volumes, which have been an issue. But my understanding is that bidding practices for new work has also been problematic. And have you witnessed anything on the leading edge when you’re going out and bidding new plate sales that would suggest that the new walls or the new restrictions put in by the Canadian government are helping on the pricing side for plate in Canada?
Michael Garcia, Chief Executive Officer, Algoma Steel Group Inc.: Not yet. We continue to give constant feedback to the government on what we’re seeing in the market and whether the measures that they have put in place are having the intended effect, because I think that’s exactly the effect that the government is looking for. So to the extent that we see that effect or don’t yet see it, we give that feedback, and I would expect based on that feedback that the government will continue to take actions to reach that effect, but we haven’t seen it yet.
Ian Gillies, Analyst, Stifel: Understood. Thank you very much. I’ll turn the call back over.
Conference Operator: The next question is from James McGarrigle from RBC Capital Markets. Please go ahead.
James McGarrigle, Analyst, RBC Capital Markets: Hey, good morning and thanks for having me on. I just had a question on the realized pricing into Q3 and more specifically on your sales into the Canadian market. You highlighted in the MD and A that 40% impact to your Canadian realized pricing. But how should we be thinking about that into Q3, given that 50% tariff was only in place towards the end of Q2?
Rajat Marwa, Chief Financial Officer, Algoma Steel Group Inc.: I think it will be around that number, James. So as Mike was alluding to where there is tariff on the sales at 50% into The U. S, the Canadian market being oversupplied by sheet is balancing around that number. So we don’t expect it to go further down, but it should be around that 40% mark.
James McGarrigle, Analyst, RBC Capital Markets: I appreciate the color there. And just how should we be thinking about the cost of goods sold into Q3 as well? I know there’s some moving pieces with input costs being volatile and, of course, the EAF ramping up. But can you just give us some color on how you expect things to move directly in Q3 versus Q2?
Rajat Marwa, Chief Financial Officer, Algoma Steel Group Inc.: Yes, it should be quite similar from Q2. We’re not expecting significant changes coming into Q3 based on Q2. Q4 definitely will be slightly higher as we approach winter and you know, the gas pricing and other things start shooting up. So, barring that, we don’t see much changes in the cost. It should stay around a similar number.
James McGarrigle, Analyst, RBC Capital Markets: Okay. And just one final one for me. I just had a question on the federal loan support. Can you just give a quick update on your talks there? And could you foresee potentially any conditions surrounding that loan, anything like warrants or anything like that?
Michael Garcia, Chief Executive Officer, Algoma Steel Group Inc.: Sure, James. So those talks are ongoing. We are currently getting great engagement with the government. I would characterize the talks as very active, and I don’t want to comment on any details at this time. I think given where the talks have progressed to, it wouldn’t be appropriate to talk about details.
James McGarrigle, Analyst, RBC Capital Markets: Okay. I appreciate the color, guys, and I’ll turn the line over. Thank you.
Rajat Marwa, Chief Financial Officer, Algoma Steel Group Inc.: Thanks, James.
Conference Operator: The next question is from David Ocampo from Cormark Securities. Please go ahead.
David Ocampo, Analyst, Cormark Securities: Thanks for taking my questions. My first one is just on shipments to The U. S. On the order book. It’s still north of 50%.
I’m curious how much of that can be reasonably shifted to alternative markets, that’s Canada or abroad? Or is there very little wiggle room there since I think most of that is contracted volumes?
Michael Garcia, Chief Executive Officer, Algoma Steel Group Inc.: Yes, it’s all contracted volume right now into The U. S. We signed these supply agreements with our contracts with our customers, our valued customers that we’ve had relationships with for over many years. We understand that those contracts have to be fulfilled at least currently in the situation that we’re in. So that’s really all that we’re moving now.
I think the ability to move that volume elsewhere will depend obviously on the opportunities of the Canadian market. And I spoke to that earlier that we are not seeing tremendous opportunities in the current right now currently and in the very short term. We expect that those opportunities will continue to grow moving forward as the Build Canada agenda begins to get fully realized in Canada. We just signed a memorandum of understanding with Seaspan, a large ship builder in Vancouver to reestablish the steel supply chain for shipbuilding in Canada, making sure that we are ready as a supplier of steel to support Canadian shipbuilding. So that’s an example of the type of work that’s being done now.
We’re doing the same type of work on the defense side. We’re doing the same type of work, I would say, on the infrastructure and specifically the energy infrastructure side. So the groundwork is being laid. So that will be a driver of the opportunity for this volume into the future. The opportunity for export is difficult.
It’s hard to, given where we sit geographically, it’s hard for us to put our steel on a ship. We can put our steel on an ocean going ship here in Sault Ste. Marie, but getting it to export customer in Europe or elsewhere, there just aren’t those opportunities right now. I don’t think that there’ll be a lot of those opportunities going forward, to be frank.
David Ocampo, Analyst, Cormark Securities: Okay. And this may be a tougher question and a little bit more loaded, but how long do you guys continue to service those volumes if the 50% tariffs continue here? I mean, eventually, at a certain point, you’re starting to burn too much capital even though these are long standing relationship that you’ve built over the years?
Michael Garcia, Chief Executive Officer, Algoma Steel Group Inc.: Yeah, I think it’s something that we need to be thoughtful about, and frankly, our customers need to be thoughtful about as well. We haven’t yet entered into the, what I would call the contract season. Start discussing annual contracts in the fourth quarter, but I think that will be the main question that both ourselves and our customers ask ourselves as we get into the fourth quarter, look at the landscape and our understanding of the landscape.
David Ocampo, Analyst, Cormark Securities: Okay. And then just going back to the EAF, I know there’s been a couple of questions on that. I was hoping you could walk us through some of the milestones or next steps in ramping up to full production that we should be made aware of. And also, at what point do you start shutting down some of the blast furnace assets against those milestones?
Michael Garcia, Chief Executive Officer, Algoma Steel Group Inc.: Sure. So, we’re into production on Unit Number 1. We have another campaign scheduled for next week. So there’s a lot of learning and shaking out, I guess, what I would characterize in unit number On the second unit, we are in active construction on that, and we should be finishing construction and entering commissioning at the end of this year. We have a ramp up plan, and I think we’ve talked in past calls about our expectations of EAF volume in 2025.
We haven’t changed that. We still expect roughly 200,000 tons of EAF steel production in this calendar year. Obviously, there could be scenarios in terms of market dynamics that could affect that. We’re not going to make steel that we don’t have orders for. Barring that, that’s our expectation.
There’s a lot of learning that we’ve applied to the construction of the second unit. We realize that in the final construction phases of the first unit, it gets pretty tight and so we are pushing for more modularized construction methods where we take more modules of the second unit, get those constructed off-site so that there’s less construction required on-site. The building is now fully enclosed, so we’re not subject to weather impacts or weather delays. We did have weather delays in the building of the first unit. We’ve identified and we know where those high congestion areas are, so we are going to build the construction plan so we can get early access to those areas.
That will make a difference. We’re building the schedule so that there’s no overtime hours in there and that will help with the labor component. The plan is robust. It will be finishing the second unit by the end of this year and commissioning it, starting commissioning it by the end of this year. We’re proceeding with our ramp up plan on the first unit and moving forward from here.
Again, are certain market scenarios you could imagine that might impact the number of tons, but that’s our base plan for right now.
David Ocampo, Analyst, Cormark Securities: Okay, perfect. And if I could sneak one last one in for Rajat. I think on the last quarterly call, you mentioned that a full 25% tariff on the on an entire quarter would be around that $60,000,000 hit. It looks to to line up this quarter. But with a 50% tariff, is it just simple math and multiply it by two?
Rajat Marwa, Chief Financial Officer, Algoma Steel Group Inc.: Yeah. It’s you know, it it depends on the pricing as well. So it’s not it won’t be as simple. It probably will be in between. So the ’64 had had a month of 50% tariffs in it.
So if you can adjust that, you’ll come to that number. So it won’t be as big as just multiplying by two. It will not go into three digit number.
David Ocampo, Analyst, Cormark Securities: Okay. That’s all. Thank you so much, everyone.
Michael Garcia, Chief Executive Officer, Algoma Steel Group Inc.: Thanks, David.
Conference Operator: There are no further questions at this time. I would like to turn the floor back over to Michael Maraca for closing comments.
Michael Moraca, VP, Corporate Development and Treasurer, Algoma Steel Group Inc.: Thank you again for your participation in our second quarter twenty twenty five earnings conference call and your continued interest in Algoma Steel. We look forward to updating you on our results and progress when we report our third quarter results later this year. Have a great day.
Conference Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
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