Steel Mills

Algoma Steel Predicts Significantly Lower Results in Current Quarter

Written by Laura Miller

September 28, 2022

Canadian flat-rolled steelmaker Algoma Steel Inc. expects results for its fiscal 2023 second quarter to be down significantly compared to prior quarters because of operational challenges, declining shipments, and lower prices.

Algoma

In its latest earnings guidance, the Sault St. Marie, Ontario-based company said it expects fiscal ’23 Q2 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) to be in the range of Canadian $75 million to $80 million ($54.7 million USD to $58.4 million USD). This is a significant drop from the adjusted EBITDA of C$357.7 million achieved in the previous quarter and the C$334.4 million seen in fiscal ’22 Q4.

“Our projected fiscal second-quarter results largely reflect previously disclosed operational challenges, as well as the continued decline in prices for our finished products, both of which had a negative impact on overall profitability,” Algoma CEO Michael Garcia said.

Those various operational challenges resulted in a production shortfall during the quarter, Garcia said. Quarterly shipments are therefore expected to be 415,000 to 425,000 tons, down from 537,524 tons in fiscal Q1.

The most significant operational challenge the company is facing is the previously-disclosed delay of the second phase of its plate mill modernization project. Originally expected to be finished by November 2022, the project has now been pushed out until June 2023. The mill is currently operating above 80% capacity and “we believe most plate mill issues are behind us,” Garcia said.

“Temporary workforce availability events” negatively affected output on the company’s direct strip production complex during the current quarter as well.

In late August, a new, five-year labor deal was agreed upon between Algoma and the United Steelworkers (USW) union.

An August fire on Algoma’s coal conveyor resulted in added costs during the quarter. Internal coke production is expected to return to 100% capacity once repairs are finished in early October.

“Amid the challenges faced in the quarter, we continue to see steady demand for our products and are advancing the development and construction of our transformative electric arc furnace project, which remains on time and on budget for a mid-year 2024 start-up,” Garcia noted.

By Laura Miller, Laura@SteelMarketUpdate.com

 

Laura Miller

Laura Miller is a reporter and editor for Steel Market Update. She has held a variety of positions within the steel industry since 2007, including reporting and editing for Steel Business Briefing/Platts, the Association for Iron and Steel Technology, and Kallanish Commodities, as well as marketing for what was then known as ThyssenKrupp Steel USA (now AM/NS Calvert). After a five-year hiatus working across other industries, she returned to steel in 2021 and has covered the flat rolled, tubular, and trade areas of the industry. She is a member of the Association of Women in the Metal Industries and a past-president of the AWMI Pittsburgh Chapter. She holds a BA in Latin American Studies from Edinboro University of Pennsylvania. She can be reached at laura@steelmarketupdate.com or 724-759-7869.

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