U.S. Steel sues Algoma over iron pellet shipments

“Now Algoma has buyer’s remorse and wants out of the deal,” U.S. Steel said in court documents filed Monday in Pittsburgh.

Sault St. Marie, Ontario-based Algoma allegedly refused the latest shipment of pellets and told U.S. Steel it will not accept any more or “otherwise honor the parties’ contract,” according to the complaint.

The contract runs through January 2027. U.S. Steel said Algoma owes the company more than “$22 million for past (accepted) pellet shipments, and U. S. Steel’s lost profits due to Algoma’s repudiation will be in the tens of millions of dollars, and could approach one hundred million dollars based on market conditions.”

“A deal is a deal,” the Pittsburgh-based steelmaker stated.

Tariff turmoil

The complaint states that in September, Algoma refused a shipment of iron ore pellets from USS. Algoma wrote a letter blaming the Trump administration’s tariffs for creating a situation where Algoma’s blast furnace steel, made using iron ore pellets, was no longer competitive in the American market.

Algoma intends to file a lawsuit in a Canadian court to seek a declaration that the contract with USS is “no longer binding and enforceable and that the parties’ obligations under the [contract] are at an end,” according to court documents. USS denies that the contract allows this.

‘Foreclosing access’

Last month, Algoma Steel announced it is reconsidering its sales to the United States after Section 232 tariffs on imported steel doubled to 50%, “effectively foreclosing access to the US market.”

Algoma, which is transitioning from integrated steelmaking to electric-arc furnace (EAF) production, makes hot-rolled coil, cold-rolled coil, and plate. The company expects to have raw steel production capacity of 3.7 million tons per year once that shift is complete. The EAF process means far less iron ore would be needed to make steel, as it uses scrap along with direct reduced iron and pig iron as feedstocks instead.

In fact, the company is speeding up the transition to EAFs after an injection of CA$500 million in fresh liquidity from the Canadian government and the Province of Ontario. Those loans are part of a broader initiative by Canada to support steelmakers who are reeling from the impact of US tariffs.

Algoma has also increased its credit facility from US$300 million to US$375 million.

Meanwhile, U.S. Steel has been counting on funding for facility upgrades from its new parent company, Japan’s Nippon Steel. Last month, Nippon said it agreed to invest $11 billion to modernize the iconic 124-year-old American company. That includes a $200 million investment for Gary Works in Indiana and $100 million for its Edgar Thomson Plant near Pittsburgh.

However, USS recently had to reverse its plans to end slab processing in Granite City near St. Louis after President Trump played the “golden share,” which was a condition of the acquisition. The president maintained the terms of the USS/Nippon agreement with the government, which states that the facility must not be idled, closed, or sold before June 2027.

Algoma did not immediately respond to a request for comment.