Algoma Steel Group Inc. Reports Financial Results for the Three Months Ended September 30, 2026

Algoma Steel posts steep revenue drop but narrows losses as EAF transition nears completion.

What the company is saying

Algoma Steel frames this quarter as a pivotal moment, highlighting the operational shift from blast furnace to Electric Arc Furnace (EAF) steelmaking. The company emphasizes the successful ramp-up of its first EAF unit and the commissioning of EAF Unit Two, positioning itself as a leader in Canadian plate steel. CEO Rajat Marwah and CFO Michael Moraca stress improved net sales realization per ton, a greater share of plate in the sales mix, and lower fixed costs as key positives, despite lower overall shipments and revenue. Management attributes the year-over-year improvement in losses to the absence of a prior $503.4 million non-cash impairment, higher steel prices, and reduced administrative expenses, while acknowledging the negative impacts of U.S. Section 232 tariffs and the Lake Superior Power (LSP) outage. The company also underscores its liquidity position ($428 million), recent government loan advances, and the resolution of a legacy coke supply dispute. Forward-looking statements focus on ramping up EAF Unit Two, restoring and expanding power generation, and advancing a joint venture in domestic ballistic steel.

What the data suggests

The numbers show a sharp deterioration in revenue, falling to $249.4 million from $523.9 million year-over-year, and a significant decline in shipments to 144,527 tons from 419,173 tons. Despite these declines, the net loss narrowed to $129.6 million from $485.1 million, primarily due to the absence of a large non-cash impairment charge. Adjusted EBITDA loss improved to $13.9 million from $87.1 million, with the margin rising to (5.6%) from (16.6%), aided by a $53.1 million capacity utilization adjustment. Average net sales realization per ton rose 33.7% to $1,510, but cost per ton also increased to $1,492. Direct tariff costs dropped to $18.1 million from $89.7 million as U.S.-bound shipments were cut. Cash generated by operating activities was $78.6 million, boosted by a $163.9 million income tax receivable collection. Liquidity remains strong at $428 million, but capital expenditures rose to $67.7 million, reflecting heavy investment in EAF Unit Two and power infrastructure. The company remains unprofitable and highly exposed to tariffs and market access risk, but operational execution on EAF ramp-up and power restoration is on track.

Analysis

The announcement is measured in tone and provides detailed, transparent financial and operational data, including realised figures for revenue, net loss, EBITDA, shipments, and liquidity. The company discloses the completion of its EAF transition and the commissioning of key equipment, both realised milestones. Forward-looking statements (e.g., projected capacity, emissions reduction, and joint venture ambitions) are present but are proportionate and clearly separated from realised results. The capital intensity flag is set due to significant capex ($67.7 million in the quarter) and ongoing financing for the replacement turbine, with benefits from these investments (e.g., full EAF ramp-up, emissions reduction) expected in the near term. There is no evidence of narrative inflation or exaggerated claims; the language is factual and avoids promotional overstatement. The gap between narrative and evidence is minimal, with most claims substantiated by disclosed data.

Risk flags

• ●Revenue and shipment volumes have dropped precipitously due to the EAF transition, U.S. Section 232 tariffs, and the LSP outage, raising questions about the company's ability to restore volumes and profitability in the near term.
• ●The company remains exposed to ongoing U.S. tariff risk, with direct tariff costs of $18.1 million this quarter and U.S. shipments now just 24% of the total, down from 50%, limiting access to a key export market.
• ●Capital intensity is high, with $67.7 million in quarterly capex and ongoing financing needs for power infrastructure; failure to realize operational or cost benefits from these investments would further pressure liquidity and margins.
• ●The ramp-up of EAF Unit Two and the installation of a leased turbine are not yet complete, and any delays or technical issues could disrupt production or increase costs.
• ●Profitability remains elusive, with an adjusted EBITDA loss of $13.9 million and negative margins, despite improved per-ton pricing; the company is not yet demonstrating sustainable earnings.

Bottom line

Algoma Steel is executing a major operational transformation, but the latest quarter shows the financial pain of transition: revenue and shipments have halved, and the company remains unprofitable despite narrowing losses. Management is delivering on key milestones, including the ramp-up of EAF Unit Two and restoration of power generation, with most benefits expected in the coming quarter. Liquidity is solid at $428 million, but high capital expenditures and continued exposure to U.S. tariffs and weak export volumes are major headwinds. The narrative of a more sustainable, higher-margin business is credible only if the company can ramp up production, restore volumes, and achieve profitability in the next few quarters. Investors should watch for realised output and earnings from both EAF units, the impact of power infrastructure upgrades, and any changes in tariff policy. The most important takeaway is that Algoma remains in a high-risk, high-capex transition phase, with near-term execution and market access critical to future value.

Announcement summary

(NASDAQ:ASTL, TSX:ASTL) Algoma Steel Group Inc. reported results for the three-month period ended September 30, 2026, with all amounts in Canadian dollars. The company completed its transition from legacy blast furnace operations, which were halted on January 18, 2026, to its Electric Arc Furnace (EAF) platform, with all liquid steel production in Q3 2026 sourced from the first EAF unit. Consolidated revenue for the quarter was $249.4 million, down from $523.9 million in the prior-year quarter. Loss from operations was $94.5 million, compared to a loss of $651.5 million in Q3 2025, which included a $503.4 million non-cash impairment charge. Net loss was $129.6 million, compared to $485.1 million in the prior-year quarter. Adjusted EBITDA loss was $13.9 million with an Adjusted EBITDA margin of (5.6%), excluding $53.1 million of capacity utilization costs, versus an Adjusted EBITDA loss of $87.1 million and margin of (16.6%) in Q3 2025. Direct tariff costs were $18.1 million, down from $89.7 million in the prior-year quarter. Cash generated by operating activities was $78.6 million, including the collection of $163.9 million of income taxes receivable, compared to cash used in operating activities of $117.3 million in Q3 2025. Shipments totaled 144,527 tons, down from 419,173 tons in the prior-year quarter, reflecting the EAF transition, U.S. Section 232 tariffs, and the Lake Superior Power (LSP) outage. Average net sales realization per ton was $1,510, up from $1,129, a 33.7% increase. Cost per ton of steel products sold was $1,492, compared to $1,282 in Q3 2025. Steel revenue, net of freight, was $218.2 million, compared to $473.3 million in the prior-year quarter. Plate shipment volume increased both in aggregate and as a percentage of sales. The company ended the quarter with approximately $428 million in total available liquidity, including $152.4 million in cash, $232.5 million in unused Revolving Credit Facility, and $43.5 million available under the LETL Facilities. Capital expenditures were $67.7 million, up from $52.4 million in Q3 2025, reflecting final construction spending on EAF Unit Two, which was completed in October. No dividends were declared during the quarter. On August 17, 2026, an unplanned outage at the LSP generating facility required a temporary suspension of EAF production, but interim arrangements allowed production to resume on August 29, 2026. A newly acquired replacement turbine was commissioned on September 30, 2026, restoring full generating capability at LSP. The company is pursuing four-year term financing for the replacement turbine. The company exercised its option under its Contract Service Agreement with GE to bring a leased turbine into service, with installation expected to be completed in Q4 2026 and not expected to interrupt steelmaking operations. The EAF Unit Two produced its first heat of liquid steel on October 9, 2026, and ramp-up activities are progressing as expected. Following the EAF transformation, Algoma’s facility is expected to have an annual raw steel production capacity of approximately 3.7 million tons and is projected to reduce annual carbon emissions by approximately 70% from pre-EAF levels. The 50% U.S. Section 232 tariff on steel imports from Canada remained in effect, with shipments to the United States representing 24% of total steel shipments in the quarter, compared to 50% in the prior-year quarter. During the quarter, the company received $124.5 million in governmental loan advances under the LETL Facilities. In October 2026, Algoma entered into a negotiated settlement agreement with Haverhill Coke Company LLC and related parties, resolving a commercial dispute relating to historical coke supply arrangements. The company continues to advance Roshel Algoma Defence, its joint venture with Roshel Inc. formed in April 2026, to support the development of domestic ballistic steel and related manufacturing capabilities in Canada. Rajat Marwah is the Chief Executive Officer and Michael Moraca is the Chief Financial Officer.

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