Algoma Steel Issues Q2 2026 Guidance Amid Continued Losses

What happened

Algoma Steel provided guidance for its second quarter of 2026, covering the period ending June 30, 2026. The company continues to grapple with 50% U.S. tariffs, negative EBITDA, and the transition to electric arc furnace (EAF) production. The guidance likely reflects ongoing pressure from tariff-related costs and lower shipments as the company shifts from blast furnace to EAF operations. Despite securing C$500 million in government loans, Algoma remains in a distressed state with modest liquidity. The market has already priced in near-term losses, and this guidance likely confirms the challenging path to recovery.

Implication

The transition to EAF and plate-first strategy could yield significant value if tariffs ease and cost savings materialize, but this is a multi-quarter story. Position sizes should remain small, and the key catalyst will be evidence of positive EBITDA in coming quarters.

Thesis delta

The guidance for Q2 2026 does not materially alter the base case of breakeven EBITDA in 2026, but it reinforces the bear case if losses persist longer than expected. The probability of the bear scenario may increase slightly if guidance shows no improvement from prior quarters. Overall, the thesis remains intact but requires close monitoring of Q4 2025 results and subsequent quarterly trends.