Algoma Steel Reports Modest Positive EBITDA, Record Plate Sales in Q1 FY2026, EAF Unit Two Nearing Completion

What happened

Algoma Steel Group Inc. turned in adjusted EBITDA of $13.8 million for the fiscal first quarter ended June 30, 2026, representing the first positive quarterly EBITDA since the imposition of 50% U.S. tariffs and validating the company's pivot toward higher-margin plate products. The result was driven by a second consecutive quarter of record plate sales as management's plate-first strategy gains traction, offsetting continued tariff headwinds. Additionally, construction of the second electric-arc furnace is nearing completion, with first steel production expected in the third quarter of 2026, keeping the broader transition on track. While the EBITDA figure is modest and still leaves the company dependent on government loans for liquidity, it marks an important early milestone in the recovery thesis. Investors now face a clearer path to breakeven or better full-year results, though sustainability remains contingent on tariff developments and successful EAF ramp-up.

Implication

This quarter's results lower the probability of the bear case, as the company demonstrates it can generate positive EBITDA under current tariff levels. If plate sales continue to grow and EAF Unit Two starts on time, Algoma could achieve sustainable breakeven or better earnings by 2027, supporting a re-rating from distressed levels. However, the modest $13.8 million EBITDA leaves the company vulnerable: a downturn in plate demand, delays in EAF ramp, or prolonged 50% tariffs could quickly push earnings back into negative territory. The base case of ~$5 implied value remains contingent on delivering consecutive quarters of at least breakeven EBITDA and maintaining liquidity above C$300 million, which this quarter's print supports but does not guarantee.

Thesis delta

This quarter provides the first tangible evidence that Algoma's plate-first pivot can generate positive EBITDA under extreme tariffs, shifting the thesis from pure speculation on turnaround to early validation. The bear-case probability diminishes, but the recovery remains fragile given the low absolute level of EBITDA and ongoing tariff uncertainty. The investment case now rests on sustaining and growing this profitability as EAFs fully ramp.