Algoma Steel Sees Q4 Loss on Tariffs and Blast Furnace Wind-Down

What happened

Algoma Steel has issued Q4 2025 guidance forecasting shipments of 375,000 to 380,000 tons and negative EBITDA, citing tariffs and the ongoing wind-down of its blast furnace. This aligns with the DeepValue report's HOLD rating, which highlights near-term softness and elevated policy risks amid the company's transition to an electric arc furnace (EAF). The EAF conversion aims to lower costs and emissions long-term, but the current phase is exacerbating financial pressures, as noted in the report's warning about execution and input cost challenges. Key watch items from the report—such as EAF commissioning, securing competitive power and metallics, and policy signals—remain critical amid this guidance. Despite the negative outlook, the investment thesis hinges on successful EAF execution, though investors must endure near-term volatility until these risks are mitigated.

Implication

The Q4 guidance confirms near-term earnings pressure, reinforcing the need for caution as tariffs and transition costs weigh on results. This underscores the importance of Algoma's ability to manage input costs and navigate trade uncertainties, which are key risks highlighted in the DeepValue report. Successful EAF commissioning is essential for future profitability, as it could lower operating expenses and tap into green steel demand trends. Investors must track quarterly updates for milestones on EAF ramp-up, contract developments for electricity and scrap, and changes in US-Canada trade relations. Until these factors show tangible improvement, the stock's upside is capped, and downside risks persist, justifying a patient, HOLD-oriented approach.

Thesis delta

The Q4 loss guidance reinforces the near-term challenges identified in the DeepValue report, but does not shift the core thesis. The delta lies in the confirmation of operational headwinds during the blast furnace wind-down, which amplifies the urgency of monitoring EAF execution and policy developments. Investors should maintain a HOLD stance, as the medium-term upside still depends on de-risking the EAF conversion and securing favorable cost inputs.