‘Challenging conditions’: Algoma Steel reports first-quarter loss amidst uncertainty caused by Trump’s tariffs

Algoma Steel Group Inc. cold rolled coils. Photo by Courtesy/Algoma Steel Group Inc.

Article content

United States President Donald Trump’s tariffs are creating “challenging conditions” for global steel markets, says Algoma Steel Group Inc.’s chief executive Michael Garcia, and that was reflected in the company’s first-quarter results swinging to a loss.

Article content

Article content

The Sault Ste. Marie, Ont.-based steelmaker had a $24.5-million net loss for the three months ending March 31, compared to a profit of $28 million during the same period last year.

Article content

Article content

Algoma attributed the loss to lower pricing due to weakening market conditions and an increased cost of sales, primarily due to higher tariff costs as well as natural gas and electricity pricing.

Article content

“In many cases, it is not feasible to pass on the tariff cost to customers,” the company said in a release on Tuesday.

Article content

The cost of tariffs was $10.5 million in the first quarter, it said. But this only covers the period between March 12 — when Trump imposed a 25 per cent tariff on steel imported into the U.S. — to the end of March, so the cost is likely to “increase materially” in the next quarter, BMO analyst Katja Jancic said in a note.

Article content

Article content

The tariffs and Canadian trade policy led to “lower realized pricing and higher production costs,” Garcia said on a conference call on Wednesday. There is also uncertainty in both the U.S. and Canadian markets as customers “adjust purchasing patterns in anticipation of supply disruptions,” he said.

Article content

Article content

He also said the trade chaos impacted the U.S. dollar exchange rate, which has influenced the company’s raw material cost.

Article content

Article content

The company also announced a slight delay in its electric arc furnace project due to unusually harsh winter conditions. It now expects to produce the first steel from the project sometime during the second quarter as opposed to in April. The project is expected to reduce the company’s carbon footprint.

Article content

Nevertheless, Garcia said he was optimistic that the new Canadian government would work constructively with steel industries to “advance timely solutions” that strengthen the company and the economy.

Article content

“With trade relationships evolving, we believe it is critical that the government immediately engage with the United States to address the Section 232 tariffs currently in place,” he said, referring to the tariffs placed on steel products. “Resolving these issues is essential to ensuring a level playing field for Canadian steel producers.”

Article content

Algoma’s first-quarter revenue decreased to $517.1 million compared to $620.6 million a year. The operating loss was $139.9 million compared to income of $3.1 million in the same quarter last year.

Article content

Article content

Bookmark our website and support our journalism: Don’t miss the business news you need to know — add financialpost.com to your bookmarks and sign up for our newsletters here.

Article content