Algoma's EAF transformation nears the finish line as Hanwha sub deal slips away
Record plate shipments and a shrinking capacity utilization adjustment are setting up a Q4 break-even, but the suspension of the Hanwha Ocean MOU raises questions about the beam mill's strategic path.
ASTL · Earnings Call · 2026-07-30
Transformation at a critical juncture
Algoma Steel reported its second quarter of 2026 with a clear message: the transition to an EAF platform is nearly complete. For the first time, all liquid steel production came from the new electric arc furnace, and Unit 2 is days away from first heat. Rajat Marwah described the quarter as "our first full quarter with all liquid steel production sourced entirely from our EAF platform" (“This quarter was our first full quarter with all liquid steel production sourced entirely from our EAF platform” — Rajat Marwah, Chief Executive Officer · 2026-07-30). The company shipped 181,000 tons, slightly above guidance, with record plate shipments of 125,000 tons. Average net sales realization rose 20% to $1,361 per ton, reflecting the deliberate pivot toward plate. The financials, though still loss-making, show a clear trajectory. Capacity utilization is the primary bridge: the $54.7 million adjustment in the quarter is down from $90.2 million in Q1 and is on track to be fully eliminated by Q4. CFO Mike Moraca reiterated the path: "We still are on the pathway to breakeven EBITDA, that's our expectation by the fourth quarter" (“We still are on the pathway to breakeven EBITDA, that's our expectation by the fourth quarter”). The sequential improvement, excluding the insurance benefit and the utilization adjustment, was about $33 million, a sign that the underlying cost structure is improving. As Moraca noted, the driver is "really shedding those costs that are associated with the legacy assets" (“The driver of the lower adjustments is really shedding those costs that are associated with the legacy assets”). The legacy blast furnace operations are permanently halted, and the company is working through the final fixed-cost exits.A strategic pivot with a new hole
The biggest company-specific change this quarter is the suspension of the binding MOU with Hanwha Ocean. The Canadian government selected TKMS as the preferred bidder for the Canadian Petrol Submarine Program, which put the Hanwha deal on hold. Rajat Marwah explained that the strategic rationale for a structural steel beam mill remains unchanged: "We continue to engage constructively with governments as we advance the potential development of the project" (“We continue to engage constructively with governments as we advance to potential development of the project” — Rajat Marwah, Chief Executive Officer · 2026-07-30). But the loss of a key partner could delay or reshape the project. The company is also doubling down on defense and green steel opportunities. The ballistic steel JV with Roshel is now operational as a Canadian center of excellence. Rajat also mentioned increasing demand for green steel, particularly in Europe, as a potential outlet for excess sheet production.Our position remains clear as Canada's only producer of discrete plate. Demand across infrastructure, construction and defense end market is healthy and growing as our EAF platform gives us a structural cost and carbon advantage that will serve us across market cycles.