SMU Community Chat: Algoma’s CEO talks prices, decarb, raw materials

Plate vs. sheet prices

Cowden asked Garcia if he thinks the price premium plate currently has over sheet will continue.

Garcia explained why he thinks the premium will hold higher than it has in the past. What it really comes down to are supply and demand drivers, he said.

Demand has been pretty healthy for plate, propped up by significant infrastructure build happening in the US, Canada, and throughout the world, he explained.

But while the sheet market has seen significant capacity additions in the recent past, there has been less investment on the supply side for plate.

He also noted that the fundamentals in plate are a little stronger than in sheet, as plate is more project-based and there is “less sentiment in plate” than sheet. There’s not a lot of speculative buying for plate, while there can be for sheet, he noted.

Update on EAF project

Garcia provided an update on Algoma’s ongoing transition from blast furnace steelmaking to EAF steelmaking. Construction of two new EAFs should be completed by the end of 2024. Commissioning will then happen, with a start-up curve expected for the bulk of 2025, he said.

The EAFs are being designed by Danieli with special enclosures that will contain noise and emissions. The design is unique to North America, according to the company.

Algoma’s production should reach 2.3 to 2.4 million tons per year by the end of 2025 by 100% cold charging the EAFs. However, for a few years, there will be the opportunity to augment cold charging with iron from the blast furnace. This could increase output to as high as 3 million tpy.

By the end of the decade, the electrical grid will be fully upgraded, and Algoma will be able to decommission its blast furnace and coke ovens.

Once the transition is complete, Algoma’s steelmaking capacity will be 30% higher and its greenhouse-gas (GHG) emissions will be roughly 70% lower.

Scrap plans

Considering Algoma’s location in Canada and the fact that charging scrap in the winter can be quite difficult, a question from the audience asked how Algoma plans to “win against Mother Nature?”

Garcia explained that the company has most definitely taken the challenging winter environment into consideration in its planning for EAF steelmaking.

“We understand the environment; we’ve been making steel here for 120 years,” he commented.

The mill’s scrapyard and scrap-handling facilities will be under a roof, he said. Three rail yards will be under the scrap bay, providing enough space for 24 open rail cars to hold scrap metal. Automated cranes will put the scrap from the cars into buckets, which will then be taken to two natural-gas-fired scrap drying stations.

Raw materials strategy

As for its raw material strategy, Garcia said Algoma is very well positioned for sourcing scrap. The Midwest US is a great source for prime and obsolete scrap, and the greater Toronto area has a number of assembly plants that generate plenty of prime scrap, he said. Much of that scrap is currently exported to the US, as there isn’t a lot of demand in Canada at the moment. That will change, however, once Algoma’s EAFs come online.

Garcia said the ATM Metals joint venture established in 2021 together with Triple M Metal will be responsible for sourcing metallics for the steelmaker.

While there is always going to be competition, “A lot of times, scrap has a way of finding itself at the logical buyer,” he commented, noting that Algoma’s geographical advantage could play a role in that.

Lots more to discuss

The above is just a recap of the Community Chat. We also talked about Algoma’s plate mill expansion project, recent policy news, power, hedging, and more. Members can access a replay of the full conversation on the SMU website.

Michael Garcia will join SMU at the Tampa Steel Conference for a fireside chat on the afternoon of Monday, Jan. 29. Click here for more information about the conference, which runs from Jan. 28-30, 2024, at the JW Marriott Tampa Water Street.