Steel Mills
Algoma Fiscal Q2 Profits Fall on Lower Prices, Operational Issues
Written by Michael Cowden
November 7, 2022
Canadian sheet and plate producer Algoma Steel Inc. posted sharply lower profits for the second quarter of its 2023 fiscal year.
The Sault Ste. Marie, Ontario-based steelmaker said the drop resulted from falling steel prices, operational problems, and higher costs.
The company had warned in September that its fiscal Q2 earnings would be substantially below prior quarters.
All told, Algoma posted net income of Canadian $87 million ($64.43 million USD) in fiscal Q2, down 70% from CA$288 million in the year-ago quarter on revenue that fell 41% to CA$599 million over the same period. That’s according to earnings figures released after the close of markets on Monday, Nov. 7.
The company shipped 435,202 tons in its fiscal ’23 Q2, down 25.9% from the same quarter last year.
Algoma said the shipment drop stemmed from significant delays in a plate mill modernization project, lower output at its direct strip production complex, and a temporary shortage of workers.
Meanwhile, prices fell amid higher costs.
Algoma recorded average selling prices of CA$1,266 per ton in its fiscal ’23 Q2, down 20.6% from CA$1,594 per ton in the year-ago quarter. Costs per ton of steel sold, in contrast, rose to CA$1,033 per ton in fiscal Q2 ‘23, up 20.7% from CA$857 per ton in the same quarter last year.
The higher costs resulted largely from a coal conveyor fire, which Algoma said forced it to replace internally produce coke with purchased coke. Costs were also higher for natural gas, alloys, and scrap.
Algoma estimates that those operational issues will cost it CA$130 million in adjusted EBITDA, with ~60% incurred in the fiscal Q2 and the rest in fiscal Q3.
Despite those headwinds, the company said it remains on track to replace its blast furnaces and basic steelmaking furnaces with two new electric-arc furnaces (EAFs). The CA$700 million project, announced in November 2021, is expected to take two years to complete and to reduce Algoma’s carbon emissions by 70%.
“Despite near-term challenges on pricing, we will continue to focus on improving operational performance and disciplined execution,” Algoma CEO Michael Garcia said in a statement.
By Michael Cowden, Michael@SteelMarketUpdate.com
Michael Cowden
Read more from Michael CowdenLatest in Steel Mills
Decision on fate of USS/Nippon deal pushed to after elections: Report
The US government’s decision on whether it will block Nippon Steel’s acquisition of U.S. Steel on national security grounds has been pushed until after the November elections.
Cliffs steadfast in commitment to Middletown decarb project
Cleveland-Cliffs Inc. on Monday reiterated its commitment to a major decarbonization project at its Middletown Works in Ohio, despite an earlier report suggesting otherwise.
Nucor expects lower steel prices to drive Q3 earnings decline
Nucor blamed lower steel prices for weaker third-quarter results in earnings guidance released on Tuesday.
SDI guides toward lower Q3 earnings on weaker flat-rolled steel prices
Steel Dynamics Inc. (SDI) expects lower third-quarter earnings on the heels of “meaningfully lower” prices at its flat-rolled steel operations. The Fort Wayne, Ind.-based steelmaker expects Q3’24 earnings of $1.94 to $1.98 per diluted share, according to figures released on Monday. That’s down from $2.72 per share in Q2’24 and down from $3.47 per share in Q3’23.
Stelco shareholders OK $2.5B sale to Cliffs
Stelco shareholders voted overwhelmingly on Monday to OK the $2.5-billion sale of the Canadian flat-rolled steelmaker to Cleveland-Cliffs. Indeed, 99.97% of those who cast ballots voted to approve the deal, according the Hamilton, Ontario-based steelmaker.