Algoma Steel’s U.S.-Bound Shipments Drop From 50% to 24% as Trump’s Steel Tariffs Restrict Canadian Exports

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An increasingly small share of Algoma Steel’s output is crossing the border that once defined much of its business. In the third quarter of 2026, U.S. customers accounted for just 24% of shipments from the Sault Ste. Marie, Ontario, producer, compared with 50% a year earlier.

The company says American steel tariffs of 50% have sharply restricted access to its traditional export market. Yet the shipment decline also comes during a major shift to electric-arc-furnace production and after an unexpected power interruption. Those overlapping pressures help explain why Algoma is selling less steel overall even as it pursues higher-value Canadian orders. The challenge now is turning that forced adjustment into a business that can stand on its own.

A Market That Once Took Half of Algoma’s Steel Is Shrinking

The latest figures show a striking reversal in Algoma’s sales geography. During the three months ended September 30, 2026, shipments to the United States made up 24% of the company’s total steel shipments, down from 50% during the same period in 2025. That represents a fall of 26 percentage points, with the U.S. share now less than half its previous level. Historically, the company says, the American market absorbed approximately 45% to 55% of its shipments. For a producer built around cross-border supply chains, losing that level of access changes how orders are priced, production is scheduled, and customers are cultivated.

Algoma’s total shipments also plunged to 144,527 tons from 419,173 tons a year earlier, a 65.5% decrease. The company attributes that contraction to several overlapping factors: American tariffs, the transition away from its older steelmaking operations, and a summer power outage. The distinction matters because tariffs alone cannot explain the entire decline in output. The trend is nonetheless persistent. In the second quarter of 2026, U.S.-bound shipments had already fallen to 23% of the total, compared with 54% a year before. What was once Algoma’s most important export destination now represents a much smaller part of its business.

Trump’s 50% Steel Tariffs Have Changed the Economics of Cross-Border Trade

Steel tariffs have changed the economics of a sale that once could be treated as routine North American trade. Washington imposed a 25% Section 232 tariff on Canadian steel in March 2025, then raised the rate to 50% effective June 4 of that year. The 50% duty remained in force on covered steel imports during Algoma’s third quarter of 2026. In practical terms, a U.S. importer faces a substantial additional charge when covered Canadian steel enters the country. That makes Canadian supply harder to justify unless the buyer accepts a higher cost, the seller reduces its price, or the product offers advantages that outweigh the duty.

That pressure is not unique to one mill. In April 2026, the Bank of Canada reported that Canadian steel exports had fallen by about half under sector-specific U.S. tariffs, while production and employment had also declined. Historical research by Statistics Canada on the 2018–19 tariff episode found similarly sharp declines in affected exports, although the earlier measures were smaller and shorter-lived. Those comparisons do not predict Algoma’s future, but they demonstrate why established customer relationships are not automatically protected by geography or decades of trade. When the delivered cost changes substantially, purchasing decisions can change with it

Lower Tariff Costs Are Not Necessarily Good News

Paradoxically, Algoma is spending much less on tariffs than it did a year ago. Its direct tariff costs were C$18.1 million in the third quarter of 2026, down from C$89.7 million in the equivalent 2025 period. That roughly 80% reduction might sound like relief, but Algoma identifies another reason: it deliberately reduced U.S.-bound shipments. The 50% duty remained in place. In effect, the company has reduced its exposure to the charge partly by reducing the business that triggers it. For an exporter, that is not the same as regaining an open market.

The same pattern appeared one quarter earlier: direct tariff costs of C$18.7 million in Q2 2026 versus C$64.1 million in Q2 2025, alongside a steep fall in the U.S. shipment share. It presents management with an uncomfortable trade-off. Continuing to serve American customers can involve substantial tariff expenses, while redirecting production elsewhere requires new buyers and a suitable product mix. A smaller tariff bill should therefore be considered alongside lost export volume, shrinking overall sales, and the costs of restructuring the business. These figures suggest that Algoma is adapting to the barriers rather than benefiting from any meaningful improvement in American market access.

Algoma’s Revenue Has Fallen Even as Its Reported Losses Narrow

Algoma’s third-quarter financial figures contain a seeming contradiction. Revenue dropped to C$249.4 million from C$523.9 million a year earlier, yet its net loss narrowed to C$129.6 million from C$485.1 million. Its operating loss also improved to C$94.5 million from C$651.5 million. It would be misleading to take those smaller losses as proof that the company has recovered from the trade shock. The 2025 comparison included a C$503.4 million non-cash impairment charge, which made that period unusually weak. Meanwhile, the latest results reflect both lower steel volumes and a plant in transition, making year-over-year comparisons particularly complicated.

On an adjusted basis, EBITDA remained negative at C$13.9 million, compared with a loss of C$87.1 million a year earlier. The figure included the benefit of a C$53.1 million capacity-utilization adjustment, meaning it should not be confused with net income or cash profit. Reduced labour and other fixed costs, improved steel prices, and growing plate sales helped narrow the adjusted loss, according to the company. But production remains well below the previous year’s level. Algoma needs those operating improvements to continue as its electric furnaces ramp up. Otherwise, better pricing on each ton cannot fully compensate for having fewer tons to sell.

An Unexpected Power Outage Made a Difficult Quarter Worse

Tariffs were not the only obstacle Algoma faced during the summer. On August 17, a turbine at its Lake Superior Power generating station detected an abnormal condition and shut down automatically. Other units remained unaffected, but the disruption forced a temporary suspension of electric-arc-furnace steelmaking. Production resumed on August 29 under interim arrangements developed with Ontario’s Independent Electricity System Operator. The timing was especially difficult because Algoma had already moved away from its legacy blast furnace and was relying on electric steelmaking to replace lost output. Even a temporary disruption became another constraint during a quarter when shipment volumes were already under pressure.

The company commissioned a replacement turbine on September 30, restoring full generating capability at Lake Superior Power. It also arranged for a leased turbine through GE, with installation expected during the fourth quarter. Management said it used some of the outage period to advance planned maintenance and commissioning work on its second electric furnace. That may have reduced future scheduled downtime, but it did not erase the production interruption. The experience highlighted another challenge associated with Algoma’s transformation. Restoring competitiveness depends on more than finding new customers or resolving tariff disputes. Dependable electricity has become central to maintaining production, meeting delivery schedules, and making the investment in electric steelmaking commercially successful.

Electric Arc Furnaces Are Transforming How Algoma Produces Steel

Algoma’s response to tariffs is intertwined with a technological overhaul that was already underway. The company permanently stopped its legacy blast furnace operations on January 18, 2026, accelerating its move to electric-arc-furnace steelmaking. During the third quarter, its first electric furnace supplied all liquid steel production while the second unit was still being commissioned. On October 9, just after the quarter ended, the second furnace produced its first heat of liquid steel, which was processed into hot-rolled coil. Management expects the additional unit to contribute to production and shipments during the fourth quarter, although that does not mean full production capacity has already been restored.

Once the transformation is complete, Algoma expects annual raw steelmaking capacity of approximately 3.7 million tons and projects a roughly 70% reduction in annual carbon emissions compared with its former operations. These are company forecasts, and neither guarantees near-term profitability. The first electric furnace is operating on a 24-hour schedule, but bringing the second furnace into consistent commercial production requires dependable electricity, reliable equipment, and sufficient demand. Electric steelmaking may strengthen Algoma’s environmental credentials and reduce its dependence on older production systems. However, modernization cannot remove American tariffs or guarantee customers for the additional steel the company hopes to produce.

A Canadian-Focused Plate Strategy Is Becoming Algoma’s Main Priority

Algoma is concentrating more heavily on discrete steel plate rather than depending on traditional volumes of hot-rolled coil. It describes itself as Canada’s only producer of discrete plate, a position that could prove valuable for infrastructure, construction, and defence projects seeking Canadian-made material. The company’s plate shipments increased in both absolute volume and as a proportion of sales compared with the third quarter of 2025, even though overall shipments declined sharply. In the second quarter, Algoma had already reported its second consecutive quarter of record plate sales. That contrast illustrates how changing what a steel producer sells can become just as important as changing where it sells.

The financial benefit is visible in Algoma’s average net sales realization, which reached C$1,510 per ton in the latest quarter, up from C$1,129 a year earlier. That represents a 33.7% increase, reflecting stronger steel prices and a higher proportion of plate products. However, revenue per ton is not the same as profit per ton. The company’s reported cost per ton of steel products sold also climbed, reaching C$1,492 compared with C$1,282 previously, partly because reduced output left fixed expenses spread across fewer tons. Selling higher-value steel may improve the economics of the remaining business, but rebuilding production volumes and securing consistent demand remain essential to a sustainable recovery.

Canada’s Domestic Steel Market Is Facing Its Own Competitive Pressures

Redirecting a shipment from the United States to Canada sounds simpler than it is. Algoma describes its strategy as Canada-centric, but the 76% of shipments that did not go to the United States in the third quarter should not automatically be interpreted as Canadian sales. The company says the domestic steel market remains crowded. Canadian producers have more material to sell at home after losing American business, while U.S. steel continues entering Canada. Algoma has also reported offshore import offers that it believes are priced below fair market value. Those concerns reflect the company’s assessment of competitive conditions rather than proof that every low-priced import violates Canadian trade rules.

Ottawa has responded with tariff-rate quotas aimed at limiting certain steel imports from outside the Canada–United States–Mexico trade area. Under rules effective since December 2025, covered imports exceeding established quotas face a 50% surtax, with thresholds tied to shares of 2024 import volumes. Federal procurement policies also prioritize Canadian-produced steel in qualifying large construction and defence contracts. These measures could create opportunities for producers such as Algoma, but government projects operate on their own timelines and must meet specific technical and purchasing requirements. Protecting the domestic market from unfair competition does not instantly generate enough demand to replace lost exports. Canadian steelmakers still need to compete on price, quality, reliability, and delivery.

Workers in Sault Ste. Marie Are Experiencing the Human Cost of the Transition

Behind the shipment figures are workers whose livelihoods have long been tied to the steel mill. In December 2025, Algoma issued layoff notices to approximately 1,005 unionized employees as it accelerated the closure of its blast furnace and coke-making operations. The notices were scheduled to take effect in March 2026, although subsequent workforce reductions were phased rather than occurring entirely on one day. Local union leaders and company representatives linked the accelerated timeline to American tariffs while also acknowledging that the transition to electric steelmaking would have reduced staffing requirements even without the latest trade restrictions.

Local reporting on March 23 confirmed that layoffs had begun and that retirements, resignations, and extensions were affecting the timing of workforce reductions. For employees, the practical concerns extend well beyond quarterly earnings. Recall rights, retraining opportunities, retirement decisions, and household financial stability all become pressing considerations when a major local employer restructures. The consequences can also extend to nearby businesses and contractors that depend on industrial activity. Although the new furnaces represent a major investment in Algoma’s future, they require a different operating structure and workforce. Whether new manufacturing opportunities can offset the employment disruption will become clearer over time, not through a single quarterly financial report.

Government Support and Defence Opportunities Could Shape Algoma’s Recovery

Ottawa and Ontario are attempting to strengthen the domestic customer base for Canadian steel. On October 21, 2026, the two governments announced a Joint Steel Action Fund with five-year funding commitments of C$3.55 billion federally and C$1.67 billion provincially, representing C$5.22 billion combined. The initiative forms part of a broader C$8.7 billion industry-support package and aims to encourage investment, diversify production, and strengthen Canadian supply chains. The fund is intended for the wider steel sector, not as a direct C$5.22 billion payment to Algoma. Separately, the company reported approximately C$428 million in available liquidity at September 30, including cash and unused financing capacity.

Algoma is also pursuing customers beyond its traditional steel markets. Its Roshel Algoma Defence joint venture, established in April 2026, aims to develop Canadian ballistic steel production and related manufacturing capabilities for defence applications. These opportunities align with government efforts to increase domestic procurement, although planned projects are not equivalent to guaranteed recurring revenue. The company’s immediate priorities remain practical: bring both electric furnaces into dependable production, maintain reliable power, secure profitable orders, and manage costs while American tariffs restrict exports. The drop from 50% to 24% is therefore more than a trade statistic. It marks a difficult shift away from a business heavily dependent on the U.S. market toward one increasingly focused on Canadian industrial demand.

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