Algoma Steel Secures C$500 Million Liquidity Support from Governments of Canada and Ontario

Rhea-AI Summary

Algoma Steel (NASDAQ: ASTL) has secured C$500 million in liquidity support from Canadian governments, including C$400 million from the federal government and C$100 million from Ontario. The financing comes as a response to challenging market conditions caused by 50% U.S. tariffs on Canadian steel.

The seven-year facilities include a C$100 million third lien secured tranche and a C$400 million unsecured tranche with warrant issuance. Interest rates start at CORRA + 200 bps for three years, increasing by 200 bps annually thereafter. The company will issue 6.77 million warrants at C$11.08 per share with a 10-year term.

In response to market conditions, Algoma will exit blast furnace and coke oven operations while accelerating its transition to Electric Arc Furnace steelmaking, with expected project costs of C$987 million. The company will focus on plate and select coil products primarily for the Canadian market.

Positive

• Secured C$500 million in government liquidity support to maintain operations
• Strategic transition to more efficient Electric Arc Furnace steelmaking
• Focus on high-demand domestic Canadian market products
• Government backing demonstrates confidence in company's critical role in Canadian industrial base

Negative

• U.S. market effectively closed due to 50% tariffs on Canadian steel
• Forced exit from blast furnace and coke oven operations
• EAF project costs increased to C$987 million
• Restrictions on capital distributions under new loan facilities

Insights

Financial Restructuring Specialist

Algoma secures critical C$500M government lifeline amid US tariffs, accelerating EAF transition while exiting blast furnace operations.

The C$500 million government liquidity package represents a crucial financial lifeline for Algoma Steel as it navigates severe trade disruption. The financing structure reveals the depth of the company's challenges: a C$100 million third-lien secured tranche subordinated to existing debt and a C$400 million unsecured portion requiring warrant issuance. These terms indicate lenders of last resort stepping in where commercial markets wouldn't, with escalating interest rates starting at CORRA+200bps but increasing by 200bps annually after three years - creating a clear incentive to refinance once conditions improve.

The warrant component is particularly telling - giving governments potential equity upside through 6.77 million warrants at C$11.08 over a 10-year period, with exercise prices calculated based on pre-tariff trading. This effectively compensates taxpayers for extraordinary risk while avoiding immediate dilution. The financing contains capital distribution restrictions, confirming the defensive nature of this intervention.

Most critically, Algoma is undergoing forced structural transformation due to the 50% tariffs effectively closing the US market. The announcement confirms the unsustainability of blast furnace and coke oven operations, accelerating the transition to Electric Arc Furnace steelmaking at a projected cost of C$987 million. This represents a fundamental business model pivot from cross-border operations to a primarily domestic Canadian focus, with production narrowed to specific plate and coil products. While preserving short-term viability, this restructuring permanently alters Algoma's competitive positioning and production capabilities, exchanging higher-cost integrated steelmaking for more flexible, environmentally advantageous EAF technology.

Steel Industry Analyst

The 50% tariff on Canadian steel imports to the US represents an existential challenge for Algoma, severing access to its largest export market and undermining its historical cross-border business model. This government intervention prevents potential collapse but comes with significant operational consequences - most notably the announced exit from blast furnace and coke oven operations that form the foundation of integrated steelmaking.

Algoma's strategic pivot to focus on as-rolled and heat-treated plate, plus select coil products primarily for the Canadian market, signals a major product portfolio rationalization. This narrower focus allows concentration on higher-margin domestic specialty products while abandoning commodity segments where import competition and limited scale would create disadvantages.

The accelerated transition to Electric Arc Furnace technology fundamentally transforms Algoma's cost structure and environmental profile. While EAFs typically offer lower operating costs, greater flexibility, and reduced emissions compared to blast furnaces, this transition wasn't planned on this accelerated timeline. The C$987 million projected completion cost reflects the comprehensive nature of this technology conversion.

For context, integrated blast furnace steelmaking allows production from raw materials (iron ore and coal) but requires high fixed costs and continuous operation. EAFs primarily melt scrap steel, offering lower capital intensity but potentially higher raw material costs depending on scrap availability and pricing. This accelerated transition helps Algoma survive but permanently alters its production capabilities and cost position relative to both domestic and international competitors.

SAULT STE. MARIE, Ontario, Sept. 29, 2025 (GLOBE NEWSWIRE) -- Algoma Steel Group Inc. (“Algoma” or the “Company”) (NASDAQ: ASTL; TSX: ASTL) today announced the execution of binding term sheets to secure C$500 million in liquidity support, comprising C$400 million loan facilities from the Government of Canada under the Large Enterprise Tariff Loan facility and C$100 million loan facilities from the Province of Ontario (collectively, the “Facilities”). The Facilities provide essential financial flexibility amid prolonged trade uncertainty and position Algoma to advance its ongoing business transformation.

Today, the Honourable Patty Hajdu, Minister of Jobs and Families and Minister responsible for the Federal Economic Development Agency for Northern Ontario, on behalf of the Honourable François-Philippe Champagne, Minister of Finance and National Revenue, alongside Will Bouma, Parliamentary Assistant to the Minister of Northern Economic Development and Growth for Ontario, and Bill Rosenberg, Member of Provincial Parliament for Algoma—Manitoulin, will join Algoma CEO, Michael Garcia, and CFO, Rajat Marwah, along with senior management team members and workers at the plant for the announcement.

“On behalf of Algoma, I would like to thank Prime Minister Carney, Premier Ford and their governments for their steadfast support of our Company and the Canadian steel industry,” said Mr. Garcia. “The ongoing imposition of a 50% tariff on Canadian steel has closed the U.S. market to Canadian steelmakers. We require this liquidity support to withstand this unprecedented U.S. governmental action, and importantly, to continue our transformation for the future. Algoma is poised to be a critical contributor to our nation’s agenda of building a stronger, more competitive, and prosperous economy. We look forward to supplying Canadian steel – from right here in Sault Ste. Marie – to, as the Prime Minister has said, help protect our sovereignty, grow our industries, export our energy, and build one strong Canadian economy.”

Loan Facilities

The Facilities will be provided proportionately by the federal and provincial governments as follows:

• C$100 million – Third lien secured tranche, ranking junior to Algoma’s existing first lien revolving facility and second lien secured notes; and
  
  
• C$400 million – Unsecured tranche, subject to the issuance of 6.77 million common share purchase warrants, with each warrant being exercisable for one common share of Algoma at an exercise price of C$11.08 for a 10-year term, vesting proportionately as unsecured draws are made.
  
  

The Facilities will have a seven-year term, with interest at CORRA + 200 bps for three years, stepping up by 200 bps each year thereafter.

The exercise price of the warrants is equivalent to the volume-weighted average trading price of Algoma’s common shares on the TSX from the completion of its going-public transaction in October 2021 through November 1, 2024, which was prior to the U.S. Administration’s announcement of its intention to impose new tariffs on Canadian steel. The warrants align the governmental support for Algoma with the Company’s long-term value creation strategy and its ongoing transformation and long-term growth trajectory.

The Facilities will include customary positive and negative covenants, including a restriction on capital distributions. Algoma’s access to the Facilities is subject to several conditions, including the completion of definitive loan documentation and the receipt of all necessary approvals under the Company’s first lien revolving facility.

Operational Adjustments in Response to Market Conditions

Alongside securing this financing, Algoma is adjusting production to better align with prevailing demand and market dynamics. The continuation of Section 232 tariffs has effectively closed the U.S. market to Canadian steel, undermining Algoma’s cross-border business model and requiring the Company to focus on products with reliable domestic demand.

The tariffs have made continued operation of the Company’s blast furnace and coke ovens unsustainable. Accordingly, Algoma will begin to exit these primary operations as it accelerates its transition to Electric Arc Furnace (“EAF”) steelmaking. The Company now expects that the final aggregate cost of completion of the EAF project will be approximately C$987 million. Going forward, Algoma intends to focus production on as-rolled and heat-treated plate, along with select coil products predominantly for the Canadian market. These adjustments are expected to enable Algoma to:

• supply Canadian industries with high-quality as-rolled and heat-treated plate;
• provide stability for continued investment in diversification projects aligned with Canada’s evolving needs; and
• reinforce Algoma’s role in supporting Canada’s infrastructure, manufacturing, defense, and nation-building priorities.
  
  

“The government’s financial support underscores their recognition of Algoma’s critical role in Canada’s industrial base, and demonstrates their willingness to provide direct support for our Company through this transition,” said Mr. Garcia.

“By combining essential liquidity with targeted support for our transition to EAF steelmaking, this support allows us to move forward with confidence — aligning operations with market realities, advancing the EAF strategy, and safeguarding Algoma’s future,” said Mr. Marwah.

About Algoma Steel Group Inc.

Based in Sault Ste. Marie, Ontario, Canada, Algoma is a fully integrated producer of hot and cold rolled steel products including sheet and plate. Driven by a purpose to build better lives and a greener future, Algoma is positioned to deliver responsive, customer-driven product solutions to applications in the automotive, construction, energy, defense, and manufacturing sectors. Algoma is a key supplier of steel products to customers in North America and is the only producer of discrete plate products in Canada. Its state-of-the-art Direct Strip Production Complex (“DSPC”) is one of the lowest-cost producers of hot rolled sheet steel (“HRC”) in North America.

Algoma is on a transformation journey, modernizing its plate mill and adopting electric arc technology that builds on the strong principles of recycling and environmental stewardship to significantly lower carbon emissions. Today Algoma is investing in its people and processes, working safely, as a team to become one of North America's leading producers of green steel.

As a founding industry in their community, Algoma is drawing on the best of its rich steelmaking tradition to deliver greater value, offering North America the comfort of a secure steel supply and a sustainable future.

Forward-Looking Statements

This news release contains “forward-looking statements” under applicable Canadian securities laws and “forward-looking information” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to future events or future performance and reflect the Company’s current expectations and assumptions. Forward-looking statements can often be identified by words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “estimate,” “target,” “project,” “may,” “should,” “will,” “forecast,” “outlook,” “potential,” or other similar expressions. In particular, this release contains forward-looking information regarding the anticipated government financing, including its size, structure, terms, and the expected impact on Algoma’s financial position, operations, and strategic initiatives, the anticipated continued and future impacts of U.S. tariffs on Algoma, completion and cost of Algoma’s EAF project, the anticipated impact of Algoma’s operating adjustments, the anticipated impact of Algoma’s EAF project, resulting reduction in carbon emissions following completion of the EAF project, Algoma’s future as a leading producer of green steel, transformation journey, ability to deliver greater and long-term value, and Algoma’s ability to offer North America a secure steel supply and a sustainable future, and investment in its people, and processes.

These forward-looking statements are subject to a number of known and unknown risks, uncertainties, and assumptions that could cause actual results or events to differ materially from current expectations. Such risks and uncertainties include, but are not limited to, the Company’s ability to enter into definitive documentation on the terms described or at all; the Company’s ability to meet the conditions precedent to funding; potential changes in government policy; general economic and market conditions; ongoing trade actions and tariffs; the risks described in Algoma’s filings with the U.S. Securities and Exchange Commission and Canadian securities regulators; and other factors not currently contemplated, including those that may be beyond the Company’s control.

Readers are cautioned not to place undue reliance on forward-looking statements. Algoma undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law.

For more information, please contact:

Communications contact:
Laura Devoni
Vice President - Human Resources and Corporate Affairs
Phone: 705.255.1202
E-mail: communications@algoma.com 

Investor contact:
Michael Moraca 
Vice President - Corporate Development and Treasurer
Phone: 705.945.3300 
E-mail: IR@algoma.com 

FAQ

What is the total amount of financial support Algoma Steel (ASTL) received from Canadian governments?

Algoma Steel secured C$500 million in total support, with C$400 million from the Government of Canada and C$100 million from the Province of Ontario.

How will the U.S. tariffs impact Algoma Steel's operations?

The 50% tariffs have effectively closed the U.S. market to Algoma, forcing the company to exit blast furnace operations and focus primarily on the Canadian market while accelerating its transition to EAF steelmaking.

What are the terms of Algoma Steel's new government loan facilities?

The facilities have a seven-year term with interest at CORRA + 200 bps for three years, increasing by 200 bps annually thereafter. They include a C$100 million secured tranche and C$400 million unsecured tranche with warrant issuance.

How much will Algoma Steel's Electric Arc Furnace (EAF) project cost?

The final aggregate cost for completing the EAF project is expected to be approximately C$987 million.

What products will Algoma Steel focus on after its operational adjustments?

Algoma will focus on producing as-rolled and heat-treated plate, along with select coil products, predominantly for the Canadian market.