Algoma Steel Posts Historic Profitable Third Quarter
Construction of a $700 million electric arc furnace complex creating work for many suppliers
Algoma Steel’s last fiscal quarter proved to be another winner.
The Sault Ste. Steelmaker Marie posted a profit of $123 million for the third quarter of 2022, the period ending December 31. The company’s fiscal year runs from April 1 to March 31.
During the same period last year, Algoma incurred a loss of $73.5 million.
The company generated $588 million in cash and was also pleased to announce that it had paid off US$358 million in long-term debt.
Algoma shipped 552,544 tonnes in the quarter, lower than expected due to holiday shutdowns, supply chain issues and pandemic-related challenges, which drove up inventory levels of steel.
In addition to posting strong financial results, company CEO Mike McQuade told analysts on a Feb. 11 web call that the third quarter was impressive in the company’s history of 120 years with Algoma’s return to public markets, debt repayment and a construction decision made to build two electric arc furnaces, calling it a “generational investment” in how Algoma will make steel .
In December, Danieli & C. Officine Meccaniche SpA of Italy won the contract to design and supply equipment for the $700 million development.
McQuade said the company is cashed in enough to complete these capital projects that will make Algoma a greener, more competitive and more resilient steelmaker.
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Regarding North American steel market conditions, McQuade said steel prices have fallen from historic highs of a few months ago, but are still higher than at any time. time before 2021.
Plate from Algoma is selling for a hefty price of over US$685 per tonne.
Although the steel market has been cyclical and prices have remained volatile in recent quarters, McQuade expects prices to settle at attractive levels.
He is optimistic for the year ahead based on their backlog, robust demand from automakers and other positive supply and demand fundamentals in the market which he believes will support the sector. steel for some time to come.
Looking ahead to the fourth quarter, McQuade said there were still positive supply-side factors in play, but the demand side was “evolving from day to day,” citing out-of-control situations like the bridge blockade. Windsor-Detroit.
Over the past several years, Algoma has made a number of multi-million dollar capital investments to modernize the plant, in particular its plate mill, to become a next generation producer.
The major megaproject currently underway is the construction of the electric arc furnace complex with driven piles as part of site preparation for the $700 million project.
“The project will fundamentally transform who we are and how we operate,” McQuade said.
The furnaces will be commissioned in mid-2024 after 30 months of construction, McQuade said, as the company begins to transition from blast-furnace-based steel production as more electricity becomes available on the Ontario network. He doesn’t expect any disruption in production when transitioning to this new technology.
The Federal Infrastructure Bank has committed $420 million for the two-furnace facility that will increase Algoma’s annual steel production to 3.7 million tonnes and reduce its carbon emissions by 70%.
An analyst asked McQuade about the ongoing labor and parts shortage and whether he was comfortable staying within the 30-month construction period and whether there could be potential cost overruns on the kiln project.
McQuade expressed confidence in the on-time and on-budget delivery as financial and schedule buffers were factored into the schedule and budget to complete the kiln complex.
As project milestones, Algoma has released a steady stream of news over the past few weeks regarding the awarding of contracts to industrial suppliers near and far.
Howard Avery Construction is installing piles for the main complex and auxiliary kiln buildings. PTI Transformres of Winnipeg will supply two 200 MVA (mega volt ampere) transformers, one for each oven. George Stones and Son are handling the foundation work with the local Lafarge factory and ManSteel Rebar supplying the concrete and rebar. GE Power is upgrading Algoma’s combined natural gas power plant to support the furnaces.
The next step is to choose a builder, which should be announced in a week or two.
McQuade said Algoma will continue to follow a prudent financial management plan that puts it in the “enviable financial position” it enjoys today.
“Our goal is to live within our means, not to spend money we don’t yet have.”