Algoma, Stelco and Canadian Steel in the Tariff War: EAFs, Cleveland-Cliffs and 50% US Duties

Canadian steel was the first industry to discover that the 2025 tariffs were not a negotiating tactic but a structural change, and Algoma and Stelco are the two case studies in how to survive it. The sector employs about 23,000 people directly, produces roughly 12 million tonnes a year, and historically shipped around half of its output to the United States. When the Section 232 rate doubled to 50 per cent in June 2025, the US market effectively closed for Canadian mills. This article follows Algoma’s electric-arc furnace transition and near-death financial year, Stelco’s new life inside Cleveland-Cliffs, the Canadian government’s quota and procurement response, and Rio Tinto’s parallel exposure in aluminium. It is part of the Canadian Company Stories hub.

How does Canada’s steel industry fit into the North American market?

As a northern extension of the US Great Lakes steel belt, with the same customers and until 2025 the same prices. Canada produces about 12 million tonnes of crude steel a year from four main producers: ArcelorMittal Dofasco in Hamilton, the largest; Stelco, with its Lake Erie Works at Nanticoke and finishing operations in Hamilton; Algoma in Sault Ste. Marie; and a group of mini-mills and specialty producers in Ontario, Quebec and the West. Roughly 23,000 people work directly in steelmaking and more than 100,000 in steel-using industries.

The trade pattern was symmetrical. Canada exported about half of its steel to the United States and imported a similar share of its consumption from there, so the two countries ran a balanced steel trade worth around C$20 billion a year in each direction. Automotive was the largest end market, followed by construction, energy pipelines, and machinery. That integration is why the 2018 Section 232 tariffs of 25 per cent, lifted for Canada in 2019, were so disruptive, and why the 2025 version at double the rate was existential.

The 2025 sequence was fast. On 12 March 2025 the United States reimposed 25 per cent Section 232 duties on steel and aluminium from all countries, ending the Canadian exemption. On 4 June the rate doubled to 50 per cent, and through the summer the administration extended it to hundreds of derivative products, from appliances to construction components. In April 2026 the rules were clarified into tiers: 50 per cent for products made almost entirely of steel, aluminium or copper, 25 per cent for derivatives substantially made of those metals, and lower rates for products with limited metal content. The Canadian Labour Congress estimated in June 2025 that 23,000 steel jobs and 9,500 aluminium jobs were directly at risk.

The policy context, including Canada’s counter-tariffs and the wider negotiation, is covered in the Kurums article on the Canada-US trade war. This article concentrates on how the two integrated mills responded.

What did the 50 per cent tariff do to Algoma’s finances?

It turned a marginal year into the worst in the company’s modern history. Algoma’s 2025 revenue fell to C$2,085.7 million from C$2,461.7 million, steel shipments dropped 14 per cent to 1,739,493 tons, and the company booked direct tariff costs of C$225.0 million as it tried to keep US customers through the first half of the year. Adjusted EBITDA swung to a loss of C$261.4 million from a C$22.4 million profit, and the net loss of C$984.9 million included a C$503.4 million non-cash impairment and C$45.8 million of severance.

The fourth quarter showed the shift in strategy. Shipments to the United States, about 51 per cent of volume for the full year, were down to 45 per cent in the quarter, and direct tariff costs were C$60.6 million on revenue of C$455.0 million. Chief executive Rajat Marwah told investors in March 2026 that the Section 232 duties had largely closed the American market to Canadian producers and that the company would pivot to discrete plate for Canadian customers, the one product for which it is the only domestic maker.

By the second quarter of 2026 the pivot was visible but costly. Revenue was C$267.5 million, down from C$589.7 million, as shipments fell 61.6 per cent to 181,473 tons during the blast furnace shutdown and EAF ramp-up. US shipments were 23 per cent of volume and direct tariff costs fell to C$18.7 million. The net loss narrowed to C$96.0 million, helped by C$45.0 million of insurance proceeds and an C$18.8 million currency gain, and adjusted EBITDA was a positive C$13.8 million after a C$54.7 million capacity-utilisation adjustment that capitalises fixed costs during the transition. Cost per ton of steel sold rose to C$1,411 from C$1,144 because the fixed cost base was spread over far fewer tons.

Preliminary guidance for the third quarter, issued on 1 October 2026, pointed to shipments of about 145,000 tons and adjusted EBITDA of negative C$10 to 20 million after a turbine failure at the Lake Superior Power plant that supplies the furnaces cut production for several weeks. The replacement turbine was installed and the company said full results would come on 28 October 2026.

How is the electric-arc furnace transition going?

Later and more expensive than planned, but technically on track. Algoma announced the EAF project in 2021 with a budget of about C$700 million, funded in part by C$420 million of federal and Ontario support, and cost estimates rose to around C$900 million through construction. The two furnaces together are designed for about 3.7 million tons of raw steel a year, matching the downstream plate and strip mills, and will cut the plant’s carbon emissions by roughly 70 per cent from the blast-furnace baseline.

Unit One struck its first arc and produced first steel in early July 2025, moved to a 24-hour schedule in the fourth quarter and, according to the company, met quality targets across plate and hot-rolled coil grades. In December 2025 the board approved accelerating the decommissioning of the blast furnace and coke ovens from 2027 to the start of 2026, so that all liquid steel has come from the EAF since January 2026. Unit Two’s electrical systems were tested in September 2026, first heat was expected in early October and commercial production and shipments in the fourth quarter.

The transition carries its own risks. EAF steelmaking depends on scrap and electricity; Algoma’s power comes partly from the co-owned Lake Superior Power gas plant, whose turbine failure in the third quarter of 2026 showed how a single component can halt an entire mill. The company used the outage to pull forward maintenance and Unit Two commissioning, and Marwah said restored power, a second furnace and improving steel prices positioned Algoma for the final phase of the transformation. Products made on the EAF route are branded Volta and marketed as low-carbon steel for energy, defence, shipbuilding and infrastructure buyers.

How did Ottawa and Ontario keep Algoma afloat?

With C$500 million of loans, a steel quota regime and a procurement promise. In November 2025 Algoma signed Large Enterprise Tariff Loan facilities with the Government of Canada and a companion facility with Ontario totalling C$500 million, of which C$417 million was still available at year-end and C$168 million by mid-2026 after the company drew C$124.5 million in the second quarter alone. Total liquidity at 30 June 2026 was about C$437 million, including C$62.6 million of cash and C$206.7 million of unused revolver.

The LETL facility, set up by Ottawa in April 2025 for large companies cut off from normal credit by the tariffs, is a loan, not a grant, and Algoma’s balance sheet carried C$206.3 million of government loans at the end of 2025. The company’s ability to repay depends on the EAF transition producing a profitable domestic plate business, which is why the second strand of support, demand creation, matters as much as the first.

On 16 July 2025 Prime Minister Carney announced tariff-rate quotas on steel imports: countries without a free-trade agreement with Canada were limited to 50 per cent of their 2024 volumes before a 50 per cent surtax applied, free-trade partners other than the United States and Mexico to 100 per cent of 2024 volumes, and steel melted and poured in China faced an additional 25 per cent surtax regardless of where it was finished. Ottawa also tightened the quotas later in 2025, extended them to derivative products, and announced that federally funded infrastructure and defence projects would prioritise Canadian steel. The package included funding for the Strategic Innovation Fund to help steelmakers retool and money for worker retraining.

The defence angle is specific. In January 2026 Algoma signed a memorandum of understanding with Hanwha Ocean of South Korea, a bidder for the Canadian Patrol Submarine Project, with a potential value of US$250 million: US$200 million toward a structural steel beam mill and up to US$50 million of product purchases, both conditional on Hanwha winning the contract. Algoma positions itself as Canada’s only maker of discrete plate, the material for ship hulls, bridges and pressure vessels, which turns the government’s shipbuilding and infrastructure plans into its order book.

Why did Cleveland-Cliffs buy Stelco and what has it done with it?

Because Stelco was one of the lowest-cost flat-rolled mills in North America and Cliffs wanted its spot-market exposure, and because Stelco’s owners were ready to sell. Alan Kestenbaum’s Bedrock Industries had bought the company out of creditor protection in 2017, relisted it on the Toronto Stock Exchange that November and run it for cash, paying large special dividends while investing in Lake Erie Works. Cleveland-Cliffs agreed in July 2024 to pay C$70 a share, about C$3.4 billion in equity or US$2.5 billion including debt, and completed the acquisition on 1 November 2024 after Investment Canada approval that came with commitments on employment, headquarters and capital spending.

Lake Erie Works at Nanticoke, a greenfield mill opened in 1980, is the asset: a single blast furnace with cokemaking, about 1,400 employees and a focus on hot-rolled coil sold through service centres and to construction. Hamilton, which stopped making steel in 2013, keeps coke ovens and cold-rolling and galvanizing lines with about 750 employees. Cliffs described the deal as roughly doubling its exposure to the North American spot market and identified synergies in procurement, capital spending and public-company costs.

Then the tariff arrived. A US-owned Canadian mill cannot ship to its parent’s home market without paying 50 per cent, so Stelco became a Canada-only business overnight. Cliffs’ results through 2025 and the first half of 2026 showed the Canadian unit as a drag, and chief executive Lourenco Goncalves told investors in July 2026 that the Canadian market was only beginning to show meaningful improvement. On 19 October 2026, reporting Cliffs’ strongest quarter in three years with adjusted EBITDA of US$612 million, he said the third quarter was Stelco’s strongest since the acquisition and that the unit had become a positive EBITDA contributor as hot-rolled prices in Canada recovered, helped by the quotas that cut offshore imports.

The same release announced that Stelco’s galvanizing lines would be idled indefinitely because the Canadian galvanized market was oversupplied, and that Cliffs did not expect government action to fix it. Total production tonnage is to be maintained with a hot-rolled focus, about 2,000 Canadian jobs preserved, and affected workers recalled if conditions improve. Cliffs also faces Canadian environmental obligations at both sites, including a federal sulphur dioxide reduction plan and a pending Ontario steel-sector technical standard whose cost it says could be material.

What about aluminium and Rio Tinto?

Aluminium is Canada’s larger metals export to the United States, and Rio Tinto is the dominant producer, so the 50 per cent tariff hit Quebec as hard as it hit Ontario. Canada smelts about 3.2 million tonnes of primary aluminium a year, nearly all in Quebec and at Rio Tinto’s Kitimat smelter in British Columbia, using hydroelectric power that makes it among the lowest-carbon metal in the world. Historically more than 80 per cent went to the United States, which produces well under a million tonnes itself and cannot replace Canadian supply.

That dependence has shaped the tariff’s effect. Because US buyers have no domestic alternative at scale, much of the 50 per cent duty has been passed through to American consumers via the Midwest premium rather than absorbed by Canadian smelters, and Rio Tinto has continued to ship. The company has nonetheless diversified, sending more metal to Europe and Asia, and Ottawa’s 2025 package extended quotas and a China melted-and-poured surtax to aluminium products as well as steel. Rio Tinto’s Quebec operations, including the AP60 expansion at Saguenay-Lac-Saint-Jean, employ several thousand people and were explicitly cited by the Canadian Labour Congress in its estimate of 9,500 aluminium jobs at risk.

Aluminium also illustrates the limits of retaliation. Canada’s counter-tariffs on US steel and aluminium products from March 2025 raised costs for Canadian manufacturers that use American inputs, and the Hydro-Québec power contracts that make Quebec smelters competitive are a provincial asset that cannot be redeployed to other industries quickly. Carney threatened in June 2025 to raise the metals counter-tariffs if talks stalled, then dropped most retaliatory measures in August to restart negotiations, keeping steel and aluminium duties in place.

What risks remain for Canadian steel?

The largest is that the domestic market is too small for two integrated mills plus Dofasco once exports are gone. Canada consumes roughly 13 to 14 million tonnes of steel a year, about a third of it imported, and the quota regime can shift import share to domestic producers only up to a point before construction and manufacturing buyers face shortages or price spikes. Cliffs’ decision to idle Stelco’s galvanizing lines shows that oversupply is already present in some products even with the quotas.

For Stelco the risk is strategic rather than financial. Cleveland-Cliffs is deleveraging toward a target of net debt below 2.5 times EBITDA by mid-2027 and is selling property to do it; a Canadian mill that cannot export to the parent’s market is a candidate for further rationalisation if the Canadian price recovery stalls. The Investment Canada commitments made in 2024 run for a limited period, and Ontario’s pending steel-sector environmental standard could add material cost at both sites.

What can founders and investors learn from Algoma and Stelco?

First, a market that is 95 per cent open can close completely, and the companies that survive are the ones with a product the home market cannot buy elsewhere. Algoma’s discrete plate monopoly in Canada is the asset that justified C$500 million of public loans; Stelco’s hot-rolled coil is a commodity that competes with imports under quota. The lesson for any exporter is to know which of its products would still have a buyer if the border shut.

Second, ownership determines options. Stelco’s sale to Cleveland-Cliffs was completed four months before the tariffs returned; had it remained independent it might have faced Algoma’s financing crisis without Algoma’s government support. Under Cliffs it has a parent with US$3.2 billion of liquidity, but also a parent whose interests lie in US plants. Investors in Canadian industrial assets should price the possibility that a foreign owner’s home-market policy becomes their biggest risk.

Third, decarbonisation and trade policy have become the same conversation. Algoma’s EAF project was sold in 2021 as a climate investment; by 2026 it is also the only route to lower costs and to the low-carbon procurement preferences that governments are writing into infrastructure and defence contracts. The companies that moved early on emissions, like those profiled in the Kurums article on Canada’s critical minerals strategy, are finding that the credential is worth more in a protectionist market than it was in an open one. Readers interested in how a parallel auto-parts story played out can turn to the Magna International profile.

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