S&P Global Ratings has affirmed its issuer credit rating of 'CCC+' on Algoma Steel Inc. and moved the outlook to stable from developing. The rating agency also maintained a 'B-' issue-level rating on Algoma's senior secured second-lien notes due 2029.
S&P highlighted mounting market pressure on the Canada-based steelmaker, pointing to a 50% U.S. tariff on Canadian steel imports and an oversupplied domestic market. Against that backdrop, the agency expects Algoma to report adjusted EBITDA of about negative C$185 million in 2026, driven by lower shipment volumes and subdued pricing. Over the 12 months ended March 31, 2026, the company recorded adjusted EBITDA of roughly negative C$450 million. Algoma also permanently idled its blast furnace operations in January 2026.
Despite the forecasted loss for 2026, S&P judged that Algoma has sufficient liquidity to bridge the period of negative cash flow. The rating agency cited more than C$100 million of working capital releases realized in the first quarter and about C$200 million of expected tax refunds later in the year as key supports. As of March 31, 2026, Algoma held C$65 million in cash, had C$195 million available under its C$375 million asset-based lending facility, and C$293 million available under C$500 million in government loan facilities.
Operationally, Algoma began steelmaking from its first electric arc furnace - EAF - facility in July 2025 and plans to commission a second EAF in the third quarter. S&P assumes that once EAF production is fully ramped up, the company will have annual raw steel production capacity of 3.7 million tonnes. That capacity increase is expected to lower fixed costs and reduce sustaining capital requirements per tonne.
Looking beyond 2026, S&P projects a return to positive adjusted EBITDA in 2027 as volumes rise and unit costs fall with greater EAF output. The agency also anticipates an improvement in the company's leverage profile, estimating adjusted debt to EBITDA will fall to just over 7x by the end of 2027, assuming the planned ramp-up of the lower-cost EAF facility and alignment of the product mix to Canadian market demand.
Contextual note - The rating action and S&P's projections reflect current company disclosures regarding production changes, liquidity sources and expected financial performance through 2027.