A bigger tariff can sound like good news for a Canadian steelmaker. Make American steel more expensive here, give domestic producers a better chance to compete, and let the orders follow. For investors, though, there’s another question: will those orders actually produce a profit?
Canada’s September 8 countermeasures increase tariffs on covered U.S. steel and aluminum products from 25% to 50%. That could help Canadian suppliers compete at home. That said, it doesn’t remove the barriers facing Canadian steel heading south, or guarantee that customers will keep buying the same amount at higher prices.
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What changes now?
The higher Canadian tariff applies to specified U.S.-origin imports. It isn’t a blanket 50% charge on every steel shipment entering Canada. Product classifications and exemptions still matter, including an exception for goods already in transit when the measures took effect.
Consider a simplified example. An American steel product with a $1,000 customs value would attract $250 under a 25% tariff and $500 under a 50% tariff. Before freight and other charges, the total rises from $1,250 to $1,500. The tariff doubles, and the resulting cost increases 20%.
My read is that this gives Canadian producers more room to win business or defend prices. However, construction companies and manufacturers also have budgets. Higher material costs can delay projects, reducing the very demand steelmakers need. That’s why investors researching Canadian stocks should look beyond the apparent winner in a tariff headline.
Where Algoma fits
Algoma Steel Group (TSX: ASTL) produces steel plate and hot-rolled sheet. Its opportunity here comes from steel, rather than aluminum. Algoma is shifting toward Canadian plate customers as U.S. tariffs restrict its export business. American shipments represented 23% of second-quarter volumes, down from 54% a year earlier. Algoma also reported a second consecutive quarter of record plate sales.
That gives the tariff change a practical connection to its strategy. If Canadian buyers replace American plate with domestic supply, Algoma stock could benefit. I’d still want to see additional orders delivered at attractive margins before treating protection at the border as a lasting competitive advantage.
Into earnings
Second-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was a positive $13.8 million. However, that included a $45 million insurance settlement and a $54.7 million capacity-utilization adjustment. Algoma stock still reported a $96 million net loss and used $79.4 million in operating cash.
Those figures make me cautious. An insurance settlement won’t repeat every quarter, and adjusted profitability doesn’t pay the bills unless cash generation follows. I’d watch whether operating cash outflows shrink as production stabilizes.
Furthermore, quarter-end liquidity totalled approximately $437 million, but only $62.6 million was cash. The remainder was available borrowing capacity. At its July results, management expected first steel from its second electric arc furnace in the third quarter. Available financing provides time to complete the transition, but drawing on it also adds obligations. For shareholders, the next production milestone matters most if it brings lower costs and less dependence on financing.
Bottom line
Canada’s higher tariffs could strengthen Algoma stock’s position at home, but I wouldn’t buy solely because competing imports became more expensive. I’d want improving cash flow, reliable furnace output, and evidence that domestic orders are profitable.
For anyone considering buying shares, Algoma stock remains a speculative turnaround. The policy support is useful, but the investment case still needs the business to deliver.
