Algoma Closes in on EAF Investment Decision
“We are currently working through the last elements of this project, which will allow for our board of directors to make (the decision),” Algoma chief executive Michael McQuade told analysts during the company’s quarterly earnings call on Friday.
The Ontario, Canada, steelmaker, which is in the process of being acquired by a U.S.-based special purpose acquisition company (SPAC) that intends to take Algoma public, is weighing a switch to electric arc furnace (EAF)-based production, a move that it says will allow it to reduce greenhouse gas emissions, improve its cost structure and allow for incremental increases in capacity.
McQuade said that if Algoma proceeds, it envisions a 28- to 30-month construction phase, with first arcs to be struck in 2024. Afterward, the company would spend the next 12 months ramping up production and obtaining product certifications, operating the new melting equipping in parallel with the current production route.
McQuade said the company will be in a better position to undertake such a project, given financial commitments from the Canadian government and new capital that will come as a result of the planned merger with the Legato Merger Corp. SPAC.
McQuade also said current market conditions are helping the steelmaker improve its balance sheet.
For the first quarter ending 30 June 2021, Algoma posted net income of CA$214 million on revenue of CA$789.1 million. Algoma said the results are primarily attributable to higher shipments, strong steel demand and improved selling prices.
Shipments for the first quarter increased by 47% to 610,000 metric tons, compared to 416,000 metric tons in Q1 fiscal 2021, culminating in steel revenue of CA$765 million, up 124% from CA$423 million in the first quarter of fiscal 2021 and from CA$633 million in the prior year quarter.
“Optimism continues for steelmakers across North America. Continued strong demand in key end markets and record pricing are creating significant opportunities for participants across the industry,” McQuade said.