Algoma Steel Announces Final Investment Decision for Electric Arc Steelmaking

Dual furnaces to provide more liquid steel to match downstream finishing capacity.
Transformation is expected to reduce carbon emissions by approximately 70%, positioning Algoma for long-term growth in the increasing market for green steel.

SAULT STE. MARIE, Ontario (GLOBE NEWSWIRE) — Algoma Steel Group Inc. (NASDAQ: ASTL; TSX: ASTL) (“Algoma” or the “Company”), a leading Canadian producer of hot and cold rolled steel sheet and plate products, announced that its Board of Directors has authorized the Company to construct two new state-of-the-art electric-arc-furnaces (EAF) to replace its existing blast furnace and basic oxygen steelmaking operations. The transformation is expected to reduce Algoma’s carbon emissions by approximately 70%.

Following the transformation to EAF steelmaking, Algoma’s facility is anticipated to have an annual raw steel production capacity of approximately 3.7 million tons, matched to Algoma’s downstream finishing capacity, and is also anticipated to include new vacuum degassing capability to expand Algoma’s offering of steel plate grades.

“We believe that today’s strategic decision to transition Algoma to electric arc steelmaking represents a win for all of our stakeholders. It is designed to transform Algoma into a more agile and profitable company, positioned for long-term growth as an economic driver and employer of choice in our community. Once complete, it is projected to deliver three million tonnes of annual CO₂ reduction, placing the project among the highest impact investments in greenhouse gas reduction in Canada,” said Michael McQuade, Algoma’s Chief Executive Officer. “The Board’s decision recognizes that Algoma’s sustainability and Canada’s path to net zero carbon emissions are aligned. You cannot get to net zero without steel, and in becoming a leading provider of green steel in North America, Algoma intends to be part of the solution.”

“Today’s decision is the outcome of hard work and decisive actions over the past two years,” Algoma Board Chair Andrew Harshaw added. “As a Board, we have a duty to carefully evaluate investments that may benefit long-term growth and create value. We believe that we have done so and are confident about the significant benefits that this transformation is expected to bring for the Company and its stakeholders. I congratulate Mike and the whole Algoma team for arriving at this exciting milestone.”

The Company believes this planned growth investment will provide a number of key competitive and strategic advantages:

• Lower conversion cost structure more correlated to market pricing drivers
• Lower carbon tax liabilities
• Lower sustaining capital investments
• Flexible production, scalable to market conditions
• Reduced single furnace risk through dual furnace strategy
• Enhanced product quality and diversification
• Positions Algoma as an attractive Environmental, Social, and Governance (ESG) investment

Algoma has employees and leadership with experience constructing and operating EAF steel mills in addition to downstream value-add finishing lines. Coupled with Algoma’s current investments in the Direct Strip Production hot rolling mill and its modernized plate mill project, the Company believes the enhanced capabilities expected to result from the EAF transformation will position Algoma as a competitive, energy-efficient, lower environmental impact steelmaker.

The Company plans to invest approximately CDN$700 million in the EAF transformation, funded with previously announced financing commitments and the proceeds related to the Company’s recently completed merger. Algoma anticipates a 30-month construction phase for the EAF facility, coming online in 2024, and expects to transition away from blast furnace steelmaking thereafter as more electric power on the grid supplying Algoma becomes available.

In preparation for the EAF transition, Algoma has been actively engaging with key stakeholders, including employees, community leaders, suppliers, and union representatives. Algoma is also partnering with regional academia to create a system of multi-generational supports to provide new skills training to Algoma’s current employees and to build career pathways for regional youth in science, technology, engineering and mathematics (STEM) subjects and the trades in preparation for the advanced manufacturing jobs of tomorrow.