Finland’s Outokumpu maintains normal steel operations despite rising power prices: CFO

Outokumpu’s stainless steel operations are currently running normally despite rising electricity prices, Chief Financial Officer Pia Aaltonen-Forsell said in a blog published on the Finnish company’s website Aug. 31, adding that it is adjusting its ferrochrome production to avoid smelting at peak hourly rates.

The stainless steel producer is well hedged from rising electricity prices in the short term, but the hedging percentage may decline in the long term, she said.

The company has hedged a significant amount of energy for this year through long-term contracts and fixed-price contracts, as well as partial ownerships in some energy utilities.

Its focus on energy efficiency and on growing the share of low-carbon energy, instrumental in lowering carbon emissions in the first place, is now also useful to address energy price inflation, the CFO said.

Outokumpu has already signed three new long-term wind-power contracts, which cover a significant part of the electricity needs of its sites in Kemi, Finland, and Germany.

The electric arc furnaces at its mills, although equipped with the best available technology, use large amounts of electricity, and electricity accounts for more than half of the company’s energy consumption, Aaltonen-Forsell said.

To keep this to the minimum, the company is optimizing the most energy intensive part of its operations, production of ferrochrome, she said. This accounts for 55% — versus stainless steel’s 45% — of the company’s total electricity consumption.

Outokumpu is now avoiding the worst peaks in electricity rates by suspending ferrochrome production in hours when electricity prices are the highest, she said.

The impact of this optimization on other operations has been limited, and stainless-steel production continues at a normal level, she added.

“We have several mills in Europe, and can switch stainless steel production from one mill to another [to work around] local energy restrictions, if needed,” said Aaltonen-Forsell.

However, she added that the situation in the European energy market is worrisome for private consumers and companies alike, saying that Outokumpu has prepared for various scenarios, and the winter ahead, which is expected to be difficult.

Outokumpu has previously informed the market that it expects energy costs to increase in the July-September quarter, but if there are disruptions in energy availability or if the electricity price keeps on rising, there could be an impact on its production volumes, Aaltonen-Forsell said, adding that any decision on the possible shutdown of production would be the sum of many factors, including the level of demand and production.

Some other European mills are already temporarily idling furnaces due to high energy prices, according to various market sources.

— Ekaterina Bouckley