SSAB signals reduced prices, margins in third quarter

Swedish-headquartered steelmaker SSAB remains uncertain regarding third-quarter developments in the European and US markets. Demand is expected to be weak and domestic prices remain under pressure, Kallanish learns from the company’s Q2 earnings report.

Overall, SSAB saw its profitability drop in Q2 by SEK 314 million ($33.4m) y-o-y to SEK 1,316 million, mainly due to the negative impact of weak European market performance.

“Demand in Europe weakened during the second quarter and SSAB Europe’s shipments were down compared to last year,” the group says. “This was primarily due to weaker demand from the automotive industry. Operating profit dropped to SEK 66 million from last year’s SEK 907 million. A sharp rise in iron ore prices and weaker steel prices have resulted in exceptional pressure on margins on the European market.”

While currently the outlook remains uncertain for both Europe and the US, SSAB saw second-quarter profit increase significantly in the USA to SEK 872m, from SEK 365m in Q2 2018. “This improvement was driven by significantly higher realized prices and lower scrap metal prices compared to the second quarter last year. Demand was good in most customer segments, although the sentiment at distributors is cautious,” the company observes.

To tackle the uncertainty for Q3, SSAB is set to take a number of flexibility measures, including the temporary stoppage of the smaller blast furnace at the Oxelösund mill in Sweden (see related article).

“Prices realized by SSAB Americas and SSAB Europe during the third quarter of 2019 are expected to be lower compared with the second quarter. Prices realized by SSAB Special Steels are expected to be somewhat lower during the third quarter. Continued higher iron ore costs will have a negative impact on margins during the third quarter, mainly for SSAB Europe, but also for SSAB Special Steels,” the company concludes.