Steel Mills

SSAB Profits Drop Abroad and in US

October 23, 2015

Swedish steel company SSAB posted a loss of SEK 191 million ($22.4 million*) in third quarter. Earnings were down by SEK 600 million ($70.4 million) due to lower margins on heavy plate in North America, the costs of relining the blast furnace in Lulea, and negative currency effects. The company plans to cut approximately 500 jobs at its Ruukki Construction division and production site in Raahe as part of its cost reduction initiative.

SSAB Americas shipments of 505,000 tonnes (556,662 tons) increased 7 percent from second quarter but slipped 10 percent year over year. Lower prices and volumes dropped sales 17 percent year over year to SEK 3.08 billion ($362 million). Compared to second quarter, sales were up 2 percent due to higher volume which was offset by lower pricing.

Americas segment EBITDA dropped 66 percent from year ago levels. Operating profit was down by SEK 480 million ($56.3 million) from Q3 2014 due to low pricing that was partially offset by lower operating costs.

In its outlook remarks, SSAB said, “In North America, the wait-and-see sentiment in demand for heavy plate is expected to continue during Q4. Destocking at distributors is also expected to continue. Underlying demand at end-customers is expected to be relatively stable, but with seasonal downturn towards the end of Q4.”

Heavy Transport is expected to be sideways in Q4 with slowdown in the US railcar segment. Automotive is expected to remain high along with solid demand for wind towers in North America. Demand for pipelines in the energy sector remains subdued. Market demand in Construction Machinery is uncertain in the short term, with export of construction machinery from the US under pressure. No change in short term demand from US service centers is expected. Service centers inventory is returning to normal levels but destocking is still expected in fourth quarter.

Demand for steel is expected to improve in Europe and North America in 2016 but profitability for the steel industry remains low due to increased exports and low prices due resulting from overcapacity in Asia.

“Although SSAB considers free trade to be important with regard to development of the global steel industry, the current situation of unhealthy competition means measures are called for to preserve the steel industry in Europe and North America,” said SSAB in its earnings report.

SSAB Americas is a leading supplier of heavy plate in North and Latin America. Production takes place at two steelworks, Mobile, Alabama and Montpelier, Iowa. Processing and storage facilities are also available in Houston and St. Paul, as well as Toronto, Montreal and Vancouver. SSAB Americas produces ordinary heavy plate and quenched steel.

(*exchange rate 1 SEK = .12 USD)