Outlook for Q4 2022
Group stainless steel deliveries in the fourth quarter are expected to decrease by 0–10% compared to the third quarter.
The European ferrochrome benchmark price decreased to USD 1.49/lb for the fourth quarter.
Ferrochrome production continues at 50–60% of its full capacity due to a furnace shutdown and the optimization of the ferrochrome production, caused by exceptionally high electricity costs.
With current raw material prices, raw material-related inventory and metal derivative losses are expected to be realized in the fourth quarter.
Guidance for Q4 2022
Adjusted EBITDA in the fourth quarter of 2022 is expected to be lower compared to the third quarter.
Short-term risks and uncertainties
The ongoing war in Ukraine and adverse economic development have increased the uncertainties and risks to which Outokumpu is exposed. The far-reaching direct and indirect consequences of the prolonged war and the possible further adverse development of economic and geopolitical tensions could have a negative impact on Outokumpu. The cost and availability of energy and raw materials, the weakened economic outlook with slowing global growth, and continued overall cost inflation are all considered to be significant risks to Outokumpu.
As a result of the unprecedented energy crisis in Europe, electricity prices have rapidly increased and uncertainty in energy gas availability remains. These are risks for Outokumpu's operations in Europe as well and create challenges in managing the negative impacts from rising costs. Most affected is Ferrochrome business, where Outokumpu has temporarily closed one of its ferrochrome furnaces due to high electricity prices. In Germany, the tightened global energy gas supply poses a risk for the continuity of operations. High energy prices and uncertainty around energy gas supply in central Europe may also impact Outokumpu through its customers’ and suppliers’ if they are unable to continue their businesses and operations.
Raw material availability risks are mainly related to sanctions imposed due to Russia's invasion of Ukraine. These actions could expose Outokumpu to supply chain disruptions or increase costs related to the change of the supplier. The risks related to raw material sourcing in high-risk countries, including environmental-social governance risks and dependencies on certain critical suppliers, remain high. Outokumpu is purchasing a limited amount of raw materials from Russia. The exposure in Russia through receivables is non-material.
The continued rise in global inflation may constrain Outokumpu's competitiveness. This is not only due to high energy prices but also overall cost inflation, such as in freight and consumable prices.
The company is also exposed to risks related to volatile metal prices, especially nickel, which may impact Outokumpu’s result, among other financial risks. The uncertainties around possible new COVID-19 variants and cyber security risks remain as they could also impact Outokumpu’s business, cost competitiveness, and demand for stainless steel.
Outokumpu is a minority shareholder in Voimaosakeyhtiö SF, which is the main owner of Fennovoima. In May 2022, Fennovoima announced that it has withdrawn the Hanhikivi 1 nuclear power plant construction license application as a consequence of the termination of the EPC (Engineering, procurement and construction) contract with RAOS Project Oy due to supplier-related causes. In August, Fennovoima announced that it has initiated several arbitration and other proceedings against various Rosatom entities.The contractual framework of the matter is complex and lengthy legal processes are to be expected. Outokumpu is closely following the situation. The main objective for Voimaosakeyhtiö SF continues to be to safeguard the interests of its shareholders
Updated on November 3, 2022.