Improved profitability while progressing on EVOLVE growth strategy
In the second quarter, European stainless steel demand remained broadly unchanged. Market dynamics were supported by the Carbon Boarder Adjustment Mechanism (CBAM) and the steel safeguard measures that came into force on July 1, 2026. Further, the European Commission is currently reviewing the EU Emissions Trading System (EU ETS) for the period 2031–2040. The proposal, published on July 17, 2026, maintains the EU ETS as the core mechanism to price emissions and drive investments in cleaner technologies. The proposal also introduces adjustments to elements such as the trajectory of free emission allowances and the Linear Reduction Factor (LRF). Outokumpu highlights that it is essential to preserve a strong and predictable carbon pricing framework that rewards investments in industrial decarbonization while ensuring a level playing field for low-carbon production.
In the US, underlying market demand has been more robust, especially in industrial end-use segments like data centers and energy. The Mexican market also showed further signs of improvement. As I am writing this, the USMCA negotiations continue with the third round between the U.S. and Mexico.
In the ferrochrome market, charge chrome producers in South Africa have reached an agreement on electricity price support. The production is expected to be ramped up towards the end of the year, and such subsidized production could impact the supply and demand balance of the market. We remain confident in the robust demand for our low-emission European ferrochrome. At the same time, we continue to expand our ferrochrome product portfolio into specialty grades.
The conflict in the Middle East is adding to market uncertainty, weighing on economic growth and driving up energy and freight costs. The direct impact on Outokumpu’s second quarter result has been limited, mainly related to higher freight costs.
In Q2, our adjusted EBITDA increased to EUR 100 million from EUR 65 million in Q1, mainly driven by improvement in business area Europe, while strong performance in business area Americas continued and performance in business area Ferrochrome further improved. Our financial position remained strong, and net debt decreased to EUR 224 million.
Our EVOLVE growth strategy is progressing. We are now starting the investment program in our Advanced Materials business to expand to high-nickel alloys, which provide attractive global growth, higher margins and resilience. We have decided to execute this investment at our Avesta production plant in two phases as it accelerates time to market and improves the investment case to reach an internal rate of return above the set 20% hurdle rate for transformative investments. In the first phase, we will invest EUR 30 million to install an electro slag remelting unit in the current melt shop, optimize the process and conduct a detailed engineering study for the second phase to confirm the total capex estimate of EUR 150 million. The second phase would include a greenfield investment in new melting and casting capabilities to further expand our high-nickel alloy product portfolio.
We also continue to advance the scale-up of our proprietary technology to produce low CO₂ enriched ferrochrome and chromium metal. What began as a focused technology development initiative is now evolving into a future-oriented business platform for growth. Led by our technology organization, the recent publication of the first patent applications covering key process elements marks an important milestone in this journey.
Outokumpu is the global sustainability leader in stainless steel. During the second quarter, Outokumpu was recognized by TIME and Statista in the World’s Most Sustainable Companies ranking. On safety, Outokumpu works every day towards zero incidents. In Q2, the total recordable incident frequency rate (TRIFR) improved to 1.4, while for the first half of the year it was 1.6, close to our full year target level of 1.5.
As always, I want to thank our employees for their dedication and drive to advance our strategic goals, our customers for their loyalty and business, our suppliers for their valuable collaboration, and our shareholders for their continued confidence in us.