Outlook for Q4 2023
Group stainless steel deliveries in the fourth quarter are expected to increase by 0-10% compared to the third quarter as we see some recovery in Europe.
The planned maintenance break in business area Ferrochrome is expected to have an approximately EUR 10 million negative impact on the business area's adjusted EBITDA.
With current raw material prices, some raw material related inventory and metal derivative losses are expected to be realized in the fourth quarter.
Guidance for Q4 2023
Adjusted EBITDA in the fourth quarter of 2023 is expected to be at a similar or higher level compared to the third quarter.
Short-term risks and uncertainties
Outokumpu is exposed to various risks and uncertainties that may have an adverse impact on its business and operations. The adverse development of global economy, geopolitical tensions including Israel-Hamas war and the continued war in Ukraine have increased the risks and uncertainties to which Outokumpu is exposed. However, the company has taken prompt measures to manage and control these risks.
The global economic outlook remains weak with intensified challenges in the operating environment. The uncertainties mainly relate to the development of the global economy, persistent high inflation level, increased interest rates, the possible consequences from the geopolitical tensions and China’s economic growth, all of which could impact Outokumpu's operating environment, business, and stainless steel demand.
Electricity market prices have declined throughout the year but volatility remains, which could possibly negatively impact Outokumpu's costs. During the third quarter, the nuclear power plant Olkiluoto-3 in Finland continued to contribute and balance the electricity market in Finland. The electricity area prices in Finland were affected by limitations in transmission capacity between northern Sweden and Finland as well as unplanned outages of Finnish nuclear production and low wind. Possible increases in the price of electricity would mainly affect business area Ferrochrome, due to the high electricity needed in ferrochrome production.
Gas availability in Germany remained sufficient during the third quarter with limited uncertainties for the winter period. The uncertainties are mainly related to increased energy price sensitivity to adverse events in the geopolitical situation. Gas availability is considered adequate for the winter period due to continued high gas storage levels in Germany. Further possible sanctions or disruptions in the natural gas supply could affect the prices or availability of gas for Outokumpu’s operations in Europe. Outokumpu acquires energy gases from the European market, for which Russia is one of the indirect suppliers.
Outokumpu does not purchase any scrap or nickel of Russian origin for its operations. The risk of possible disruptions in its raw material supply chain due to sanctions is considered to be limited. At the end of the third quarter, indirect supply from Russia still exists for a very limited amount of raw material, and the company is demanding that its supplier finds alternative sources globally. The company remains exposed to risks related to volatile metal prices, especially nickel. Volatile metal prices may impact Outokumpu’s result, among other financial risks.
In addition, cyber security threats and dependencies on critical suppliers expose Outokumpu to the risk of operational disruptions and additional costs. A key critical supplier dependency in this regard exists in Calvert, Alabama in the US where Outokumpu procures hot rolling services from an external party. There is an agreement in place until 2036, which, as of October 1, 2023 can be terminated by either party with a 36 months’ notice period.
The EU safeguard measures, renewed in June by the European Commission, are in place until June 2024 which decreases the risk of a sudden import surge. In August, the anti-circumvention investigation on cold rolled stainless steel from Indonesia was initiated and this is expected to immediately decrease the risk of imports from Taiwan, Turkey, and Vietnam until at least April 2024.
Outokumpu Oyj was in May 2023 joined into arbitration proceedings over a dispute between Fennovoima and RAOS Project Oy related to the termination of the EPC (Engineering, Procurement and Construction) agreement for a nuclear power plant. Outokumpu disputes the existence of any contractual relation, obligation, or arbitration agreement between Outokumpu and RAOS Project Oy.