Outlook for Q2 2024
Group stainless steel deliveries in the second quarter are expected to increase by 5–15% compared to the first quarter. The recent political strike in Finland is expected to have approximately EUR 30 million negative financial impact in the second quarter. The scrap market is expected to remain tight. With current raw material prices, some raw material-related inventory and metal derivative losses are expected to be realized in the second quarter.
Guidance for Q2 2024
Adjusted EBITDA in the second quarter of 2024 is expected to be at a similar or higher level compared to the first 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. However, the company has taken prompt measures to manage and control these risks.
The development of the global economy, geopolitical tensions, and the continued war in Ukraine all expose Outokumpu to risks and uncertainties within its operating environment. The main uncertainties in the global economy relate to slow global economic growth, inflation, high interest rates, and continued uncertainties concerning China’s economy. Geopolitical tensions and conflicts, including the Red Sea, Israel–Hamas war and possible adverse escalations could all further disrupt energy markets and global supply chains. The consequences of these disruptions could impact Outokumpu's operating environment, business, and stainless steel demand.
The increased energy price sensitivity to the adverse geopolitical situation exposes Outokumpu to price risks. Any severe disruption or possible further sanctions 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.
During the first quarter, electricity prices declined but Outokumpu remains exposed to an increase in energy costs as uncertainties in volatility and price peaks remain for part of the consumption. Outokumpu’s energy portfolio has been hedged with more than two thirds of the estimated consumption for 2024. Possible increases in the cost of electricity would mainly affect the Ferrochrome business area due to the high electricity consumption in ferrochrome production. The activities implemented in relation to electricity optimization enable the mitigation of peaks in spot market electricity prices.
Cyber security threats, trade disruptions on raw materials and dependencies on critical suppliers expose Outokumpu to the risk of operational disruptions and additional costs. Further tightening of the scrap market could impact on the scrap price and availability.
Outokumpu does not purchase any scrap or nickel of Russian origin for its operations. At the end of the first quarter of 2024, an 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.
The EU is reviewing the safeguard measures and will conclude by the end of June 2024 if these measures will be renewed or expire. The EU safeguard measures decrease the risk of a sudden import surge. The anti-circumvention investigations initiated in August 2023 on cold rolled stainless steel from Indonesia continued to decrease the risk of imports from Taiwan, Turkey, and Vietnam.
Outokumpu Corporation has been joined in arbitration proceedings over a dispute between Fennovoima and Rosatom entities related to the termination of the EPC (Engineering, Procurement and Construction) contract. Outokumpu disputes the existence of any contractual relationship, obligation, or arbitration agreement between Outokumpu and any Rosatom entity.
For more information on Outokumpu’s risks, please refer to the Annual Report for 2023 and the Notes to the 2023 Financial Statements.