Outlook for Q3 2023
Group stainless steel deliveries in the third quarter are expected to decrease by 5–15% compared to the second quarter, in line with the seasonal pattern. For business area Europe, the market environment is challenging in the third quarter.
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.
Maintenance costs for the rest of the group in the third quarter are expected to increase by up to EUR 10 million compared to the second quarter.
With current raw material prices, some raw material related inventory and metal derivative losses are expected to be realized in the third quarter.
Guidance for Q3 2023
Adjusted EBITDA in the third quarter of 2023 is expected to be lower compared to the second 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 consequences of the continued war in Ukraine and the adverse development of economic and geopolitical tensions have increased the risks to which Outokumpu is exposed, but the company has taken prompt measures to manage and control these risks.
During the first half of 2023, energy prices have decreased and inflation has shown signs of slowing down. However, the global economic outlook remains uncertain. The uncertainties mainly relate to the development in the global economy, inflation, interest rates and recovery of China, all of which could impact Outokumpu's operating environment, business, and stainless steel demand.
During the second quarter, electricity prices continued to decrease. The nuclear power plant Olkiluoto-3 in Finland started its commercial production, which contributed to balancing the electricity market in Finland. Uncertainty regarding electricity price development and impacts on costs remain for the upcoming winter period. Possible increases in the price of electricity would mainly affect business area Ferrochrome, due to the high amount of electricity needed in ferrochrome production.
Gas availability in Germany remained sufficient during the second quarter but some availability and price uncertainties remain for the next winter period. 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 second 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.
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.
The EU safeguard measures were renewed by the European Commission at the end of the second quarter and they will be in place until June 2024 which decreases the risk of a sudden import surge.
In May 2023 Outokumpu Oyj was joined in 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.
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.