SSAB AB (publ) (SSABA) Earnings Call Transcript & Summary

Good morning, and welcome to this presentation of SSAB Q3 report. My name is Per Hillstrom. I'm the Head of Investor Relations at SSAB. And presenting today, we have Martin Lindqvist, President and CEO; and also Leena Craelius, CFO. And if we have a look at the agenda, we can see that Martin will start. Yes. Sorry, here we have the agenda on the screen as well. Martin will start as usual, overview of the quarter, and then Leena comes -- have a deeper look at the financials and then Martin closes with outlook and summary. And then we will also open up for questions at the end. So by that, the floor is yours, Martin, please.

Thank you, Per. And just let's dive into it. If we start with the transformation, it's moving on according to plan in Oxelosund. And this is a picture from yesterday. We have started now to erect the building for the electric arc furnace, and that project is ongoing. And as you know, we will build the new electric arc furnace. We will close down the coking plant and the 2 blast furnaces, but we will keep the existing advanced rolling mill and Q&T line. So it's moving on according to plan. In Lulea, we are more in the preparation phase for the mini-mill, and that's ongoing. The next big step will be the environmental permit, and we are foreseeing that in Q4 to get that environmental permit, but until then, it's more about the preparations. And just as a reminder, why do we do this? We do the transformation because we want to build a more flexible production setup with lower costs and a bigger portion of variable costs and lower portion of fixed costs. We want to, with Lulea investment, increase capacity for high-strength steels and premium steels. We have the ability with this new mill to shift the product mix with 1 million tonnes and that is very important because we see that also in Q3, and I will come back to it. We see much more stability when it comes to prices and earnings from niche products compared to more standardized deal. So that's one other important aspect. Then of course, elimination of CO2 emissions from our own operations, having the possibility to take away quite a few million tonnes of carbon emissions that will be very costly for us in the future. And then, of course, meet the growing demand of emission-free steel products or more environmental-friendly products. But it's also about avoiding both in Oxelosund and in Lulea, avoiding to invest in old technique and in mills that are mainly built during the 60s. And in the Swedish strip system, we have the blast furnaces and the steel shop up in Lulea and then we have the rolling mills and everything else in Borlange and that requires a lot of transportation, a lot of working capital. And we have 900 kilometers between the slab machine and the reheating furnaces in Oxelosund or in Borlange. So that would also be a huge difference. And the segments where we see a strong and increasing demand for emission-free steels is automotive, heavy vehicles and construction machinery, construction and industrial equipment and distribution partners and consumer products. So, so far, so good. We are moving on according to plan. And the next big step will be the environmental permit in Lulea and that would be hopefully then, and we are very hopeful for that in Q4. If we then move into the quarter, I would summarize the quarter as a, I would say, decent or strong quarter in a very demanding market, also impacted by planned maintenance. We had a cost of SEK 950 million in Q3. We had the semiannual maintenance stop in Montpelier, and we also had other maintenance stops. So we -- as we discussed last time, we put them a bit forward, especially in the U.S. because the market fundamentals were better to have the outage in Q3 than later. If you look at safety, which is one of our many very important KPIs, we continue to become safer and safer. This is the LTI frequency per million working hours, including contractors. We are now at 0.82, we are not where we would like to be at 0, but we have some of the major sites being at 0 since a couple of years and then you always, of course, need to knock on wood, but continued good development when it comes to safety. When we look into Q4, the focus areas will be, of course, to finalize the planned maintenance in Q4 and adjusting production to lower apparent demand. Utilize the framework we have introduced in Sweden and Finland for flexibility working hours. In the U.S., we have a slightly different setup with more, call it, flexibility in the pay structure. And then, of course, as always, when the market is a bit tougher, very restrictive approach to cost. So I would say, nothing new, but the usual things we do and implement when the business cycle is a bit tougher. If we dive into the divisions, Special Steels, weak market in Europe, more stable demand in the rest of the world. I think that the earnings are still on a good level. Price is very stable, and they should be stable over time, up 1% compared to Q2 '24. So I would claim that very good pricing management during weak conditions. It's a good profitability given the circumstances. If you look at Europe, we as always see a seasonal slowdown versus the second quarter and also a weaker apparent demand in Europe. Fairly stable prices versus second quarter and also, of course, the usual impact from the maintenance outages, which are typically done during Q3 and beginning of Q4. So, all in all, I would say, a positive result, but on the low side given the apparent demand and the seasonal slowdown and also the planned maintenance. If you look into Americas, cautious market, as I said, the maintenance in Montpelier, the semiannual maintenance were done during Q3. Prices came down compared to Q2 with 8% from still a very high level, but still came down 8%. The maintenance -- the cost of the maintenance was about SEK 450 million. And I would say, in line with our external expectations. If we look at 2 daughter companies, Tibnor and Ruukki Construction, there was, of course, Ruukki Construction, impacted by the underlying still very weak construction market. We have been focusing a lot on the renovation segment, which is slightly better than new buildings. We clearly see the positive effects from the cost-cutting program, which is on a yearly basis, around SEK 150 million. So we see that if you compared to a year ago or if you compared to Q2. In Tibnor, shipments was impacted by seasonality in a weak underlying market and weak apparent demand. The difference between Q3 '23 and Q4 -- Q3 '24 was a combination of lower inventory losses compared to a year ago, but also here positive effects from cost savings. So with that, Leena will take you through some more details when it comes to financials.

Thank you, Martin. And I'll try to be brief so that you have a chance to ask questions last time from Martin in his current role. But let us start the financial analysis by looking at the steel shipments, which is on top of the graph on the right. This is the sum of all the steel division shipments. And in Q3, the shipments were 1,457 kilotonnes. As already mentioned, you can see from the graph that the seasonality has an impact in the Q3 being lower than Q2 throughout the year. But as the header says, the market sentiment in Europe was rather weak and turned more cautious also in the U.S. Already mentioned the maintenance outages. We have maintenances during Q3 and 4 and this year, we had maintenance outage in Montpelier mill, impacting the Americas division. And that's good to bear in mind when we do the year-on-year comparison as we didn't do that last year. And then in case of Europe division, we had outage in Lulea and Borlange. And also in the case of Lulea, we had a bit more extensive maintenance this year. The similar scope maintenance we've done last time in 2015, so that we don't do also every year. Oxelosund was starting the maintenance outage at the end of the quarter. And already last time we released the results, we mentioned that the production pace has been reduced somewhat to balance with the demand, and we continue to do that also during Q3. So the shipments compared to Q2 were 11% lower. And if we do a bit of a comparison with the outlook we gave, we were in line with Special Steels being 10% lower. Europe division was slightly lower than the outlook we gave with 13% lower shipments, while the Americas was slightly better, being 9% lower when we were indicating significantly lower volumes. Compared to last year, the shipments were 3% lower, which is then reflecting the market sentiment. The revenue graph next to steel shipments, revenues, SEK 24.4 billion in Q3. The reduction compared to Q2 was 14%, shipments being 11% lower, having a big impact, but also prices coming slightly down. And then if we do the comparison of revenue with the previous year Q3, the reduction is 17% while the shipments were 3% lower, it is indicating a clearly lower price level compared to last year. EBITDA, Q3 this year, SEK 2.3 billion, a reduction of SEK 1.7 billion compared to previous quarter and then a reduction of SEK 3 billion compared to last year. But let us look into more details. First, comparing Q3 with the previous quarter. And this is comparing operating result, SEK 1.2 billion in Q3 compared to SEK 3 billion in the last quarter or previous quarter. Deviation, negative deviation reflecting the story already told, the prices, volumes, variable cost and capacity utilization having a negative impact, while the fixed cost having a positive impact. If we first look at the prices, SEK 690 million negative impact. A majority of this is, of course, coming through the Americas and Special Steels and Europe already mentioned, were stable in this quarterly comparison. Volumes being lower, SEK 842 million negative impact. Now here, the biggest contribution is coming from the Europe division, lowering volumes with 13%. And then also Americas with 9% and Special Steels, 10%. But the biggest portion coming through Europe division, while the Ruukki construction being the only division with some higher volumes quarter-on-quarter. And the variable cost, here also the biggest contribution is coming through the maintenance outages. Fixed cost, seasonally, we always see this kind of a positive impact in this quarterly comparison. The positive impact with the holiday season, we did some minor adjustment to the bonus programs and also some minor impact of the FX here. And the capacity utilization already mentioned coming through the maintenance outages, while we didn't have any of those during the second quarter. Then, in the comparison with the previous year, already indicated that the biggest impact is clearly coming from the prices, negative impact of SEK 3.5 billion. Special Steels and Europe division, they were both 5% lower in the average prices. Contributing then, Special Steels, SEK 0.7 billion and Europe, SEK 0.8 billion and Americas prices were 24% lower, thus the biggest contribution, SEK 1.8 billion coming through that. Volumes 3%, 53 kilotonnes lower than last year. And here also, the majority of this coming through SSAB Americas, 300 of that is coming from Americas, Special Steels, 70, Europe, 10, Tibnor, 10 and Ruukki Construction already mentioned, having a positive impact of 30 in this. Positive impact with variable costs, SEK 675 million, and the majority in this case is coming through with lower raw material costs in the Nordic mills, which is then offset with the maintenance outage costs in the U.S. Slightly lower fixed cost, and here, we have a positive impact with the FX bonus accrual adjustments and already mentioned the cost savings in Tibnor and Ruukki Construction. And the capacity utilization also, more extensive maintenance, as already discussed. If we then have a look at the cash flow, quarterly performance comparison year-on-year. Earnings, yes, lower. And the release in working capital, slightly less positive than last year. The maintenance CapEx on similar level. But if you look at the year-to-date figure, you can see that the R&D investments is on a higher level this year than last year. And the other item, the negative item in Q3, that is majority related to purchase of CO2 emission allowances. That was done in Q3 this year. Last year, we did it during Q4. That's why the deviation in that line. Still positive impact in the financial items, interest income and then the strategic expenditures, quarterly comparison already illustrating that, that is on a higher level. And if you look at the year-to-date figure, you can see that clearly higher and naturally related to Oxelosund and also, to some extent, Q4, we will have a higher spend in Lulea project as well. So the cash flow before dividend, positive, quarter and year-to-date. And as a reminder, the dividend payout was SEK 5 billion and share buyback program impact this year during Q1, was this SEK 1.2 billion. Net cash position at the end of Q3, SEK 13.3 billion. That is still well in line with the financial targets. And the main deviation with the end of '23 is the dividend payout, SEK 5 billion, and the share buyback program, SEK 1.2 billion. CapEx plan for this year. We have not changed this since last time we showed it. Still, plan is to spend SEK 6.3 billion when it comes to R&D and strategic CapEx. Year-to-date, we have spent SEK 3.5 billion, but the forecast is higher in Q4. So there will be more spend in R&D and strategic going forward. Raw material, this is illustrating the iron ore, coking coal price development. Iron ore as well as coking coal prices have gone downwards during Q3. And since China announced their stimulus package in September, the prices started to go upwards. And the outlook is that the Special Steels raw material cost in Q4 is somewhat lower compared to Q3 because of the low price inventories while the Europe division, the cost will be stable. And the reason being that the Lulea will be hit by the increasing price of iron ore sooner than other mills. They don't have the pellet inventory. And then if we look at the scrap price, it has moved sideways during summer months in the U.S. Expectation is that it would start to go upwards, indicating that the raw material cost for Americas would be somewhat higher during Q4. Just to remind, the maintenance cost as this table illustrating Q3, we had more maintenance than what we have planned for Q4. In Oxelosund, we started maintenance at the end of Q3. And majority of that will be done during Q4. We will have maintenance in SSAB Europe in Raahe. And as a total, Q4 will sum up to SEK 700 million. And compared to previous time, we showed this, we have done some minor update to the cost. So it will be SEK 1.65 billion for the full year. But then back to Martin for outlook and summary.

Thank you, Leena. So if you look at the different segments, they are either neutral or weak. If we start with heavy transport, we see a slowdown of heavy truck production in Europe, and that continues. We see a stable trend for railcars and shipbuilding to important segments for our U.S. operations. Automotive, yes, the European market is weakening and the U.S. market is a bit more stable, but we still continue and expect to continue to structurally grow the advanced high-strength steel markets for us. So increasing volumes when it comes to this advanced high-strength steel -- martensitic steels for mainly cold forming. Construction and machinery, weak demand in Europe and a slowdown in North America. China, more stabilizing. Material Handling, we see and foresee a fairly stable demand within mining, energy, good demand for wind power and other renewables, especially in U.S. Construction continues to be weak. It has been weak for a while. Renovation market is slightly better than new production, but it will continue in Q4 to be weak. And then Service Centers, the big swing factor, well cautious approach, both in Europe and the U.S. If you look at the inventory levels amongst steel service centers, both in, I would say, Europe and in the U.S., the inventory levels are on the lower side. So steel service centers are going from hand to mouth and at some point, they need to see some restocking. So all in all, I would say, neutral to weak looking into Q4 with the exception of the energy-related business, especially in North America. And when we then guide for the outlook, as Leena said, we will have a planned maintenance in Oxelosund and in Raahe in Q4. We guide for somewhat lower shipments in Europe and Special Steels and higher shipments in the U.S. because of the outage was done in Q3. When we look at realized prices, we say somewhat lower in Special Steels and lower in Europe and Americas. And this is, of course, an effect of spot prices and also what we typically see somewhat of a lag effect when spot prices move and until we see it in our P&L. So if I would sum it up, strong focus on safety is yielding results. We are not as said, but we want to be at 0, but we are slowly and steadily getting there. And we have some very good examples, one is the Raahe, where we had a number of years now without lost time in injuries. Good levels of earnings in Special Steels. We have been focusing the last couple of years on pricing management, which has also yielded results. The investment program for Lulea and Oxelosund continues. And we are as said, targeting substantial benefits when it comes to cost and flexibility. The platform to further increase our mix with 1 million tonnes, more Special Steels, more Q&T products, less standard products. The possibility to eliminate CO2 emissions from our operations and also the possibility to meet the growing demand of emission-free products. And we see that also already in automotive, where we are coming into more and more new platforms in advance of also building up the fossil-free steel production. So my last slide is something that Per presented to me. I was a bit not willing to show this, but then I realized that it's quite funny. I've been releasing 55 interim reports as a CEO. And then before that, I had a couple of years in the line organization, but also in addition, 29 interim reports as the CFO. So after 84 interim reports, me standing here either as the CFO or a CEO, you will at last get rid of me, but I want to thank you all and many of you have had contact since I was the CFO. So I just wanted to show this and say thank you. And with that, Per?

Thank you, Martin and thank you Leena. Then we can get ready here for the Q&A. And just as a reminder, it's perfectly fine to ask more than one question, but please state them one at a time to make the process a bit smoother here. So by that, I can ask the operator, please if you can present the instructions.

[Operator Instructions] The question has come from the line of Adrian Gilani from ABG Sundal Collier.

Yes, I'll kick off the Q&A for your 84th interim report. I just wanted to touch on the -- you said that you want to structurally grow with the automotive high-strength steel volumes. And you, of course, done well to outgrow the overall automotive market this year. But in terms of the near-term outlook, do you see a risk of a significant drop in these volumes in the coming quarters?

I think over time, we will continue to structurally grow those volumes in that market. I mean we have been -- in Borlange, we have this quite unique line -- the continues annealing line, and we are constantly developing better and better grades, better and better energy absorption, lighter and lighter possibilities. We see possibilities also within safety. For Automotive, we are seeing battery protection also. How it plays out a certain quarter is always hard to predict, but over time, we expect to continue to grow these volumes. So we know that now they're into a number of new platforms in the coming years. So the volumes will over time continue to increase.

Understood. And then I guess your view on sort of the typical restocking cycle that we tend to see in the first quarter of the year. How do you view that going into 2025, considering we are in a weaker market? Do you think we will see the typical restocking or more hesitancy among distributors and customers?

It's always hard to predict the future, but what we typically see is that we see restocking in Q1, and we have seen that in the last couple of years, and will of course be dependent on the underlying market. But as soon as prices start to show any signs of moving up, we will see restocking and better apparent demand. And I mean if you take hot-rolled coil prices in Europe, they are at very low levels compared to what we have seen in the last year and also compared to, call it, the marginal costs when you need to take into account also cost for emission, right? So, one could expect a restocking in Q1.

Okay. And a final one for me. I mean, your largest owner, LKAB, they announced yesterday that they're passing their green sponge iron plants in Gallivare and I understand you're not dependent on sponge iron, you can always use scrap for your EAFs, but does LKAB changing their plans have any impact on you and how you sort of evaluate your transition?

We take 100% of our volumes from Gallivare, what they internally called the Southern systems, I don't have a view on Kiruna because we're not taking volumes from there. But they also said that they continue with the transformation in Gallivare. So no changes for SSAB.

The question has come from the line of Alain Gabriel from Morgan Stanley.

Martin, just want to wish you also the very best in your next adventures. I have 2 questions from my side. First one is on the permitting at Lulea. You mentioned that you expected the permit in Q4, but we are 6 or 7 weeks effectively left for the quarter. How confident are you in receiving that permit? And in case you don't, what does that mean for your spending in 2025? That's my first question.

No. But of course, we need an environmental permit to really start to build and it's impossible. Yes, we are into the fourth quarter. And I mean, no one really knows, of course, but we are very positive that we will -- and hopefully that we will get the needed environmental permit during Q4.

I guess if you don't get it, what would that mean for the spending?

Then we can't start the project. So we need an environmental permit to start to build. It's impossible in Sweden to do anything before we have the environmental permit. But maybe famous last words, but so far so good, and there is nothing pointing in that we won't get it, but we don't know yet. But as I said, we are hopeful, and we need the environmental permit to start the project.

My second question is on the recently received grant for more than EUR 100 million. Should we see this grant as an orphan grant? Or do you think this is the start of a few more to come to fund your decarbonization plans? How should we think about these plans that you are receiving?

I mean the final decision is not taken yet. It was a positive, call it, the signal or decision from EU. And now formally, it needs to be taken also by Sweden [Foreign Language] and we will come back to that when they take that decision. And then what comes next remains to seen and we'll come back as soon as we have more information.

The question has come from the line of Krishan Agarwal from Citigroup.

All the best to Martin for the next adventure. I have a few questions. I'll take one by one. The first question is on raw material costs. So can you confirm that the raw material cost in the Europe is going to be stable? Does that mean that there is a lag effect for the raw material cost decline to come through? Is it coming into the Q1? Or you've already seen that cost decline during Q3 for the Europe?

In case of Europe division, yes, we have actually winter stocking taking place in the nordic mills for the coking coal, secure the ice security or the situation in winter. So we do have quite substantial coke inventory. So we are consuming during Q4, that material. And then when we are buying new material, there is a lag definitely in the impact of coking coal. With the pellet prices already mentioned in Lulea, we don't have inventory. So there, the impact will come rather immediately. And if the prices start to go up and continue to go up during Q4, there will be impact in Lulea's case. In Raahe, we do have inventory for the pellets. So there, the delay is approximately 1 quarter lag with the pellet. And with the coking coal, the lag is even longer, it's 1.5 quarters. So you're absolutely right. The impact will come later.

Okay. And then does that mean that the raw material cost and the pellet cost for Raahe in the Q3 was lower?

I would say that it's stable or somewhat lower now during Q4.

Okay. I understand. And then my next question is on the CapEx. I mean you've maintained the guidance for this year, and then you're saying that the CapEx probably will peak in 2026 and '27 and I appreciate that you don't discuss the exact numbers for the next year and the year after that. But is there any way you can give us a sense that where or what will be the ranges for the CapEx to peak 2026 and '27, just kind of medium term CapEx directionally.

As it's already illustrated on the slide, the peak in the CapEx is '26/'27, it will go up during next year, and we will actually then give more outlook for '25 during next result release. But as said, still quite many moving elements so we don't want to disclose the figures or more detailed figures.

I understand. And next question is mostly on the Special Steels. I mean, the margins for the last, I would say, 8 to 10 quarters have continued to be higher. And then if you look back the history of last 5 to 7 years, there is a clear kind of a rerating going on in pellet specialty margin. How comfortable you would be -- or how confident you would be to say that these margins are structurally related and unsustainable in a longer period of time versus the margins you had 5 years back?

If you take Special Steels, it's 2 things. I mean, first, I would say, the last couple of years, I would call it a better pricing management so you see more volumes maybe fluctuating a bit, but stable prices. And that's a combination of better pricing management, but it's also a combination with an improved mix. There is a huge difference between different products in Special Steels as well if you take Hardox 450 and then compare it to Hardox 500 Tuf, which is a product that is now growing quite a lot. The margins and the prices are better for 500 Tuf compared to 450. If you go back a couple of years, we were selling 400 vinyl material, Hardox 400, that's not the case anymore, that's for us, more -- I wouldn't call it a commodity, but more commodity-like. So it is about also moving the mix within Special Steels, more and more advanced products every year, and that typically takes a number of years to start to ramp up. But I think Hardox 500 Tuf is one of very good -- quite a few good examples. So it's about mix and quality pricing management. And we see that in Europe as well, fairly stable prices. Yes, there is a lag effect, but also a mix effect. And the mix effect is very important and over time quite substantial as well.

The question has come from the line of Tristan Gresser from BNP Paribas Exane.

The first one is on Europe. When you look at the production adjustment measures, what exactly do you have in mind? I think very early last year when the market was pretty bad, you decided against keeping a blast furnace idle. So what is your view on the market right now? Does it warrant some more prolonged blast furnace shut down? And also in Europe, just a quick follow-up on that. Given the stable cost outlook, would you expect the division to remain profitable in Q4?

We are not guiding for absolute figures. But I mean, we have over the years now worked with quite a few things to -- internally, we call it improved low point profitability. It is, of course, as we have discussed already about improving the mix, and that's something we can drive to a large extent, I would say, ourselves. But also in, call it, a rigid system with blast furnaces and coke oven batteries introduce flexibility. We have this Tuf system, which is time banks in Sweden. Now we have introduced it in Finland as well. So we have possibilities to be flexible when it comes to fixed costs and manning. So a lot of, call it, small but very important step that we have been constantly introducing the last couple of years that will pay off in a tougher market situation which we will continue to do. And you will see effects of that in Q4, you see effects of it in Ruukki Construction and Tibnor already. So it's a combination of, I mean, structural things, but also flexibility measures. So what we try to do is to every cycle improve slowly but steadily what we call low point profit.

Okay. That's clear. And the blast furnace outage at [ HIO ], when did it start? And how long should it last?

We haven't taken any decisions regarding the blast furnaces. And that will, of course, remains to be seen what happens with the market. But we haven't communicated anything or taken any decision. So we stick with our for the time being, flexibility measures and the mix improvement, and I mean the only thing we know is that the business cycle goes up and down, and the important part is to come out in relative terms, better and better during each downturn and use the measures we have introduced and the measures we have.

Okay. Sorry. I thought [ HIO ] was part of the planned maintenance in Q4?

The maintenance is in the plate mill.

In the plate mill, yes.

Yes, not in the blast furnace.

Okay. Got it. And then in the U.S., I think last time when we discussed, you said you expected some -- maybe some positive inflection in Q4 and now with more visibility to year-end, do you still think that it's possible before year-end? And if you can comment a little bit, I mean, plate metal spread have continued to drift lower, which particular end market has been that weak? Or is it more a question of more supply coming in to the market? And just for the sequential bridge into Q4, you have the alleviation of the maintenance outage from Montpelier. Do you think that's going to be enough to offset the spread compression into Q4?

What we are guiding for in U.S. for Q4 is higher volumes. And the obvious reason for that is that we don't have the maintenance outage, and we are guiding for a bit lower prices. So I don't know when -- what will happen in Q1, but we have a certain visibility or decent visibility into Q4, and that's what we are guiding for. And then we'll see what happens going into 2025. But as I said, I mean, the big swing factor is, of course, the Steel Service Centers segment, they are even more important, call it, in the U.S. market or a more important player than in the European market. So it is also about the swings in apparent demand and when they realize with fairly low inventory levels when they think that prices are starting to go in a different direction, they will act accordingly.

Martin, all the best for what comes next.

And the question has come from the line of Tom Zhang from Barclays.

Two from me. So actually just touching on that, Martin, you mentioned the sort of Service Centers. I see in the end market outlook, you downgraded them kind of from neutral to neutral/week. To be honest, already thought the buying for Service Centers was already very soft. So question one is how much weaker did it really get? And did it improve at all after this kind of China stimulus, particularly the move up in iron ore and coking coal?

So I wouldn't say it's weaker than what we see now. But it is already weak, and we expect it to continue to be weak/maybe neutral. So they are, if not sitting on their hands, but at least consuming from hand to mouth and have been taking down inventories. We see that in the statistics. So we expect them to continue to be hesitant in Q4 or until we see a different direction of steel prices. So we are not saying that it's really weakened, but we say it's a weak market. Apparently...

Maybe I was reading too much into it. Just in your presentations, you obviously have this outlook slide, and it's gone from neutral to neutral/weak. So I was just curious if things got any worse?

Maybe I was a bit -- my explanation wasn't that good then, but I apologize for that.

Tom, remember also that the yellow for Q3, that was an estimate. I think the market has probably been a bit weaker now in Q3. So that could also explain some of the...

So you're actually saying that we were wrong.

Slightly wrong.

Okay. And then sorry, just the other question was on the mix. I think you guys talked a bit about the Europe mix. But if I look in the release on the third page, it sort of says there's 0% impact from product mix at group level versus both Q2 and versus last year. So I think you talked about European mix being better. Was mix worse in the other divisions that sort of offset that? And how do you expect mix in general to kind of change into Q4?

That's very rough calculation. What we have in the table, I would say that it was neutral in that analysis. But for sure, we have seen the improvement and the automotive volumes have been really, really strong and performing really well. So that's a proof of the good mix improvement. So the table and the calculation is on a very rough level. So maybe not to make conclusions based on directly from that.

And it's always hard also to draw a conclusion out of a single quarter. But what we strongly believe is that we will continue over time to see a better and richer mix over time, then it can go up and down a bit between quarters. But if you look at it in the history and also in the projections going forward, we will continue to grow the mix of advanced high-strength steels and Q&T.

But into Q4, that sort of reversal in the auto mix feels likely in Europe, is that right?

Automotive into Q4. Yes, it will be probably a weaker market, yes.

Yes.

The question has come from the line of Johannes Grunselius from DNB.

Yes. A couple of questions from me. I'm going to start with Oxelosund linked question and your latest thoughts on the green steel premiums. I think, Martin, you have said earlier that you have talked about like EUR 300 per tonne green steel premium. Is that still a relevant number? And I mean, how should we think about in the initial phase when Oxelosund EAF is producing, should we apply a sort of a significant premium on those volumes? That's my first question.

No. But the volumes we sell today, which is mainly SSAB zero. The steel produced in Americas with -- using biogas, biocarbon and fossil fuel electricity. I think we are up to close to 100,000 tonnes now since we started that, we still apply that premium. When it comes to, call it, hybrid steel or fossil-free steel, we have still -- we are still using the small plant we have up in Lulea. So I would say fairly limited volumes, but also applying a premium on that. How that will look over time is, of course, hard to tell in the long run. My hope and belief is that we will see more and more production, call it, greener steel, and then it will adjust. But it will be a combination of a lot of things. What will be the cost for emissions and cost avoidance and so on for end users. But, so far, we are still applying that premium and sale volumes. I think it's up to 100,000 tonnes so far. How that will look end of 2026 or end of 2028? I think it's hard to say, but we see a huge interest, and we see a growing demand, and we are constantly announcing new partnerships and new applications and new, call it, segments with a huge interest. And we see that, among other things, in construction, we see it in heavy transport but we see it also quite substantially within automotive. So it remains to be seen Johannes, but so far, so good if I would conclude it.

Yes. Then on Lulea, I mean, you've given us the very rough idea of the investment size, total CapEx, what have you. But after you have received the environmental permit you will go more into a sort of a different phase in the project. Would you say you will be happy to share more details on the project? Any essential financial details and data and what have you externally then?

Yes, that's the plan. Then exactly I mean it will probably, I guess, be during a Capital Markets Day or something. But yes, that's the plan to open up more and make it easier to, call it, understand or describe.

Yes. I also wonder about the net working capital release you typically have in the fourth quarter. If you could give us some idea what to expect there in cash flows in the fourth quarter this time.

I think the fourth quarter will be really challenging this year. The inventories will not go down as heavily as they did last year. Of course, Martin gave the outlook for the top line, working capital development, I would say, fairly in line with the performance in Q3 but also, you saw that we plan to spend quite substantial amount of CapEx during Q4. So I would say that there are some challenges with the cash flow generation. But of course, we focus with the net working capital, we do as much as possible. We have reduced the production pace to keep the inventories in control and yes, we're still focusing the cash generation and rather look the sort of the overtime performance than focusing only one quarter. But it will be tough.

There are still possibilities. So then how it affects certain quarters, it's always hard to tell. But last year was a bit special because we entered into the year due to the war in Ukraine and so on with quite substantial stocks. And that was the safety measures, especially for PCI coal and coking coal where we had to find new suppliers and test out new material and that those volumes are now, call it, sweated out, so -- but there's still possibilities to become more capital efficient. And over time, we should be that.

Okay. Understood. Martin, thanks a lot. And from my behalf as well, good luck with the career outside SSAB.

The question has come from the line of Bastian Synagowitz from Deutsche Bank.

I've got a couple of questions left. Just going to start off with Special Steels. And here, I'm just curious about gross margins. You're obviously guiding for lower prices and lower cost as well. So do you think you can keep gross margin stable in the fourth quarter? Maybe a bit of color here would be great. That's my first question.

Well, I think over time, you should expect Special Steels margins to be more stable than for standard products. That has been the case. And it's, as I said, the combination of mix and pricing management. So if anything, more stable than maybe in the history. But it's constant over time, call it, struggle and development process with new and more advanced grades in order to reduce weight or increase payload, I mean, the usual stuff. So more stability. Will they be stable forever? Well, it's still -- the steel industry is still a volatile business, as we all know. But the volatility should definitely be lower in these, call it, more advanced products or niche products. So more stable than for standard products for sure. But how that exactly will play out in a single quarter is, of course, dependent on a lot of other things.

Okay. So in other words, so I totally understand it's more stable over time. But you say it's basically still hard to say more or less how gross margins will move into Q4 and whether you will see a gross compression after basically, after all or whether you'll be indeed able to keep it more stable? So no real color on Q4 at this point?

No. But the color we gave is the guidance with volumes and prices. And then, of course, as Leena mentioned, the raw material cost. So from that, you can draw conclusions, of course, but over time, much more stable than for standard products. Then of course, you never know it will be dependent on a parent demand. It will be dependent on production stability and a lot of other things. So, but over time, definitely much more stable. So that's the whole idea behind our strategy to move more and more into, call it, niche products or advanced high-strength steel products where we have a unique selling point with high -- the best quality in the world, strong market positions, good segments, customers that are seeing the benefits of buying a steel that is more expensive per tonne, but allows them to do less welding, less bending and by, in total, lower volumes of steel because they can use a thinner gauges in their applications.

Okay. Sounds good. And my next question is on the U.S. And I guess, if we look at pay prices now which have dropped into the 800s. I mean, just if we work these price deltas basically through your numbers, I basically get to numbers, which get me very close to breakeven for the U.S. business. Now, I wonder, am I wrong here? The current spot prices, and I guess you're still selling a lot of material probably on a more contracted basis with a slightly longer lag, which is hopefully a big advantage for you. But if you look at spot prices, would these put you somewhere close to breakeven for Americas?

First of all, you're right, we have a lag effect. You can't yet just put in the spot prices in the P&L. There is a lag effect. And then it is, of course, also mix effect and a contractual effect. So I mean, still steel prices are coming high -- down from fairly or very, I would say, high levels. So where that will take us in Q4. I have an idea, but we haven't said that publicly. So I'm sorry to say, but you have to do the math.

Okay. No problem. Fair enough. And then just last one on CapEx. And sorry to keep bugging you here Leena. But first question is, so how much of the SEK 10 billion budget for Oxelosund have you spent or will have spent by the end of 2024? And then again, coming back on 2025, we're also getting very close. I know you're pushing back. But could you maybe at least give us maybe a floor or even a range for the overall budget to have like a rough idea on what we have to work with i.e., like in a scenario where maybe the permit doesn't come, There's still going to be infrastructure work. There's still going to be maybe some leftovers for Oxelosund. So that could at least give us a floor, and then we know the number could be higher, but at least if we had a floor, that would be quite helpful already. But those would be my 2 questions.

Well, it depends how you sort of put it in different buckets. With the EAF construction, we have still some SEK 4 billion left to spend after this year. And this year, I think in case of Oxelosund, it's around SEK 1.7 billion. That is the plan to be spent. And then this preparation that already took place before this year, there we have some SEK 1.2 billion. So there is still money to be spent. And as said, we will give the guidance for '25 during Q4. So there, we will also give more detail figures for Oxelosund. So be patient.

Remember Oxelosund is running until the end of '26. So there's still basically 2 years to build there as well.

And the SEK 4 billion, which is left after 2024, you mentioned, is this including the SEK 4 billion for the power line, which was running sort of separate...

It's excluding the power line. You should maybe not expect SEK 4 billion for the power line, that's probably on the high side.

Okay. Got you. Sounds good. Great. And Martin, also from my side, all the best for your -- for the next phase of your career and stay well.

And the question has come from the line of Andrew Jones from UBS.

Just a couple of questions for me. First of all, just on the U.S. plate market. Obviously, Nucor's plate volumes in their results were still very weak. So Brandenburg is still on way of full capacity. I mean clearly, you seem to be getting close to breakeven in that division and you're obviously a big player in that market. I'm wondering if we are getting close to a floor and given, obviously, you're struggling to make money in this market. And if we don't see that demand impulse come through into next year, what is the -- what can you see happening on the supply side? I mean other high-cost assets potentially are waiting on to drop out to help the market? Are you still confident about that coming through? That's the first question. Then I have a second one, maybe if you can answer that first.

No. But if we look at U.S., while we were close to breakeven in Q3 was, of course, because we have this semi-annual outage with a cost of SEK 450 million. And of course, that also gives a lot of lower volumes. So that's one explanation, of course, the main explanation. Then, when we look at the U.S. plate market, we are quite positive over time with this Inflation Reduction Act, with the infrastructure build and all the needs that is coming in North America or in U.S. We also see that over time, import -- you need to remember that the U.S. plate market is structurally undersupplied, and we see also over time, import coming down. So of course, both measures will be taken. And the future will, of course, be dependent on who takes the seat in the White House. But we also typically see, which is a bit strange maybe for European to understand that we see also wait and see more than an election year, which we typically don't see at least in the Nordics because that doesn't affect any markets, but we typically see that in an election year, especially when we are getting close to the election and until the new President has taken the office. So overall, we are still positive, very positive to the U.S. plate market. And we typically have a better capacity utilization than many competitors because of our cost position and our quality position. So you should expect us to come out better over time than our competitors producing U.S. plate. And if the market, of course, as always, the market dynamics works like you -- exactly like you said, if the market gets tough, you typically see the high-cost producers taking down capacity. But I would claim that in Montpelier, we have the best cost position of all the producers in North America. The best quality and the #1 in the Jacobson Survey. So I'm over time, very positive and optimistic for the U.S. plate business we have.

Excellent. And just a follow-up to -- I mean, you touched on it, the U.S. elections obviously coming up. I think there's probably a lot of moving parts potentially for SSAB in a Trump win scenario. Obviously, I guess, if there are any tariff impositions, your domestic assets would benefit. I guess people talk about the risk to some of the IRA spending, which might be quite plate intensive in Trump win scenario, I guess, there's also maybe some knock-on effects to your European or Special Steels businesses if he's go around slapping tariffs on other markets? Can you just talk us through net-net, how you see that scenario? I mean is it beneficial for SSAB? Is it sort of more neutral? How do you see the moving parts in that outcome?

First of all, the majority of the Q&T volumes we sell in North America, we are producing in Mobile, Alabama, where we have invested quite a lot in Q&T capacity and so on. So it's not 100%, but to a very large extent, we produce it and source it locally for the North America and to some extent, also for the Latin American market. What will happen with different possibilities or to the -- and the difference between the Democrats taking -- staying in the White House or the Republicans coming in. Hard to say for me, I don't have that knowledge. But I think that regardless of who becomes the next President, we will continue to work hard to make sure that we as a relevant plate producer in the U.S. with the strongest market share, we'll continue to do good. And I think that if you look at the U.S. market and regardless, if you call it, Inflation Reduction Act or onshoring whatever you call it, there are a lot of needs for infrastructure for renewable energy, wind towers and so on, a lot of projects in the pipeline that are typically projects that will consume heavy plate. So coming back to our starting point with the strong market position, the best cost position and received by the customers also the best quality on the market. We should be in relative terms regardless quite okay.

Okay. That's clear. Good luck with the next phase of your career.

And the question has come from the line of Patrick Mann from Bank of America.

I'll get it out of the way upfront. So all the best for the future, and it's always been a pleasure to interact with you. So yes, thank you very much from my side. I just wanted to ask more of a sort of strategic or philosophical question, I think. I mean, given the pressure that European steel companies are under, I think we've seen a few of your peers starting to look as though the decarbonization plans are sort of either unrealistic or unaffordable. I mean, how is your -- and obviously, SSAB is in a different position with your geographic location, with the access to the raw materials, with the net cash balance sheet. I mean, do you feel as though you are in a better position overall given how the market has changed? Or do you think sort of the deteriorating European macro overweighs that? I suppose I was just trying to get a sense of how you think SSAB comes out of this period of pressure to decarbonize whether you think it's getting better or worse at the margin?

No. But as I tried to explain, I think this is much more than just a decarbonization. It's about building a cost-effective system for the future and avoiding to invest over time the same amount of money in a system that was originally built in the '60s and keep that system with, call it, internal transport of 900 kilometers between the slab machines and the rolling mill. So building an effective system for the future is one important part. The other important part is to continue in our strategic direction to reduce the amount of, call it, more standardized products and have the ability to produce special steel products, advanced high-strength steels for automotive over time, but also thin and wide the Q&T up to 2 meters, which we can't produce at all today, and that's where the market is heading. And then, of course, on top of that, avoiding future costs for carbon dioxide emissions with the CBAM and ETS system in place in Europe. But when we look at the market and the interest from customers, you would then think or we at least in the beginning, thought that this would be mainly a European topic or a European focus. Now we see customers from all over the world and from different segments, very interested in this possibility to have, call it, more environmental-friendly products. So given the size of SSAB, the location where we are, with the ability to source very high-quality iron ore and have a fossil-free grid and so on, I'm still convinced that this is definitely the right way forward for SSAB. And hopefully, over time, the rest of the industry will follow and start to reduce emissions because as you know, I mean, the steel industry as such stands for 7% to 8% of the global carbon dioxide emissions. And that is a problem whether we like it or not that we need to deal with in order to fight climate change and make sure that we leave something that our kids and grandkids can cope with or live in. So I'm not hesitant at all. And as I said, the alternative would have been then to continue to build -- to renovate and build blast furnaces and coke oven batteries. And that's quite a big undertaking because if you build a new coke oven battery in Oxelosund as an example, you have to live with that for at least 40 years. And the good thing is that these mini mills, it's nothing new to us either. I mean we have been running mini mills now in U.S. for quite a few years. So we know the technique. We know how to deal with it. And we have been testing also in our U.S. mills to run sponge iron and a combination of sponge iron and scrap. So I think we are very well prepared for this journey. And then, of course, the business cycle will go up and down as always, and that will continue in the future as well. So this is -- I mean, the Lulea mill will be up and running in Q4 2028 and the Oxelosund mill will be up and running in Q4 2026. I guess, the business cycle will look slightly different than it looks today.

Sure. I mean, it kind of sounds like you're going to end up being the new core of Europe, right? And I suppose the follow-on question there would be, why do you think the U.S. is so far ahead of Europe on this? Is it just energy costs and access to energy? And is that why the U.S. steel sector looks like it does versus Europe in your opinion?

First of all, I would love to be, SSAB being the new core of Europe because they are a very impressive company. When I started in the industry, it was -- in U.S., it was the big integrated guys. And now that the industry has changed a lot, and we see this highly cost-efficient, highly automated, very flexible mini mills in U.S. And I think that is where Europe over time will head as well. And it's about cost efficiency, it's about flexibility. It's about lead times. It's about a lot of things. And for us, on top of that, the ability to continue to shift the mix. And if you take the possibility to shift another 1 million tonne from, call it, more standardized products into niche products or advanced high-strength steels, it makes a big difference. So I think we will see and who am I to judge, but I think we see, call it, a similar development as we have seen in U.S. with more mini mills and more high effective, flexible, high-quality producers in Europe as well. And SSAB will definitely be one of them if not the leading one. Then if we end up as the new core of Europe, I don't really know, but that wouldn't be too bad.

And the question comes from Anders Akerblom from Nordea.

Just speaking of the weaker European market, obviously, quite subdued, but I noticed that you mentioned that import volumes have been at high levels. So could you please elaborate a bit on this?

But I mean, what is it to say? We see now Chinese material going into Asia and other countries in Asia being pushed out and trying to find other markets around the world. We see -- I mean, the 2, call it, the biggest consuming segments in Europe and also globally for flat carbon is actually construction and construction in Europe has been for a time now very weak if almost nonexisting. We see some signs, as I said in the renovation market that is maybe turning and then automotive, overall automotive, which is a bit subdued, and so it is in that aspect, I call it a perfect storm then. But then, of course, you typically see the steel industry start to screen for trade barriers and so on. And I think it's important to remember that over time, what serves us best as a company, at least being fairly small, but also very, call it, export oriented. On top of 2 important home markets in North America for plate and strip in the Nordics is a combination of free and fair trade. And of course, if you don't have that combination because the fair trade is also a very important element, then you see disruptions. Then, I would say, in relative terms, maybe we are a bit better off because of our product mix and the uniqueness we have in many of our products. If you take the, call it, most advanced high -- advanced high-strength steels, martensitic grades for the automotive industry, we are quite unique. And some of the products there are actually very unique, and no one else is producing it. So it's all about continuing to stick to our strategy and move the mix and come up with more advanced products and better products. And the real uniqueness of SSAB, that sounds boring, but it is the inner cleanliness we have in our steels, which is, I would say, state-of-the-art globally, and that's the whole thinking behind this strategy. So continue to move the product mix, continue to implement in a very rigid system flexibility measures and then in the future with the mini mills, have much more flexibility and continue to take this everyday's fight to do things slightly better today than yesterday, a bit better this week than last week and so on. And I think that's -- maybe it sounds a bit boring, but the recipe of continuing to develop a leading company. And in that aspect, we are far from done.

No, I appreciate that answer. But kind of what I was -- and you touched upon it, but of course, kind of with very weak certain end markets, key end markets, probably doing whatever they can to kind of support earnings, how should we think about kind of the structural premium to market prices that you've had? I mean, in the quarter, this was, I mean, quite healthy. But kind of going forward, if I kind of read your comment right, one should maybe not in earnest, extrapolate the current uplift to market prices given kind of the structural overcapacity in China and especially with higher imports than to Europe, to key end markets. Should we see this then trending down a bit more to its previous average irrespective of mix effects and such?

No. But I think the big thing here is the mix effect and call it, pricing management then that will give more stability. And when I talk about more stability, I'm comparing to standard steel prices because they will continue to be volatile and they will go up and they will go down. And right now, they have gone down. So you should expect better stability for our niche products. Will they always be absolute stable, the margins? Of course, not, but much better stability, less volatility, but on a higher level. I know that, that doesn't answer your question. But...

No. But, yes. No, I hear you. And then maybe looking to 2025, I was just wondering a bit on kind of continuing on the cost side and the trajectory there. I mean I know that you haven't -- it's quite poor insight into this at the moment. So anything you could say in terms of kind of the cost inflation emanating from -- or the potential cost inflation, I should maybe say, emanating from the kind of EPS and the emission rights? What can you say in terms of this?

No. But I mean when it comes to emission rights, as Leena pointed out in her presentation, we are buying. This is a benchmark system. So with us running in the Swedish and the Finnish system, one of the most carbon dioxide-effective blast furnace systems globally, we, of course, are, in relative terms, a bit better off compared to some other producers in Europe and elsewhere. But we still -- we don't have free allowances to run our production, so we need to buy emission rights, but we have been doing that for a number of years. So the only thing we know with the current policy in EU, the free allowances will gradually over time, go away, or continue to shrink. But in relative terms, given what we have invested with the PCI and everything in our blast furnaces, a very, call it, effective setup, a very good raw material and so on. We are, in relative terms, much more carbon dioxide effective than our European peers. But of course, it will be a cost and it will be an increasing cost if we stay with the current policy, and that seems to be the idea of the new commission for the coming 5 years.

Yes. But with your previously banked emission rights, I mean anything you can say in terms of when this kind of is depleted and when you will be buying to cover 100% of your emissions? What would that kind of give on the cost side?

Of course, the timing of that will be, of course, dependent on when -- how fast you phase out the free allowances. But it will be -- I mean, if you look at today at the marginal cost for any European steel producer on marginal tonnes, you need to take that into account already today. And if you look at the current spot prices, I would say that they are under for a normal European steel producer, it should be under the marginal cost.

Okay. And lastly, just on LKAB. I know you've gotten several questions on this, but I just want to clarify, you say that this doesn't impact your green steel transformation ambitions. But still, I mean, as I had understood that you still were planning on getting volumes from Lulea after 2030. And I assume now that the -- I mean, obviously, the input must come from elsewhere. So how will you kind of work to counteract that volume drop off after LKAB's announcement?

No. But what they said, if I read it correctly yesterday, and I have no insight at all, but they are delaying or postponing or not focusing on Kiruna. We are not taking 1 kilo from Kiruna. We take all the volumes from the Malmberget, it's just the Southern system. If I read it correctly, they say...

But that is at the moment, right? I mean you were still planning on getting volumes from there in 2030, or am I mistaken?

Not from Kiruna, no. So they had -- in practice, they have 2 systems, the Southern system, which is Gallivare where we always took our volumes and they said yesterday that no change in plan and then the Kiruna system where we never -- which is typically shipped out to other customers via Nordic to 2 separate systems, and we don't take 1 kilo from Kiruna and will not in the future either.

And also from me, best of luck on your future endeavors.

Thank you. We have no further questions at this time. I will now hand back to you for closing remarks.

Okay. Thank you very much. Thank you also, Martin and Leena. Lot of good questions. Thank you to the audience.

Thank you.

Thank you very much.

And we wish you a nice day.

As always. Good.