SSAB AB (publ) ($SSABA)

Good morning, ladies and gentlemen, and welcome to this presentation of the first quarter of the year for SSAB. My name is Per Hillström. I'm Head of Investor Relations at SSAB. And presenting today, we have our President and CEO, Johnny Sjöström; and also our CFO, Leena Craelius. And if we look at the agenda, we have the usual agenda here with Johnny starting with the first quarter in brief. Leena will then present more details on the financials. And then Johnny will come back with the outlook. And then we will also have good time for questions at the end. So by that, Johnny, the floor is yours.

Thank you very much, Per, and good morning to all of you. I will start, like I always do, to go through the safety. We still have a rather good safety trend within SSAB. Our lost time injury frequency, which is a rolling 12 months, is at 0.49. But if you're looking at the year 2026, we have quite a good start actually. So a really good performance, I think, from the organization and the focus on the safety is our main priority. And I will come back to the Luleå discussions at the end of this presentation. Now looking at our financial performance measured now as the EBITDA, we ended Q1 at SEK 3.2 billion. It is a good and stable earnings. And what I'm happy about is the improvements both in Europe and Americas, and we'll get back to that in the next coming slides. And of course, Special Steels still continue to present a solid performance. And our net cash position, we have some seasonality, and I think that Leena might say something about that in her presentation, but we are at SEK 9.6 billion right now. And like I said, normally in the first quarter, we have a higher amount of cash out than normal. But we have a strong balance sheet, and there is a proposal now to the Board -- from the Board that we should have a dividend of SEK 2 per share. Now the transformation update and sort of the -- I will cover more about the illness in this discussion. But first of all, the conversion of Oxelösund is progressing quite well. We were there in the beginning of this week with the whole Board that was actually yesterday. And we are -- we can see how it's taking place, how it's progressing and it's on time and its own budget. So I think so far, a good performance by the whole project team, and we're looking forward to the startup that we're planning to have in the beginning of 2027. When it comes to the Luleå transformation project, the construction site has been paused now. And I just want to emphasize the most important thing for us and our main priority is the safety of the workers on the construction site. There has been some reports on illness and we took that very seriously. We were the ones that initiated a construction stop because we wanted to understand more, and we've done enormous amount of measurements. And I think I have more information about that later on. And so far, we haven't seen or found anything that is deviating or -- which is about the threshold, which makes a little bit puzzled. We continue to work on this. And right now, up until now, the additional cost or the stoppage is not material. It will not have an impact on our overall time plan and the cost is not significant at this point. But we still have a stable production in our production site in Luleå. So the steel work is still continue according to our plan and our expectations. Now moving into the divisional performance and first, SSAB Special Steels. We came out on a fairly good level when it comes to shipments, a level of 356,000 tonnes. It's a rather high amount of shipments, higher than we were at last year and higher than the year before for the first quarter, very pleased about that. And also the financial performance was on a stable and high level. I'm happy to see that Special Steel is continuing to deliver on a high level and are quite stable at that level. Then moving into SSAB Europe. The financial performance for Q4 was significantly lower than Q1 2026. I think that what makes me most happy is that they had a record high level of sales advanced deals, which is according to our strategy and sort of the direction that we've set. And also it's the foundation. One of the foundations for the Luleå investment where we add more capacity to be able to sell more of the advanced high-strength steels. And they were also able to increase our shipments by 18% compared to Q4 2025, and it was also significantly higher than Q1 2025. So I'm also pleased about that. And then moving into SSAB Americas, stable performance there as well. Prices have increased. And if you compare Q1 2026 with Q1 2025, it's a significant improvement. Prices have moved up and they are continuing to move up. We had some scrap price increases in the beginning of the quarter that sort of reduced the spread, but those scrap prices are on its way down and helping us to improve the profitability even more going forward. The shipments were stable and Americas has been stable when it comes to production and output. And hopefully, that will remain. Then we have the 2 subsidiaries, Tibnor and Ruukki Construction. And then we start with Tibnor, we can see that the shipments were, of course, higher than Q4, but pretty much on the same level as Q1 2025. And looking at their financial performance, we can see that it came in much higher than Q4, but also much higher than Q1 2025, which was a little bit expected. Now we see that they have a positive inventory effect while Q1, they actually had a loss in the inventory. So that's a positive effect. And then looking at Ruukki Construction. Unfortunately, the winter season was a little bit longer than normally, it was actually delayed by 1 month. That had a big impact on the order intake and also on Ruukki's financial performance. But since then, we have seen that order intake has been very, very strong. I think that they will be able to compensate for the lower performance in Q1 in Q2. Now moving into financials. I'm leaving the word over to Leena.

Thank you, Johnny. Then we will have a bit more group level view. And if we start the revision of financial figures by actually looking at the steel shipments. This is now the total of Steel division shipments. Performance in Q1 was 1,736 kilotonnes which compared to Q4 was a 15% improvement in the shipments performance. Of course, to bear in mind the seasonality in Q1, also the fact that we didn't have any maintenances taking place during Q1, like we did during Q4. Market remained cautious, as Johnny already referred, but also the production performance was supporting this good performance in the shipments. If we compare the performance to the outlook we gave for Q1 compared to Q4, we were spot on in Special Steels and Americas and even slightly higher in Europe division with 18% improvement in shipment volumes. And then compared to previous year, the increase in shipment was 4%. If we then move to revenue. Q1 was SEK 25.3 billion, also improvement by 15% compared to Q4. And if we similar way compare the prices outcome compared to the outlook we gave, all the divisions were in line and special steels even slightly better than the outlook we gave. And then compared to previous year, the revenue reduction was minor. It was 1% reduction. And here, actually, the biggest impact is coming through the FX, while volumes and prices were somewhat higher. But I will talk about that in more detail in the coming slides. EBITDA performance already mentioned SEK 3.2 billion in relative terms, 13%. Of course, clear improvement compared to Q4, which was SEK 1.8 billion and 8%. But bear in mind that Q4 had the impact of annual maintenance outages around SEK 1 billion. And then compared to previous year, we do see improvement in the EBITDA performance on a total level as well as per delivered tonne level, and I will dive into details more in the bridge analysis. First, comparing Q1 versus Q4. And here, we have operating result. Operating result in Q1 was SEK 2.2 billion, which is improvement by SEK 1.4 billion compared to Q4. And as the graph is illustrating, the biggest impact to this improvement is coming through the shipment volumes, which were 15% higher. Prices, as already mentioned, are somewhat higher in all steel division, which is offset negative impact of FX. However, this is actually offset in the variable cost with the positive impact of FX. The iron ore and coking coal, they were somewhat higher in Q1 compared to previous quarter as was the cost of scrap, as Johnny already was referring to. And of course, somewhat lower variable costs, which were related to maintenance outage, also impacting positively the fixed cost in Q1. And of course, to bear in mind that we do still continue the strict cost control that we have had during last year as well. The capacity utilization, positive impact over SEK 300 million, and majority of this is coming through the Special Steel division, who had the maintenance outages during Q4 as did Europe division. So both of them are contributing positively to this element. And if we then continue comparing Q1 versus previous year Q1, the improvement in operating result is SEK 850 million. And as the graph is well illustrating, the biggest positive impact is coming through the variable cost, also supported by higher shipments and better production performance. If we start with prices, prices on average being 5% lower than last year. And here, we also have the impact through the stronger Swedish crown. So FX is offsetting this minor positive impact in underlying prices. However, again, compensated by this positive impact in the variable cost. To point out that iron ore and coking coal, those were lower compared to last year, while scrap cost was higher compared to previous year Q1. Volumes, they were 60 kilotonnes higher in Q1 this year compared to previous year. Both Special Steel division and Europe division had higher shipments than last year. And the capacity utilization there, the biggest contribution is actually coming through Europe division followed by Special Steel division. So in -- just to point out that in Q1, big improvement in the European division mills. Cash flow analysis, Q1 this year compared to previous year, as the table is well illustrating, very similar trend, both years, and this is representing sort of the seasonality that Johnny was already referring to when it comes to change in working capital. In Q4, we tend to have a positive impact. And during Q1, we have this negative impact. That is mainly related to the fact that during Q4, we are building raw material inventories and these large invoices we are paying out during Q1. Also, the accounts receivable is going up during Q1 with higher sales. Inventories were somewhat lower during Q1 compared to previous quarter. But the outlook for Q2 is that the change in working capital will be less negative as we will have a lower build in the working capital. Maintenance CapEx, fairly similar level as previous year. The other line here tends to be related to CO2 emission allowance transactions. And the strategic expenditures almost double compared to previous year. And of course, this is now through Oxelösund, Luleå transactions, and we have actually added more information on the strategic spend in our external report. No dividend paid out in Q1. But bear in mind that during Q2, there will be dividend payout if the AGM later today will approve the proposal by the Board over SEK 2 per share, which is then just below SEK 2 billion payout during Q2. This cash flow is leading to net cash position of SEK 9.6 billion and the gearing minus 14%. End of last year level was SEK 11.6 billion, with gearing minus SEK 17 million. And of course, the biggest reason behind this drop is actually the strategic investment close to SEK 1.5 billion. And on top of that, we add this FX impact related to currency related assets and liabilities, which was around SEK 400 million. Raw material, this slide, we have updated. We have drawn this iron ore and coking coal price development as indexed. We start from Q4 '24. And as the graph is illustrating, Q1 this year, the cost of iron ore and coking coal was slightly higher compared to Q4. However, lower compared to previous year. So that was giving the positive impact in the Nordic mills and Special Steel division and Europe division. The outlook for Q2 is that the prices will be somewhat higher or the cost of raw material consumption actually slightly higher than Q1. To remind that the lag in the impact in iron ore is 1 quarter and in coking coal a bit longer, 1.5 quarter. And then on the right-hand side, we have the scrap price in U.S. And as the graph is illustrating during Q1, '26, we had higher costs compared to Q4 last year, and also slightly higher cost than Q1 last year. The outlook, however, is that the prices have stabilized and then the cost will be more stable for Q2 compared to Q1. And the lag in scrap cost is around 1 month. Maintenance cost is stable, we have not updated, so this is exactly the same that we were showing last time. To remind Q1, Q2, we don't have major planned maintenance outages. Most of them will take place in Q3 and Q4. And the full year spend in maintenance cost is fairly well in line with the previous year on a similar level. The CapEx guidance, this we have not updated either. So we are sticking to this year view that the maintenance CapEx is remaining on the same level as last year. Strategic CapEx last year was SEK 7.2 billion. This year, it will be around SEK 10 billion, and of course, related to transformation projects, Oxelösund and Luleå, where we are picking up the pace in investments. We were also guiding the impact in cash flow when it comes to CO2 emission allowances, and we have kept the estimate on the same level during '26. That will be on a similar level as '25, which was just above SEK 700 million. And also, we were telling about our IT projects that we have started during last year, biggest one focusing on this minimal ERP environment built. So these projects will continue also during '26, and this will be reported as operational expenses, and we are following this in the other division. So impact of these activities on annual level estimated to be SEK 200 million. With this, I give it back to Johnny.

Thank you very much, Leena. And I will give a short summary and outlook. And normally, I will go through the different segments. But I think what's important here is not really what's happening with the underlying demand. It's actually what's happening with this supply and demand and the supply and demand situation and the realization that we can see on the market. And as you all know, this Made in America policy with the Section 232, they have implemented a more stricter condition with the melt and pour, and they did that 2024. And then 2025, we added up to 50% import tax for steel coming into United States. But they've also added sort of these derivatives that they need to be paying an import tax on that as well. For us, we can clearly see that the import level in the United States have reduced significantly, decreased to less than 2%. That means that there is a sort of higher demand than supply, especially if you talk about these industrial segments, we see a very high demand. And that is, of course, benefiting SSAB since most of we sell in the United States are actually produced in the United States. We are one of the few plate producers in the United States. And now we see similar things are happening in Europe. Now the CBAM was implemented 1st of January that immediately meant a price increase. But now it seems as if the European Commission will take the decision to implement the safeguard from 1st of July. That means that roughly 18 million tonnes will be subjected to an import tax of 50%. Here, this will, of course, change the supply and demand situation. Now just like we could see in November, December that the import into Europe increased just before the CBAM, we see similar behaviors now that distributors are increasing their inventory just before the new sort of tariffs will take place from 1st of July. Hence, there might be a temporary hampering of the price increase. But as soon as these inventories are going down, it's very likely that prices will go up due to supply and demand situation. I think that's probably the biggest impact on the steel market in Europe and the United States, where we are mostly active. Hence, the sort of what's happening in the segments are of less importance. So the guidance we've made, they look pretty much the same for the all 3 divisions, shipments, stable and price is somewhat higher. And I guess there will be some questions on the prices going forward. And I think I will say my answer to those questions because I can understand that there are questions on that. But let's wait with that until we have opened up for questions. To summarize, we see financial improvements in SSAB Europe and SSAB Americas, and we're happy and pleased with that, and I'm happy with the whole organization and the way they have managed the production, the production output and the shipments. We continue to see a very good and stable earnings in SSAB Special Steels and their shipments were also higher than it has been for a long period of time. I'm very pleased about that. And also, I'm very happy to see the progress of the Oxelösund conversion from a blast furnace to an electric arc furnace is progressing according to plan, and it's very close to being finalized. I'm also very pleased about that. So with that, Per, I think I'm done with my summary.

Thank you, Johnny, and thank you, Leena. Then we can prepare for the Q&A. And in order now for let as many people as possible to ask questions, I suggest we will limit to 2 questions each here in the first round. We also have our AGM today, so we will need to close at around 11:00, this conference. But it's a good time now so it shouldn't be a problem. So then I would please ask the operator to present the instructions.

[Operator Instructions] And our first question comes from the line of Kaleb Solomon of SEB.

You touched on this briefly a bit earlier, Johnny. But regarding the illness reports in Luleå, some sort of toxicology experts from [ Karolinska ] have been in the paper suggesting that one possible explanation could be vanadium-containing slag sort of generating airborne dust. And I appreciate it's too early to draw any conclusions and that you're still conducting tests. But if that turns out to be the case, what would it mean for the sort of restart time construction? And I guess, how fast could that be resolved? And could it have any implications for the environmental permit?

Yes. So just like you said, we don't want to speculate. You're absolutely right about that. And we want to have facts on the table. But if, let's say, if this would be the case, this would not mean the whole area will be for -- because we've done 170 ground testing. We know pretty much what's in the ground. If we would have vanadium in some area, it's from the LD slag that would be a smaller part of that industrial area. And of course, we would handle that according to the guidelines that we have. And there are clear guidelines of how that would be dealt with. And it would come, of course, we would then need to remove that soil and how much time and how much cost that will mean. It's hard to speculate. But having in mind, we have already moved 3 million tonnes of material from that area over a period of 3 years without any sort of illnesses or incidents being reported. So all of this is a surprise, and we're very puzzled. And having said that, we've done more than 150,000 gas readings without any reading close to the threshold or above the threshold. So it's hard. It's difficult to understand, and we will continue to measure this. And the vanadium theory is one among a lot of theories. And of course, we've looked into it and we talked to [indiscernible]. We talked to a lot of others to get better understanding of this.

Okay. That's very helpful. And just as a follow-up to that, if this drags on for, let's say, another month or two, because I noticed you keep your CapEx guidance of SEK 13.5 billion of strategic CapEx this year. At what point does some of that get pushed into next year, I guess, if this takes a while?

We have to -- if you look at the time line, the whole project was delayed with 1 year because of this power station. That was announced, was it a year ago or something like that, a long time ago. And because of this, we have actually more time for these kind of events. So from a time perspective, we don't believe that even you said 3 months, even if in 3 months, we don't believe it's going to have any big impact. And from a cost perspective, it's not going to hurt us. So it's -- we only have small amounts of additional cost because of this. That is not our biggest concern. Our biggest concern is the safety of the operators and the workers at the site. That is a priority. And we will do everything we can to understand what's causing this. That is our main priority.

Okay. That's clear. And just lastly, you mentioned seeing some inventory buildup ahead of the new tariffs, as you sort of did for CBAM. But the inventory levels, as you described it in the report, are still somewhat high, which seems to be unchanged, I guess, since last quarter. So just to clarify, did you start seeing it in the past 2 weeks? Or do you sort of more expect to -- for inventory levels to stay unchanged?

So we can see it now at the end of April because the safeguard hasn't been clear, but it was an announcement not so long ago. And after that announcement, we've seen more activities in this regard. And we expect now also the inventory levels in Europe to increase. And hence, the reason why when we do sort of pricing guidance, we believe that this is going to have some effect on the spot prices on the spot market. That means there will be an increased amount of material coming into Europe.

Our next question comes from the line of Alain Gabriel of Morgan Stanley.

I have a couple. Firstly, on the Oxelösund ramp-up. Johnny, when would you be in a position to give a guide on the ramp-up costs from an OpEx perspective given that you'll be running both the blast furnace and the EAF simultaneously. That's one. And two is on the plate market in the U.S. You've given some market color about the strength of the end markets. However, the lead times have increased quite sharply in the last few weeks. What explains this dynamic? And what are you hearing from your commercial teams in the U.S.? What has changed in the last few weeks to support the sharp increase in lead times? Those are my questions.

So maybe, Leena can start with the first question, then I will cover the U.S.A.

Yes, the Oxelösund ramp-up cost. We can get back to that in the coming webcast. We have some estimates at the moment. The impact in the operational cost will actually be rather marginal. We have succeeded to keep the cost on a good level. Of course, existing organization is working with the EAF and some sort of support coming from Americas division or actually from Mobile and Montpelier mills. But those costs are rather marginal. But when we have more details, we will get back to this topic.

And to your question regarding the plate market in the United States, we've recently learned that a lot of distributors and stockholders are running out of stock. And they have been passing plates to each other just to survive. But now they all realize that they need to start destocking or restocking. And so the demand has increased quite fast. Hence, the reason for an increase lead time, so -- which is positive news for us because that means that they need to start building up their stock again. And I think that they have been hoping for prices to come down, but it seems as if it's not going to come down. And now with the increased demand, prices are going to go the other way around. It's going to be higher. So that is the word from our marketing team, our market team in the United States.

We will now take our next question from the line of Tom Zhang of Barclays.

Two for me as well. First, just a follow-up actually on the U.S. please. So you just mentioned inventories are actually now really low. It feels like pricing could get quite tight. Can you talk a bit about the 0% to 5% pricing guide into Q2, because I recognize there are some lags, but spot prices have been really strong on U.S. plate, especially in April. I know in Q1, FX was a bit of a headwind, but that looks like it's normalized a little bit in April as well. Is there anything else negative on the U.S. pricing front that we should know in Q2, either from mix or further negative FX? And how are you baking in why the pricing guide is a bit more conservative than we might have otherwise guessed?

Well, we've already seen and we know that we have price increases because the order book, we know exactly what kind of price increase we have in the order book. I think here, it's a little bit difficult to guide because it's just between sort of somewhat higher and higher and so on. And so we've got to be a little bit cautious here. And also, there is a delay, there's a lag. I've said that before. So when we have sort of half year contracts, quarterly contracts, those changes doesn't happen until next quarter, et cetera, that's one effect. We can already see that the late prices are moving up, hot-rolled coil prices are moving up. And then I think there is a threshold where prices probably will not move up as much. But here, it is all about speculation. So what we can do right now is only look at what is our sort of order book average price level and try to do some guidance from that.

Okay. So it sounds like towards the top end of the somewhat higher range perhaps. Okay. And then in your comments also, Johnny, you sort of talked about the other segments, maybe they don't matter as much. It's all about supply, demand and bigger picture. And I kind of hear you on the U.S., and it feels like part of the tightness has been because of that expansion to downstream applications. I guess we're seeing in Europe protectionism from the 1st of July on direct steel imports, but not yet the rollout of protections to downstream applications. Do you see that as much of a risk to your end markets, basically the shift of direct steel imports towards indirect steel imports and then basically demand destruction?

Long term, of course, there is that risk. I think that we have been watching the United States a lot and trying to learn from what they're going through, it's already -- we already have talks on adding the derivatives and so on. Because otherwise, we are afraid that a lot of manufacturing will move from Europe, and that's something we don't want to happen. But of course, it can't happen overnight. But if nothing has changed long term, this will have an impact. But like I said, the European Commission is on it. They were discussing it. The question is when will there be an implementation of adding sort of derivatives into the European safeguards.

And from your conversations, nothing on a kind of time line yet for when that could be implemented?

No, I think that will be very difficult to speculate on. The lead times are somewhat longer than you expect. I can't guess it's going to be impossible.

Our next question comes from the line of Tristan Gresser of BNP Paribas.

The first is a follow-up on Europe and your comment on the [ ASP ] guidance. I just wanted to make sure I understand it. So you do expect spot prices to fall in May and June because of this inventory overhang? And then on the cost guidance as well, if I look at iron ore, coking coal, they've been pretty steady. So why are you seeing your cost base moving higher? Is that due to carbon costs? I mean we've seen ETS benchmarks have been revised lower as expected. Any impact there? So that's the first question. And then the second question is on the ETS reform. I think you made a comment in the press release. I would be keen to hear you, what would be a good scenario for you when the commission comes in, in July and announced the change and the implication perhaps for your Luleå project and time line?

All right. I will try to -- if I remember the first question about the pricing in Europe. And you asked whether I think prices will come down now in November and June, I mean, your guess is as good as mine, but I don't think it's going to come down, maybe stabilize. That's just my speculation. And then to your question regarding the ETS, I know that the European commission is looking at the ETS system. They want to try to balance it, but they want to keep it, that's clear. So we've done a lot of sensitivity analysis and looked into how would this impact our investment in Luleå and also in Oxelösund, and we see that, let's say, for the sake of it that the free allowance trajectory would be postponed until 2039 instead of 2034, we see that a very limited effect on our business case. And we also then did the simulation of what would happen if we took away the ETS, it would have a negative impact, but it was still -- we still have a pretty good strong case, both for Luleå and Oxelösund. So it wouldn't be as good case, but it will be detrimental. So it rests on other aspects than just sort of the ETS system, which makes it less vulnerable in that sense.

A question on the raw material guidance, Leena, could you -- why do we expect Europe to have slightly higher?

Slightly higher. As we have seen during Q4, the coking coal prices have been developing up and, to some extent, also iron ore. So the lack of the purchase price impact in P&L will come with this quarter delay. So there will be somewhat higher impact now in the consumption cost of Europe division due to that reason.

And the carbon costs, is that any impact with the lower ETS benchmark starting in 2026? Or I've seen you kept your new cash flow carbon cost kind of guidance unchanged. So I'm just curious there.

Yes. We are forecasting a certain level of purchases of CO2 emission allowances on the market. And at the moment, the view is that on an annual level, it will be on a similar level as last year. So we don't see a big change in that.

We will now take our next question from Adrian Gilani of ABG Sundal Collier.

Yes, just a follow-up question on you mentioning some inventory buildup among the European distributors ahead of the new safeguards. I guess, after the safeguards are implemented, do you have any assessment on how long it will take them to destock before we start to see the full impact of higher market prices from this effect?

We have simulated it. We have it addressed. Are we saying stuff like that, or are we...

You can maybe make a rough estimate because we -- of course, we -- like you said, Johnny, we can simulate, but it's a fair degree of uncertainty, of course.

It is a fair degree of uncertainty. But towards the end of Q3, that inventory has come down to a level where prices are, again, are going to start moving up that sort of our assessment.

Okay. That's helpful. And my second one, you got a question on the guidance in Americas being conservative. I'd like to push you on the guidance in Europe as well. Market prices seem to be up around 8% in Q1 on average. And I appreciate it's not a 1:1 ratio always, but to me, the somewhat higher pricing in Q2 sounds a bit conservative. So was that also a point where you were deciding between somewhat higher and higher?

Yes. I mean we are conservative. So yes.

You have the, yes, the annual and half year contracts. So those are making the quarter-on-quarter price development a bit more stiff. So that's also the reason.

Our next question comes from the line of Anders Akerblom of Nordea.

I wanted to follow up on the most recent question, and what you said about sort of the contract mix. Could you elaborate a bit on how that has changed in recent quarters? And sort of how material sort of that impact is to sort of stickiness on prices?

The contract mix hasn't changed.

Yes. The contract mix hasn't really changed. And if we talk about Europe division, some 15% is annual contracts of the total volumes. And then we have half year contracts around 25%, which is actually quite high level. And then the quarterly contracts are around 40%. So the spot pricing, purely spot pricing is around 20%. When it comes to Special Steels, they have around 60% quarterly contracts and then 30% on monthly pricing. So spot pricing in their division represents only like 5% to 2%. So that over time hasn't really that much changed.

If we go back a few years, it's a change with the product mix a bit in Europe due to higher automotive growth. But not recent quarters, Anders.

So that's not a sort of dynamic in terms of why sort of guidance could be viewed as conservative vis-a-vis sort of the market price accretion then. Okay. And I wanted to ask a bit in terms of Americas. So as you mentioned, some scrap inflation impact in Q1. Kind of in your high-level view, could you share in a bit more detail maybe what you're seeing here, and what do you think about a representative level for 2026? So as you said, scrap prices have come down recently. But sort of how are you thinking about it for the full year in a general sense?

It's difficult to predict the full year because the scrap prices updated monthly. And then the impact on the result is with the month lag. So the outlook we have is only on Q2, and there, we foresee that these prices would be a bit more stable. And then, of course, Americas division with somewhat higher prices and then less impact through the scrap cost, we could see some improvement in the margins during Q2.

But I guess moving a bit further out, my question may be more what are you seeing in terms of tightness in terms of the scrap market specifically? What are you sort of seeing in that end of the market?

In U.S. market, we haven't been sort of discussing anything related to the lack of scrap availability. or lack in scrap, but we foresee that it is relatively stable and secured market, at least in our business.

We will now take our next question from the line of Dominic O'Kane of JPMorgan.

I have two questions. So just the guidance and commentary on the outlook. Obviously, you've given us building blocks for Americas and Europe. But could you maybe just talk to what that looks like in terms of your current order book trajectory. I noted in the comments, you do mention some emergence of more cautious customer behavior. Do you actually see any evidence of that building in your order book? And then my second question is just on cash flow and a strong cash flow performance in Q1. Could you just help us with the bridge for cash flow, particularly working capital into Q2?

So I'll answer the first question, and then I'll let Leena take the other question then quite naturally. But if you talk about the order book, and I can't go into details of it, but I think in the report, we mentioned the impact from the war in the Middle East. And I think what's causing concern is that we were hoping for the Construction segment, which is important for the sort of demand for steel in Europe. We were hoping that Construction segment to kick off to have an increase. We've been waiting for it, we've been expecting it, especially since the interest rates in Europe has been going down, we've been waiting for sort of the Construction segment to kick off again. Now when we see an inflation, which is driven mainly by the energy costs, similar to what we saw when Russia attacked Ukraine, we now can see that Construction segment is more cautious again, afraid of increased interest rates and so on. So they are waiting -- they're in a wait-and-see mode with some of the investments. I think that's really what we referred to. But when it comes to the order book, the order intake has been very, very strong, both in the United States and in Europe. So there, we cannot see anything of that. But that's probably more driven and related to the supply and demand situation that we talked about before related to CBAM, safeguards, Section 232 and so on.

Yes. And then for the cash flow, we can say that you can have a look at the previous sort of years and historical performance with the working capital. So the seasonality will support the working capital to be sort of less impacting the cash flow. It will be more neutral. And of course, to bear in mind that the RNC investments will still continue and the strategic investments and of course, the dividend payout depending on now the decision today, but that will take place also during Q2. So those are sort of the elements when we talk about cash flow in Q2.

And see any exceptional CO2 outflows?

Nothing exceptional. We had now Q1, we had the impact of SEK 44 million related to CO2 transactions. At the moment, I don't have any sort of forecast or prediction for Q2 impact. I would say that it would be minor, if anything, in the bigger picture.

Our next question comes from the line of Reinhardt van der Walt of Bank of America.

First one, just on your comment around inventories that are building up now. I'm conscious that there's only 2 months left until the slated implementation date of the TRQ. Can you just give us a sense of what shipping times look like at the moment? And I guess when that window of opportunity for orders is effectively going to close?

No. Yes. So here is an area where the lead times have actually -- if we're talking about shipments from Asia to Europe, and that's usually the most normal stream that we see. Those lead times have increased now because of the situation in the Middle East. So the approximate lead times would be from 6 to 8 weeks. So that window is closing very, very fast. And to your question, why haven't you seen much of that inventory buildup so far, but actually it's about to happen because of the lead time. So it's happening as we speak. Now how much inventory they will be able to build up, that is remaining to be seen. But we have clear signals from the market that they're trying to do whatever they can to build up some inventory just before this new safeguards are implemented.

All right. That's very clear. And a question just about kind of when you look at the market balance in Europe, do you think that European steel producers can actually produce an extra 10 million tonnes of steel come 1st of July or 3Q this year? Because you did mention that you're seeing more capacity actually getting idled in Europe. Is there a risk here that we maybe actually see once we work through the inventories in 3Q that the market actually does get a little bit squeezed?

Yes. We know that there are at least one larger blast furnace being started up again, adding more capacity. And the utilization level in Europe right now is roughly 65% to 68%. I think that we could easily get up to 7% to 8%. And that should give us roughly 10 million tonnes. So 10 million tonnes, I think Europe can do. But if we're talking about 18 million tonnes, that is a big question mark. That's a really big question mark. And then it could be a situation where there will be a sort of a shortage. And yes, maybe not on all products, but maybe on some products then.

Our next question now comes from the line of Christian Kopfer of Arctic Securities.

All right. Just a follow-up. Sorry for taking this one more round on the pricing guidance for Americas, but just looking at the spot prices are roughly 20% year-to-date, even if you measure from the quarterly average of Q4, you're coming up to pretty much the same number. So on your guidance, 5%, 6% up for where you are, I don't know exactly. But I'm just wondering if you expect SSAB Americas to catch up with the current spot price, just assuming it will stay on current levels. Will it be in Q3 or will it be in Q4?

So we have been pushing and taking the lead in price increase and announcing price increases and all the price increase that we have announced have been accepted, absorbed by the market, and we're quite pleased about that. And the minute that we have announced something new or we actually announced something as well. So there seems to be a consensus in the market that price increases are accepted. But just like Leena explained earlier, we have these quarterly contracts, yearly contracts, et cetera. So some of them were actually stuck with. We know what our order book -- order intake, order book average price level is at. And that is probably was our standing point when we took that decision. We are just about to open up the orders for June, and that's going to fill up immediately because that's what we saw from May. It was just a matter of days and the order book, which is filled up for that quarter. And normally, what we do is that we increase prices before we open up the order book. And we haven't really done a price adjustment in the middle of the month. But we are looking into whether that's possible to do and how the reaction would be. But of course, we are -- and that's only related to the announcement. Of course, we can always negotiate higher prices. And to your question, when do you think we will catch up with the market. I would say that it's rather towards the end of Q3 than Q4, but there is a delay, and we're gradually catching up and we have a strong order book as it is. And I think that was sort of the foundation for the guidance. And just like we alluded to before, it was a close call and we decided to be conservative in this case.

All right. Excellent. And then finally from me, on Oxelösund or sorry, Special Steels as a whole, coming up quite remarkably on volumes here quarter-over-quarter. The mix between the different grades, is that roughly the same from Q4? Or still the bulk -- [indiscernible] Hardox 450, or I don't need an exact number, just to understand how you are succeeding to take your customers in Special Steels up to better grades.

So in general, we see an increased demand for grades such as the Hardox 500 Tuf, that grade is growing really, really fast. I think we also had an increase of the nonbranded [ QT ] in the United States. And one of the reasons for that is because Algoma is not really shipping any material from Canada into United States anymore. So they left those volumes on the table, and we picked it up. I think that's probably where you see the biggest change.

All right. And how is it going from the defense industry, just to follow up on the grades. Are you able to ramp up Armox now for the upcoming quarters?

So ramping up capacity to supply the defense injury is one of our priorities. That would mean with the capacity we have today that we have to turn down other orders and replace it with this because that's how constrained we are for some dimensions, especially in Oxelösund. Of course, we're looking into whether we can add more capacity. And that's something that we're looking into as we speak. But for sure, we have extremely high margins on the defense material. But there are also -- there is a commitment for us to supply the market because we're one of the few that is qualified to supply. And that demand will continue to grow. But like I mentioned before, but if there are orders coming in, let's say, there's tanks or any type of military vehicle, there's a lead time. So when they talk to us, it usually takes 2 years before we start to deliver. That's the normal lead time. We're very slow in Europe, I have to say, but that's the way it is.

Yes, operator, we have time now for one more question.

Certainly, our final question for today comes from the line of Bastian Synagowitz of Deutsche Bank.

Just two very quick ones. Maybe first of all, on Special Steels, where I thought your volume performance was actually quite good also relative to last year's comps. Could you please help us to understand how far this is driven by the business basically getting back on the structural growth path, which you are aiming for? Or have there been some tailwinds from CBAM and the pending EU import policy as well? And then the second one is just on the cautious client behavior you're citing, and I think you gave a lot of good and helpful color here already. But just to make sure we have not missed anything. Have you seen any hard warning signs such as order cancellations in any parts of your business?

All right. So first, the answer to your first question is very much related to the question that we got from Christian Kopfer, what is this related to? And I guess that some of the volume increase is actually coming from Algoma not selling into United States anymore, that gave us a big push. They left that -- those volumes on the table. But we have a steady growth on the strategic products for special steel such as the [ final draft, the high As, ] the Armox, we have a steady growth with them. But the big jump is mainly coming from the nonbranded QT that we picked up from Algoma sort of more or less. And then what was your second question?

The second one was just on the cautious client behavior. Just I wanted to understand, have there been any harder warning signs such as order cancellations? So approximately, just to say.

We haven't seen any order cancellations. It's I mean, like I said before, the order intake has been very, very strong to us. But like I said, it's also more related to regionalization than it's related to segment improvements, and we have to have that in mind, but the order intake in Europe and United States has been very, very strong.

Okay. Thank you. That concludes today's conference. So we thank the audience for the attention and good questions, and thank you, Johnny and Leena.

And thank you, Per.

And we wish you a nice day.

Thank you.

Thank you.