Outokumpu - A continuous rollercoaster or a serious investment?

Stocks
3756

Apparently, the EU’s draft proposal does not change the existing situation much regarding stainless steel.

“I believe the Commission has now expressed a firm political will on import restrictions. The EU must want to preserve the relationship with Asian countries, particularly when the rapport with the US has become tricky. Regarding stainless, the [leaked] document represents 40 pages of nothing. This will strongly impact the sector that has suffered months of unsustainable margins. This represents a significant setback for producers but also for the downstream, as it is unlikely that coils derivatives will increase,” a coil buyer comments.

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Have Outokumpu’s lows been seen now? Defense industry investments, interest rate cuts, US tariffs, EU carbon tariff regulations, overall investment growth, green transition investments. Is this enough?

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Some more speculation about repairing the EU’s protection mechanisms.

The “melted & poured” clause, familiar from the US, is being introduced into EU import regulations.
I thought such a trivial matter would have already been handled (see link below ref Indonesia / Turkey), but apparently, at that time, it was about a clear-cut customs fraud of imported goods. It is mentioned that in Turkey, the Value Added was less than 2%, e.g., 3000 eur/t x 2% = 60 eur/t. Surely, with that money, steel ingots are not processed, heated, rolled, coiled, and coils handled. Rather, some kind of import duty saving kick-back mechanism was likely present.

In addition, the threshold for intervening in customs matters is being lowered, and something apparently raw material-intensive (intermediate) product is being added to the scope of the CBAM mechanism.

Well, this doesn’t fix the fact that carbon leakage is constantly happening by importing finished products, but improvements are always steps in the right direction, and a springboard for future development areas.

The European Commission will introduce a “melted and poured” rule as part of its steel and metals action plan, to underpin the effectiveness of its trade defence measures.

The rule will mean the origin of goods is determined by the location at which the metal is originally melted, regardless of where it was further processed. This will prevent minimal transformation to evade dumping and other duties and provide greater clarity over the origin of the product, a draft of the plan suggests.

The move will clearly have big ramifications for steel, where material produced in countries with duties, such as China, is further processed — for example, from hot-rolled into hot-dip galvanised — before being sent to the EU without paying duties.

The commission said it will “remain vigilant, as overcapacities generated under non-market conditions may also have the effect of driving unrelated market-based producers in other third countries to export quantities to the EU that are displaced from their domestic or other traditional non-European markets”.

And the rule will have major implications for the EU’s imports of cold-rolled and hot-dip galvanised, among other products, with one trading firm saying it would be a “game changer”. European steel association Eurofer requested a melt and pour on Chinese steel as part of its request for a functional review of the steel safeguard.

The commission also will “proactively” open duty investigations based on a “threat of injury” without waiting for material injury to occur.

The carbon border adjustment mechanism will be extended to certain downstream products to prevent a shift to downstream goods that then avoid paying the carbon taxes required on upstream products, such as steel. European service centres and distributors have been requesting this move to protect themselves and their customers, which could face greater import penetration without an extension of the measures.

https://gmk.center/en/news/the-eu-extended-anti-dumping-measures-to-the-import-of-stainless-steel-coils-from-turkiye/

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Apparently, some whistleblower has leaked a draft.

Well, a draft is just a draft, but I’ll include some thoughts on CBAM, as well as the continuation of import protection, reformed after summer 2026. Reform is needed because the EU, being compliant, adheres to WTO restrictions.

It’s astonishing that a regulatory superpower is only now bringing such trivial and obvious problem areas into its preparation. Poor planning, weak foresight, but always better late than never.

CBAM
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On Import Protection / Actions:
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https://www.euractiv.com/wp-content/uploads/sites/2/2025/03/Steel-and-Metals-Action-Plan-EURACTIV.pdf

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Outokumpu is lowering its price list discount percentage, i.e., raising prices in the USA / early March. NAS, i.e., Acerinox, has not yet followed suit, but perhaps in early April? Or maybe not?

Of course, we don’t know how different Outokumpu’s starting point for price changes is compared to NAS, but a clear stance has been taken regarding tariffs.

In the USA, pricing uses a separate surcharge for variable material costs, so price list changes are more related to the company’s own operating profits than to “pass-through items” (like main raw materials).

In Europe, it’s probably anemic, but since trade is now done at transaction prices, including raw materials, one would think that European “gentlemen traders” would have to yield to price increases once raw materials force them to, as margins have already been driven to a weak level.
-at least nickel has risen slightly, reaching early 10/2024 levels.
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A clear turnaround is indeed observable in the price curves of BLACK STEEL in the USA, +25% this year. In Europe, over +15%
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http://steelbenchmarker.com/history.pdf

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Apparently, the Steel action plan came out soon after the draft leak.
I’ll post screenshots of the same sections as from the draft a couple of messages earlier.
So, it has been refined and adjusted a bit.
Unfortunately, there seems to be some adjustment towards “it is intended to”, e.g., “melted & poured”

CBAM:
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About Import Protection / Actions:
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https://ec.europa.eu/commission/presscorner/detail/en/ip_25_805

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EPS might be 0.10. Q1. In the US, it looks reasonable, ferro good, in Europe operating margin positive. Great that you provide this data, thanks.

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A few takeaways from the EU Steel Action Plan.
The sentiment from the stainless steel side is that it’s quite good but should also be implemented, and a bit faster.

FINNISH STAINLESS STEELMAKER OUTOKUMPU:

“Outokumpu is pleased that the European Commission recognizes steel as one of Europe’s key industries and is taking decisive actions to strengthen its competitiveness.”

“The Steel & Metals Action Plan clearly identifies the challenges that European steel industry faces, but still lacks solutions to some of the challenges.”

“The industry remains threatened by global excess capacities and by global distortions from China and other countries. () These challenges need to be mitigated with more assertive solutions including replacing current safeguards with more effective measures from July 2026”, Outokumpu said.

LUXEMBOURG-BASED STEEL GROUP APERAM:

" Aperam strongly supports any initiative to introduce long-term measures that ensure robust protection for the EU’s steel sector against the negative impacts of excess steel production from Asia once the current safeguard measures expire in June 2026."

“The key point is how the European Commission will translate this high-level action plan into concrete legal measures: urgent action is needed and therefore proposed measures must be implemented swiftly and effectively.”

“In particular, as regards trade defense, we believe that concrete actions can and should be implemented already now, without awaiting the future post-safeguards instrument that would enter into force from July 2026.”

https://www.investing.com/news/stock-market-news/european-steelmakers-weigh-in-on-eu-steel-action-plan-3937191

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Outokumpu pre-silent call coming Mon 31.3.

Outokumpu to host Q1/2025 pre-silent period call on Monday, March 31, 2025, at 3:30 p.m. EEST

During the call, CFO Marc-Simon Schaar will review the quarter’s events and answer questions. The event will be held in English.

You can participate in the call by registering via the link below. Upon registration, participants will receive the conference call number and a personal PIN code. Participants can dial the number they receive themselves or use the Call me function.

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That was the pre-silence call. Quite downbeat. Demand is weak even though there are signs of markets waking up. Volumes are at the lower end of the forecast, meaning something closer to a 10% increase in both Europe and the US. Prices are still under pressure. Negative impacts of a 15 million (implied currency) week-long strike and 10 million (implied currency) from maintenance. I didn’t listen to the end, but something like this at the beginning.

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Further comments on the updates to the EU’s import protection, which on the stainless steel side fell a bit short of expectations for something better…

Europe’s stainless steel industry has had a mixed reaction to the European Commission’s safeguard steel review and its action plan to protect the bloc’s metals industry, both announced on 11 March. Steelmakers have welcomed greater commitment from policy makers to support the sector, but are still concerned at a lack of concrete commitment to significant protectionist measures, while traders, service centres and scrap suppliers are worried the most radical proposals could severely damage their businesses.

The European Commission’s review of definitive safeguard measures on imports of certain steel products identified no new import pressure for stainless cold rolled sheets and strips, and left tariff rate quotas for the next 15 months virtually unchanged even as carryovers and unused quota access were removed. And the commission’s European Steel and Metals Action Plan included proposals to curb imports of finished steel and exports of scrap alongside the extension of the Carbon Border Adjustment Mechanism (CBAM) to potentially include raw material exports and downstream products.

European stainless steel flat producers — battling weak medium-term demand and a high cost structure — expressed disappointment on the absence of protectionism in the safeguard review through to July 2026, but told Argus they were encouraged by proposals in the Action Plan that acknowledge the need to to curb imports for domestic industry’s long term health.

“The industry remains threatened by global excess capacities and by global distortions from China and other countries that artificially support their domestic industries or circumvent the current measures,” Finnish producer Outokumpu told Argus. “These challenges need to be mitigated with more assertive solutions, including replacing current safeguards with more effective measures from July 2026.”

European trading groups surveyed by Argus welcomed the stability offered by the unchanged import quotas as the industry navigates other pressures — such as high energy prices and US tariffs — but said they expect lobbying by producers to drive a wave of new measures in the fourth quarter of this year, with stainless steel-specific safeguards likely to be implemented from next year.

“Current quotas will only last this year, if you ask me,” a trader said. “We expect new regulation to be announced in September/October.”

A key area of focus for the industry is the possible introduction of the melt-and-pour clause, which determines the origin of goods by the location at which the metal is originally melted, and disregards third countries where further processing may take place for circumvention of anti-dumping duties. The EU stopped short of immediately implementing this clause as part of the Action Plan, and will conduct further assessment of the action. But market participants expect consultation on the policy will start after the current safeguard period ends.

Several large European stainless steel producers are heard to be importing slab from Asia, and traders told Argus they were relieved that melt and pour is not coming into play this year. A Spanish trader said the clause will level the playing field for European producers, but a hasty implementation this year would have simply added to costs for both producers and consumers in the near term. Outokumpu said it welcomes the melt-and-pour proposals as part of a wider anti-circumvention drive that it said is required in Europe.

The EU’s Action Plan also calls for the need to address carbon leakage of exported steel through a potential extension of the CBAM to include exports. Trading groups told Argus this will be difficult to implement across the spectrum of trading partners, and may render exports uncompetitive to the detriment of European service centre groups.

Outokumpu called upon the need to leverage the EU’s competitive advantage by including Scope 2 emissions within any CBAM regulation for downstream products.

“It is critical to prevent European steel producers from being placed at a disadvantage from imports with higher emissions from energy usage,” the group said. “Outokumpu uses low-carbon energy across its operations with a high-recycling rate, so a fair benchmark definition is necessary to ensure that our low-emission production receives the competitive advantage it deserves.”

The EU’s action plan also proposes the potential introduction of export duties for all steel scrap in order to limit scrap leakage from the bloc. Stainless steel scrap traders surveyed by Argus said there was no chance such a move would ever be implemented as Europe simply cannot consume all the scrap it produces, and that recyclers use exports to keep prices at a level that encourages further investment.

“We would drown in scrap if exports fell,” a trader said. “Prices would decrease sharply and work like a subsidiary for an antique industry. High-end recycling plants need high prices to process complex materials which would end up in landfill otherwise. No investments would be made if prices are pushed into the ground.”

Trade bodies BIR and EuRIC suggested a more rational move could be to introduce mandatory recycled content targets for metals products that incentivises domestic demand and usage for scrap, while also allowing scrap to move freely to export markets.

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Here are Petri’s comments from the call. :slight_smile:

Outokumpu held an investor call yesterday before the Q1 quiet period. During the call, the company shed light on the stainless steel market situation in particular and commented on market observations based on customs policy.

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[quote=“Opa, post:3767, topic:621”]

[/quote Let me try to explain how this works concerning “public procurements” as they seem to be coming in billions in the future.

The University of Eastern Finland holds Circular Economy Webinars once a month, and the latest one: Regulation and Legislation is almost here webinar discussed this topic. Harri Kalimo explained, if I recall correctly, that a directive is coming from the EU that obliges these matters to be taken into account. There was no recording or presentation material available from the event. They probably only make it for internal use as only ELY Centre staff hang out there.

However, I took a picture from the webinar and asked AI Grok’s opinion on the matter.

Hello, I am looking for information on the EU directive on recycling related to public procurement. Can you help?

I understand that you want to interpret the circle in the image and its connection to public procurement. The image presents the principles and measures of the circular economy that relate to EU legislation and policies. Promoting the circular economy is a key objective in the EU, and public procurement is one tool through which these principles can be implemented. I will go through the elements of the image and explain how they relate to public procurement.

General structure of the image

In the center of the image is a circle depicting the circular economy (“A circular economy”). Inside the circle are various stages, such as raaka-aineet (raw materials), suunnittelu (design), tuotanto (production), jakelu (distribution), kulutus (consumption), keräys (collection), and kierrätys (recycling). Around these stages are various measures and policies that support the circular economy. These measures can affect how public procurements are carried out.

Individual elements and their connection to public procurement

  1. Extended Producer Responsibility (Laajennettu tuottajavastuu)
  • This means that producers are responsible for the entire life cycle of their products, including recycling and waste management. In public procurement, conditions can be set requiring bidders to comply with producer responsibility, for example, by ensuring that their products are recyclable or that they have a system for taking back used products.
  1. Process standards – recycling (Prosessistandardit – kierrätys)
  • In public procurement, it can be required that procured products meet certain recycling standards, for example, that they contain a certain proportion of recycled materials (recycled content requirements). This supports the circular economy and encourages bidders to develop their recycling processes.
  1. Recycled content requirements (Kierrätetyn sisällön vaatimukset)
  • This is a direct link to public procurement. With the EU’s circular economy action plan and, for example, the Packaging and Packaging Waste Regulation (PPWR), requirements can be set in public procurement that procured products (e.g., packaging) must contain a certain proportion of recycled material. This may apply to, for example, construction materials, office supplies, or packaging.
  1. Bans on substances or products / Design requirements (Kieltoja tietyille aineille tai tuotteille / Suunnitteluvaatimukset)
  • In public procurement, the use of certain harmful substances can be prohibited (e.g., CAC ban, i.e., a ban on certain chemicals) or it can be required that products are designed for recycling (design for recycling). For example, procurement criteria may require that bidders supply only products that are designed to be easily disassembled and recycled.
  1. Digital Product Passports (Digitaaliset tuotepassit)
  • Digital Product Passports are a tool developed by the EU that provides information on a product’s life cycle, materials, and recyclability. In public procurement, bidders may be required to provide such passports so that contracting authorities can ensure that the product meets circular economy requirements.
  1. Mandatory eco-markings / Eco-labels (Pakolliset ekomerkinnät / Ympäristömerkit)
  • In public procurement, it can be required that procured products have certain environmental labels (e.g., EU Ecolabel) that indicate their environmental friendliness. This supports Green Public Procurement (GPP) and encourages bidders to produce more sustainable alternatives.
  1. CAC requirement / CAC ban / Economical / Informational (Kemikaalivaatimukset ja -kiellot / Taloudelliset ja tiedolliset toimenpiteet)
  • In public procurement, conditions can be set that prohibit the use of certain chemicals (CAC = Certain Chemical Substances) or require additional information on product composition. This improves the transparency of procurements and supports the circular economy.
  1. Green claims / Refurbishment (right to repair) / Reuse incentives / Green procurement (Vihreät väittämät / Korjausmahdollisuus / Uudelleenkäytön kannustimet / Vihreät hankinnat)
  • Green procurement (Vihreät hankinnat) is directly mentioned, and it is a key way in which public procurement promotes the circular economy. For example, procurement criteria may require that products are repairable (right to repair) or that they use reused parts (reuse incentives). In addition, misleading green claims can be prohibited (green claims) to ensure that bidders do not falsely market their products as environmentally friendly.
  1. Ban to plan obsolescence / Ban to destroy / Ban to dump – EOL / Permits – EOL / Process standards – EOL / “Waste law” (Kielto suunnitellulle vanhenemiselle / Kielto tuhota / Kielto kaatopaikalle – elinkaaren loppu / Luvat – elinkaaren loppu / Prosessistandardit – elinkaaren loppu / Jätelaki)
  • These measures relate to the fact that in public procurement, conditions can be set that prevent planned obsolescence (e.g., that a product breaks down quickly) or require that at the end of a product’s life cycle (EOL = End of Life), it is recycled appropriately. The Waste Law (Jätelaki) can guide procurements, for example, so that procured products must be such that they do not end up in landfills.
  1. Takeback obligations / Deposit-and-refunded / Systems prefiling / Shared utilization (Takaisinottovelvoitteet / Pantti- ja palautusjärjestelmät / Esitäyttöjärjestelmät / Jaettu käyttö)
  • In public procurement, it can be required that bidders implement take-back or deposit-and-refund systems (e.g., for beverage packaging). In addition, shared utilization can be favored (shared utilization), such as leasing models where the public sector does not own the product but leases it, which reduces waste.

How does this relate to public procurement?

The principles of the circular economy, as presented by the circle in the image, are directly applicable to public procurement through the EU’s Green Public Procurement (GPP). GPP is a voluntary tool, but with the EU’s circular economy action plan and new regulations (such as PPWR), it is becoming increasingly mandatory. In public procurement, it is possible to:

  • Set criteria that require the use of recycled materials (recycled content requirements).
  • Require Digital Product Passports (Digital Product Passports) to ensure product recyclability.
  • Require eco-labels (eco-labels) or prohibit the use of certain chemicals (CAC ban).
  • Encourage repairability (right to repair) and reuse (reuse incentives).
  • Ensure that procured products do not promote planned obsolescence (ban to plan obsolescence).

SummaryThe circle in the image depicts the life cycle of the circular economy and related EU policies, which also guide public procurement. Public procurement can act as a lever in promoting the circular economy by setting criteria that support recycling, reuse, and sustainable design. For example, requirements for recycled content, repairability, and eco-labels are concrete ways in which public procurement can implement the principles presented in the image.

If you want more detailed information about a specific part, such as how one of these measures has been implemented in Finland, let me know, and I can delve into it!

I can’t guarantee it, but I think this is the correct interpretation :grinning:
IMG_0796

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Acerinox stated;
-due to local production, US tariffs are positive, stating that the benefits outweigh other effects of the tariffs in the USA
-the EU should act to implement protection mechanisms, because steel intended for the US market may flow into the EU area.
Not new per se, but today’s statement, i.e., the US tariff content, is known

Aperam, on the other hand, calls for exemptions and for the EU to implement countermeasures and provide protection for EU producers.

Outokumpu, meanwhile, is holding a meeting, perhaps with some refreshments, you see, as it’s their annual general meeting…

MADRID (Reuters) - Spanish steel maker Acerinox (BME:ACX) said on Thursday that the U.S. tariffs would have “in principle” positive effects on the company as the country is its main market and where its main steel mills are located. The positive impact would offset the broad effects they may have on the economy, the company said. Acerinox added the European Union should protect its steel industry as a lot the steel made in the countries hit by the tariffs is likely to flood the EU market as they become less competitive in the U.S.

(Reuters) - The Luxembourg-based steel group Aperam (AS:APAM) said on Thursday it would explore potential exemptions from announced U.S. tariffs, along with its U.S. customers.

The long-term impact of the tariffs on the U.S. economy remains uncertain and could influence any investment decisions, Aperam told Reuters in an emailed statement.

“Unfortunately, the current lack of regulatory predictability creates an unfavorable business environment on both sides of the Atlantic,” it added.

The group stressed the “need for an appropriate and proportionate response from the European Union”, urging the 27-nation bloc to protect the region’s steelmakers from the negative impact of U.S. trade policies.

https://www.investing.com/news/stock-market-news/spains-acerinox-says-tariffs-positive-in-principle-but-wary-of-surplus-flooding-eu-3964607

https://www.investing.com/news/stock-market-news/french-steelmaker-aperam-to-seek-potential-exemptions-from-us-tariffs-3965275

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Lawyers and economists have written the release :magnifying_glass_tilted_left:, but I would understand that:

  • The bond matures in July, and until then, shares, bonds, and money will be exchanged. By August, the matter will be settled and the new share count will be known.
  • Outokumpu issues new shares against the bonds, but simultaneously cancels old shares on a one-to-one basis.
  • Outokumpu has ~31 million shares, and at most ~45 million shares would be needed, so there might be a dilution of several million shares as a result of the bond redemption.
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Quote from an analyst’s comment three days ago. My highlights:

  • Tariff policy is on the table

The US administration’s tariff policy and related comments played a significant role in the call. Outokumpu reiterated its earlier comments that its imports from its Mexican plant to the US are very small-scale (10-20 kilotons), so tariffs do not have a significant impact on Outokumpu. Furthermore, the company’s customers have communicated that they will continue purchases, even if tariffs are reflected in these deliveries. Outokumpu also reiterated its earlier message that the tariffs imposed by the US benefit it, as it has suffered from low-priced imported steel entering North America. We have estimated that the tariffs imposed by the US could lead to greater import pressure on the European market, which would further weaken the market. According to the company, it has not observed exports from the US to this side of the Atlantic, but emphasized that it is important for the EU to be able to react to potential changes in import pressure. All in all, our interpretation is that tariff policy has so far mainly caused uncertainty in the market, i.e., slowed down the recovery of demand, but overall, the concrete effects are minor.

There will certainly be import pressure on the Union’s part, but now the gloves are off and it will be reacted to. So why is Outokumpu plummeting like a stone down a well?

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Well, pretty much everything is plunging, and the dividend went ex-dividend today as well.

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In practice, Outokumpu’s share count will thus increase by a maximum of 14 million based on that, or by a maximum of 3.7% (current amount approximately 457 million pcs).

My understanding is not sufficient to comprehend from the release why it is more economical to issue all VVK shares as new and cancel previously acquired own shares versus issuing the own shares and additionally issuing any missing ones as new if needed. If someone, e.g., Petri, understands, it would be interesting to hear. In itself, it doesn’t have a big significance from a shareholder’s perspective because what is essential is the total number of shares after all actions, and that would presumably be the same in any case.

From the pre-silent call, I recall that Q1 delivery growth was indeed closer to +10 percent than twenty, and the CFO mentioned something that it’s not due to the market but rather some temporary challenges due to which deliveries shifted to Q2.

It will be very interesting to hear the company’s comments in connection with the Q1 results regarding US tariffs, European safeguard measures, and markets. Previously, tariff commentary has been on the positive side, but of course, the global trade impact resulting from the situation cannot be positive.

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Exactly, that would be truly interesting information, because, in Finland, the transfer tax is paid, as I understand it, by the taxpayer, i.e., the transferee…

  • If “old shares are subscribed” in the offering, transfer tax becomes payable, whereas no transfer tax needs to be paid for new shares.
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Outokumpu teki teknisen järjestelyn kesällä erääntyvään vaihtovelkakirjalainaan liittyen - Inderes here are my short comments on this stock matter. Indeed, the reason why it is more advantageous to use new ones is related to tax reasons.

In my opinion, @Realmcrusader’s point about the tax treatment of different shares could be the reason. It is also possible that the terms of the convertible bond (vvk) stipulate that in such cases, the company must pay the taxes on behalf of the bondholder. Or, more technically, probably compensate for those taxes for whoever has to pay them. This is purely my guess, but I don’t have information on the matter. In my opinion, it would be logical that from the convertible bond (vvk) holder’s perspective, all such potential factors related to taxes and other “extra” costs are excluded.

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