SSAB - Swedish steel giant

[INVST]

Hmmm, with the rise of the defense industry, I started thinking about the fate of steel. Unfortunately, I couldn’t find (read: GPT couldn’t find) any mention in the European steel giants’ quarterly reports about how much of their product goes to the defense industry. One would think, however, that tanks, armored personnel carriers, cannons, ammunition, etc., will consume a large amount of steel in the future. Europe’s military equipment stockpiles are probably empty, and destroyed equipment should be replaced, and a few extra pieces built. In Ukraine, there would also be plenty of reconstruction work on the building side after the war, whenever it ends.

However, I have no idea how much steel is needed for this, and whether this growing demand has any impact, for example, alongside general construction and the automotive industry. That is, even if steel demand from the defense sector were to increase tenfold, would a slowdown in the construction/automotive sector still drag the company’s results down to the ground?

Some good reflections have already been made above, but has anyone considered this in more detail? Or read an informed article or opinion somewhere? SSAB indeed manufactures harder special steel; could it be one of the beneficiaries?

[Verneri_Pulkkinen]

Blumman’s review assesses the impact of Trump’s new steel tariff threats on the European steel industry.

“Steel output in Europe may need to shrink by 6 million tons with a halt of exports to the US and 25% tariffs on steel-intensive sectors like automotive and machinery. These sectors rank among the EU’s top US exports so are prime targets for the Trump administration. Tariffs could cut EU exports to the US by 70%, lowering EU GDP by 1.5%, according to Bloomberg Economics. The EU sells one in 20 cars it produces to the US and about 18% of its US exports are machinery and appliances, which consume 17% of the EU’s steel. Steel demand from these sectors could fall by almost 2 million tons if exports take a hit. The knock to GDP may cut another 600,000 tons of demand from other sectors. Diverting the EU’s 3.6 million tons of US steel exports to other markets will be difficult, given the global glut and rising protectionism”

However, SSAB’s presence in the United States helps, making it relatively the least losing steel company. On the other hand, competition generally intensifies with others in the domestic market if an important export market weakens for one reason or another.

[Koala]

Good news from Vattenfall, LKAB, and SSAB’s Hybrit joint project for fossil-free steel; the pilot project has been successful in terms of the hydrogen storage phase.

Nordnet

AI translation:

Hybrid hydrogen storage is technically possible, pilot project results show

The results of Hybrit’s hydrogen storage pilot project show that it is technically possible to store fossil-free hydrogen for the production of fossil-free iron and steel on an industrial scale. This was stated in a press release after the project reported on the project to the Swedish Energy Agency.

“The pilot project has been very successful and has produced the results we wanted,” says Mikael Nordlander, Head of Industrial Development at Vattenfall. Vattenfall is one of the three companies participating in the initiative. The other two are SSAB and LKAB.

The hydrogen storage facility has been built in connection with the DR pilot for sponge iron production in Luleå.

“With tests at the Luleå pilot plant, the project has shown that hydrogen storage with LRC technology works, and with the knowledge and experience gained by the team, it is now possible to take the next step,” says Gunilla Hyllander, CEO of Hybrit Development.

22 percent of the hydrogen storage project has been financed by the Swedish Energy Agency, while the companies have paid the remaining costs.

According to estimates, Hybrit technology will help SSAB reduce Sweden’s carbon dioxide emissions by 10 percent and Finland’s by 7 percent.

[Index]

The article is behind a paywall, but the essential information is in the headline:

SSAB’s Stock Soared, and More Gains May Be Ahead – And Trump Isn’t the Only Reason

Donald Trump’s proposed import tariffs would benefit the steel manufacturer.
SSAB also supplies special steels for defense.

SSAB:n osake kääntyi hurjaan nousuun, jota voi olla edessä lisää – Eikä Trump...

[Teletappi]

SSAB up about 55% YTD. Nucor 11% and AM 35%.

25 days ago I wrote that the rise in steel prices, in my opinion, does not explain this, but the market quite well sniffed out the future rise (of course, there could be other reasons behind the rise).

If there are real steel industry professionals here, opinions would be very welcome. I’m trying to figure out how much higher this could still go if one considers the following catalysts. These can, of course, go in one direction or another.

• Rise in steel prices (plate and HRB); how high can it go?
• Possible peace in Ukraine (sentiment) + reconstruction (demand)
• Tariffs in the USA (I have understood and believe from history that they play strongly into SSAB’s hands)
• Money taps open in Europe; will Germany shovel money into infrastructure and similar projects?
• General increase in activity in Europe, of which there were small indications (e.g., engineering workshops)
• Growth of war economy in Europe, will SSAB still get some crumbs from it, at least due to rising steel prices?
• Improved confidence in SSAB’s investments (vague)
• Improved confidence in SSAB’s earning capacity (a bit vague)
• Scrap prices have risen, I cannot assess other relevant costs myself
• Joker card; NATO. Could, for example, Armox start to be used more, even if not directly for tanks or similar military equipment.

It’s hard to be out of such a “special situation” where, in my opinion, there are many positive things or at least interesting catalysts. On the other hand, we are not very far from the peaks anymore, and back then money was flowing in from all directions, and we are not at that level of earnings now - at least not yet.

EDIT: HRB above, Plate below

[Opa]

A story about green steel premiums.
Though volumes are small…
Apparently, in addition to actual “green steel”, there’s a small premium even on the “reduced” side with double emissions.

Fastmarkets’ methodology defines European green steel as “steel produced with Scope 1, 2 & 3 emissions at a maximum of 0.8 tonne of CO2 per tonne of steel”.
**> **
> During the assessment week, premiums for such steel were reported at €200-300 ($216.96-325.43) per tonne from major European suppliers.

Buyer sources estimated that achievable premiums for such material were at €100-150 per tonne. But suppliers claimed that the lower end of the range was not workable for electric-arc furnace (EAF)-produced green steel.

Notably, two suppliers told Fastmarkets that they would be willing to knock off no more than €20-30 per tonne from their offers of €200 per tonne.

Buyer sources argued that big tonnages (more than 3,000 tonnes) could be booked with lower premiums – of around €150 per tonne

“The demand [for green steel] is not booming, but we sell 200 tonnes here, 100 tonnes there,” a mill source said.

“Nobody books green steel to stockpile it – it would have been too expensive. So this is back-to-back business – you have a project, you book green steel for it,” the mill source added.

Transactions for flat steel produced with emissions below of 0.7 tonne of CO2 per tonne of steel were reported at €170-180 per tonne, for May-shipment material.

While Nordic countries remained the main demand drivers in Europe, sources have also pointed out that they noted they have heard more inquiries coming from Spain lately.

As a result, Fastmarkets’ assessment for green steel domestic, flat-rolled, differential to HRC index, exw Northern Europe was €150-200 per tonne on Thursday, widening upward from €150-180 per tonne in the previous week.

Meanwhile, Fastmarkets’ assessment of the flat steel reduced carbon emissions differential, exw Northern Europe was €30-60 per tonne on Thursday, unchanged week on week.

For steel produced in blast furnaces, with reduced carbon emissions of 1.4-1.8 tonnes of CO2 per 1 tonne of steel, offers for premiums were reported at €40-70 per tonne during the assessment week.

Notably, premium steel produced with carbon footprint of 1.5 tonnes of CO2 per 1 tonne of steel was reported at €70 per tonne from one supplier.

For steel with produced with 1.8 tonnes of CO2 carbon footprint, the premium was reported at €40 per tonne.

Buyer sources estimated a premium level of €30-60 per tonne, depending on the carbon footprint.

Demand for green flat steel muted in Europe, but premiums remain high -...

[Teletappi]

Confusingly written report. But hasn’t SSAB itself also talked about some premium of around €200? If I interpret the text correctly, then the reference group there is probably Zero and similar competitor products when looking at the limit of maximum CO2 per tonne.

Hybrit Fossil-Free is intended to be on a different playing field regarding “greenness”: SSAB Fossil-free™ steel are targeted to be less than 0.05 kg CO2e/kg steel in Scope 1, 2 and for iron ore upstream Scope 3, of the GHG Protocol.

How it affects the premium remains to be seen. Perhaps that 200 - 300 is still a good assumption.

[Opa]

Good point.
According to SSAB, the Hybrit line indeed emits 50kg CO2/tonne, whereas ‘Green steel’ in Fastmarkets’ premium tracking emits 800kg/t and ‘Reduced’ 1400-1800kg/t.

According to the image below, the world’s
BOF route average 2330kg/t
EAF route 1370kg/t leads to the ‘Reduced’ side
-and scrap steel EAF falls into the ‘Green steel’ category.

So Hybrit is significantly lower-emission than ‘Green steel’, almost zero-emission.
Presumably, it deserves a higher premium than ‘Green steel’, although presumably with higher production costs, as well as lower emission costs / surplus emission allowances to sell.

The challenge is that demand for low-emission products appears to be low in the market. But of course, everyone would take such products if the price didn’t matter.

In steel production, global CO2 emissions are around 5% in the EU and 7% globally.

One can calculate for fun that
-a car contains about 60% steel by weight, i.e., e.g., 1000kg
-premium 200€/t
→ additional cost 200€/car
Costs ‘multiply’ through various producer coefficients (cost allocations, depreciations, profit, etc., as well as frequently defined sales channel costs, car tax, and VAT, perhaps e.g., 2.5 times)
So, for you as a new car buyer, the additional cost would be, for example, around 500€ for a 50k€ car.
Perhaps not an impossible amount of money, i.e., a 1% addition to the sales price, but in practice, consumer trade is not largely conducted with the emissions of product manufacturing being visible and comparable.

In addition to an energy label, an emission label should be introduced for all products, along with emissions-based VAT or an emission fee.

World Steel in Figures 2024

[Jukka7]

Fire broke out at a factory in Raahe: 10 exposed to smoke - Ilta-Sanomat

Fire at SSAB’s Raahe steel mill. No information (yet) on its impact on production.

[LillaGris]

One inevitably comes to the conclusion that people in the Nordics are impatient.

US Steel near ATH

Thyssenkrupp YTD. Even after the Trump decline +100%

SSAB’s slump is a bit without “support” from comparables

[Ellu1]

Thyssenkrupp’s stock price rise is also strongly influenced by their announcement to spin off their submarine division from the company.

[Sijoittaja-alokas]

Here is Salkunrakentaja’s article about SSAB.

OP gives SSAB a buy recommendation after its previous ‘add’ recommendation, following a stock price decline that ‘prices in risks quite aggressively’. The bank raises the target price for the stock to 5.75 euros from the previous 4.9 euros. Currently, the stock is quoted at 5.0 euros.

Subheadings:

1. SSAB expects growth in delivery volumes, but a decrease in prices
2. The stock price includes a lot of risk pricing

SSAB:n osake ei ole hinnalla pilattu

[Kumiorava]

SSAB published its interim report today 1.1.-31.3.2025 - SSAB

First quarter:
Net sales were SEK 25,523 (27,148) million
Operating profit was SEK 1,351 (3,157) million
Earnings per share were SEK 1.13 (2.57)
Net cash was SEK 14.4 (18.2) billion

[Cotr]

But it’s quiet on the forum regarding SSAB. I myself returned as an owner by buying several times during May.

Trump is raising tariffs from 25% to 50%, and in the short term, this should further raise prices in the Americas segment. The Q1 report already predicted that segment prices in Q2 would be “significantly higher”, i.e., >10%.

Overall, there was an increase in delivery volumes and prices across the board. I am expecting an excellent Q2 report and further rising prices for Q3. And if this happens, I see no reason why the share price wouldn’t clearly head towards the peak figures of recent years, i.e., numbers starting with 7.

For example, 250 Meur operating profit + rising guidance for Q3 is not, in my opinion, a very utopian prediction. But I would gladly hear differing opinions.

[Kumiorava]

According to MEPS, steel prices are expected to remain very close to current levels in Q3. SSAB is helped by US tariffs and their strong position in the special steels market.

[Teletappi]

It feels like even professionals find it difficult to estimate SSAB’s “normal earning capacity”, let alone a layman. Or what would be the “correct” multiple level, if it could consistently generate, for example, 8-10 billion SEK in EBIT going forward. On the other hand, it’s worth remembering that even though SSAB has special steels and other non-bulk products, it is (or has been) a highly cyclical industry.

I recall that expectations are around SEK 8 billion EBIT for 2025, so in that sense, quarterly results of around SEK 2.5 billion should be a fairly basic level.

Americas is practically the question mark; the increased prices will come through either now in Q2 or Q3, but by how much?

I myself expect Q2+Q3 EBIT of 5 billion - 6.5 billion SEK, leaning more towards the upper end of that range.

[Cotr]

I’m also banking on cyclicality. If the markets conclude from the Q2 report that prices will cyclically rise next, then only the sky is the limit. China tariffs are and will remain in Europe, and steel won’t be coming from Ukraine for years (rather, it might go that way). 2.5 billion would be a good indication of a turnaround and, of course, then it would rise towards the end of the year.

[Teletappi]

Nice daily rise today. I previously wrote about various catalysts, and tariffs were one of them. Of course, one-day rises are what they are, but I think the management has indicated (very) clearly that SSAB benefits from USA tariffs.

I brought up NATO (and Armox) as a wild card. I still find it surprisingly little discussed, for example, in earnings calls; hopefully, more in the next one. However, about a week ago, there was apparently an article about this in DI in the form of an interview with Per Hillström. Could this indicate that its significance is growing and it’s already somewhat safe to talk about, or is it more marketing hype at an opportune moment?

I had AI research the matter, and interestingly, it highlighted the USA angle very strongly. With a grain of salt, as always:

Here are the key commercial takeaways regarding Armox from the past year:

U.S. Market Expansion: A primary commercial focus was the expansion in the United States, highlighted by the April 2025 launch of local Armox 500T production in Mobile, Alabama. This aims to better serve U.S. domestic programs, offering quicker availability and shorter lead times.

Strategic Investment in U.S. Production: This U.S. expansion is backed by a significant $74 million investment to enhance the Quenched & Tempered (Q&T) steel production capacity at the Alabama facility, specifically to produce SSAB’s “most advanced products,” which includes Armox. This investment is expected to be completed in 2027.

Targeting Defense and Security Sectors: Armox is consistently positioned for the defense and security markets, with SSAB noting an anticipated increase in demand from the defense industry. The U.S. production initiative involved rigorous testing with U.S. Army research labs to meet military standards.

Growth in High-Value Special Steels: Armox is a key product within SSAB’s Special Steels division, which has shown resilient financial performance and stable pricing, underscoring the commercial importance of such premium products. The division achieved an operating margin of 20% in Q1 2025.

Dual-Market Strategy (Defense and Civilian): While defense is a core market, Armox 500T produced in the U.S. is also intended for demanding civilian applications, broadening its market base.

Strengthening Regional Supply Chains: The localization of Armox production in the U.S. is part of a broader strategy to have production facilities close to major customers in key regions like North America, enhancing supply chain resilience and mitigating trade-related risks.

Focus on Premium Product Mix: Company-wide transformation projects, including investments in Luleå and Oxelösund, aim to improve the product mix towards more profitable premium products like Armox.

Anticipated Long-Term Defense Contracts: SSAB noted that contracts within the defense industry are often long-term and financially solid, indicating a stable revenue stream for products like Armox serving this sector.

[Kumiorava]

A couple of weeks old article in Tekniikka&Talous:
Steel Shortage Hampers Tank Production – Industry Monopoly Found Surprisingly Close | Tekniikka&Talous

Behind a paywall, but the most important part is this:
“The armor-grade steel needed in Europe is practically supplied by one factory, which is SSAB’s factory in Oxelösund. Its market position in Europe is described as a monopoly.”

Competitors have woken up, but the certification of a new steel grade takes years, and if a tank/vehicle is certified with a specific manufacturer’s steel, it’s not easily changed.

[Ana]

There has been some discussion in the thread about whether the company’s strategy to invest in emission-free steel is correct or not. There is an article in the Tekniikka ja talous magazine about how the gradual reduction of free emission allowances starting from 2026 and their eventual cessation will affect costs, assuming that the decisions will be adhered to at the EU level.

SSAB Could Face an Additional Bill of Up to €800 Million if Raahe Plant’s Transformation is Delayed – “We’re Really Pushing the Limits”

SSAB’s Raahe steel plant has benefited for years from free emission allowances, but from 2026 onwards, the benefit will start to diminish. If the plant’s transition to fossil-free production is delayed, the result could be an annual additional bill of €500–800 million for emissions – and at the same time, the price of steel could also rise significantly.

SSAB:lle voi napsahtaa jopa 800 M€ lisälasku, jos Raahen-tehtaan muutos viivästyy – ”Mennään aika lailla rajoille” | Tekniikka&Talous.

With very rough math, that €800M is approximately a €400 additional cost per ton produced in Raahe.

Many scenarios can be constructed from this. It seems certain that the price of steel produced in Europe will rise. Producing it CO-emission-free can be profitable or even a prerequisite when viewed from many different angles. I strongly hope that the European steel industry remains competitive, as steel is needed in so many places. Also at the border.