SSAB AB (SSAB-A.ST), the Swedish steel company, reported its third-quarter earnings, highlighting the impact of market challenges on its financial performance. Despite a dip in revenue and EBITDA compared to the previous quarter, the company emphasized progress in its transformation projects aimed at improving flexibility, reducing costs, and lowering CO2 emissions. The construction of an electric arc furnace in Oxelösund and preparations for a mini-mill in Luleå are underway, with an environmental permit expected in Q4. The company is adjusting production in response to low demand but maintains a strong net cash position and unchanged capital expenditure (CapEx) plans.
Key Takeaways
- SSAB's Q3 revenue was SEK 24.4 billion, a 14% decrease from Q2, with EBITDA falling to SEK 2.3 billion.
- Shipments totaled 14.57 kilotonnes, reflecting seasonal impacts and maintenance outages.
- The company's Europe division saw a 13% drop in volumes, with Americas and Special Steels down by 9% and 10%, respectively.
- Prices negatively affected earnings by SEK 3.5 billion, primarily in the Americas.
- The net cash position at the end of Q3 was SEK 13.3 billion, with a CapEx plan of SEK 6.3 billion for the year.
- Maintenance costs for Q4 are expected to be SEK 1.65 billion.
- SSAB anticipates growth in the automotive market and expects to finalize maintenance and adjust production for Q4.
Company Outlook
- The company plans to finalize maintenance and adjust production due to low demand.
- SSAB expects to receive an environmental permit for the Luleå project in Q4, which is crucial for project initiation.
- The outlook remains cautious for the heavy transport and construction sectors, while demand for energy-related products in the US is strong.
Bearish Highlights
- The company experienced a decrease in revenue and EBITDA compared to the previous quarter.
- A significant drop in volumes across all divisions has negatively impacted earnings.
- Lower shipments are expected in Europe and Special Steels in Q4.
Bullish Highlights
- SSAB reported ongoing progress in transformation projects that will enhance flexibility and reduce costs.
- The company maintains a strong net cash position and has met its financial targets.
- There is strong demand for advanced high-strength steel, particularly in the automotive market.
Misses
- The company's revenue and EBITDA decreased due to the maintenance cost of SEK 950 million.
- Prices and volumes negatively affected earnings year-over-year.
Q&A Highlights
- CEO Martin Lindqvist discussed improvements in product quality and safety, anticipating volume growth in the automotive sector.
- CFO Leena Craelius confirmed stable raw material costs in Europe, with some reductions expected in Q4.
- Lindqvist highlighted the company's flexibility measures in operations to manage fixed costs effectively.
- The company's export-oriented strategy focuses on a unique product mix, especially in advanced high-strength steels.
SSAB AB (SSAB-A.ST) remains focused on navigating market fluctuations and maintaining profitability through internal efforts, product mix enhancements, and strategic positioning in both the US and European markets. The company's commitment to its green steel transformation and adaptation to market changes underscores its long-term strategy, despite the current market volatility and macroeconomic challenges.
Full transcript - None (SSAAF) Q3 2024:
Per Hillström: Good morning, and welcome to this presentation of SSAB Q3 Report. My name is Per Hillström. I'm the Head of Investor Relations at SSAB. And presenting today, we have Martin Lindqvist, President and CEO; and also Leena Craelius, CFO. And if we have a look at the agenda, we can see that Martin will start -- sorry, here we have the agenda on the screen as well. Martin will start as usual overview of the quarter, and then Leena comes -- have a deeper look at the financials, and then Martin closes with outlook and summary. And then, we will also open up for questions at the end. So by that, the floor is yours, Martin, please.
Martin Lindqvist: Thank you. Per. And yes, let's dive into it. If we start with the transformation, it's moving on according to plan in Oxelösund. And this is a picture from yesterday. We have started now to erect the building for the electric arc furnace, and that project is ongoing. And as you know, we will build a new electric arc furnace. We will close down the coking plant and the two blast furnaces, but we will keep the existing advanced rolling mill and the Q&T line. So, it's moving on according to plan. In Luleå, we are more in the preparation phase for the mini-mill, and that's ongoing. Next big step will be the environmental permit, and we are foreseeing that in Q4 to get that environmental permit, but until then, it's more about preparations. And just as a reminder, why do we do this? We do the transformation because we want to build a more flexible production setup with lower costs and a bigger portion of variable costs and lower portion of fixed costs. We want to, with the Luleå investment, increase capacity for high strength steels and premium steels. We have the ability with this new mill to shift the product mix with 1 million tonnes. And that is very important because we see that also in Q3, and I will come back to it, we see much more stability when it comes to prices and earnings for our niche products compared to more standardized steel. So that's one other important aspect. Then, of course, elimination of CO2 emissions from our own operations, having the possibility to take away quite a few million tonnes of carbon dioxide emissions that will be very costly for us in the future. And then, of course, meet the growing demand of emission-free steel products or more environmentally-friendly products, but it's also about avoiding both in Oxelösund and in Luleå, avoiding to invest in old technique and in mills that are mainly built during the '60s. And in the Swedish strip system, we have the blast furnaces and the steel shop up in Luleå, and then we have the rolling mills and everything else in Borlänge. And that requires a lot of transportation, a lot of working capital. And we have 900 kilometers between the slab machine and the reheating furnaces in Oxelösund, so -- or in Borlänge. And so, that will also be a huge difference. And the segments where we see a strong and increasing demand for emission-free steels is automotive, heavy vehicles and construction machinery, construction and industrial equipment and distribution partners and consumer products. So, so far, so good. We are moving on according to plan, and the next big step will be the environmental permit in Luleå, and that will be hopefully then and we are very hopeful for that in Q4. If we then move into the quarter, I would summarize the quarter as, I would say, decent or strong quarter in a very demanding market. Also impacted by planned maintenance, we had a cost of SEK950 million in Q3. We had a semi-annual maintenance stop in Montpelier, and we also had other maintenance stops. So, as we discussed last time, we put them a bit forward, especially in US, because the market fundamentals were better to have the outage in Q3 than later. If we look at safety, which is one of our many very important KPIs, we continue to become safer and safer. This is the LTI frequency per million working hours, including contractors. We are now at 0.82. We are not where we would like to be at zero, but we have some of the major sites being at zero since a couple of years and then you always, of course, need to knock on board, but continued good development when it comes to safety. When we look into Q4, the focus areas will be, of course, to finalize the planned maintenance in Q4 and adjusting production to low apparent demand, utilize the framework we have introduced in Sweden and Finland for flexible working hours. In US, we have a slightly different setup with more, call it, flexibility in the pay structure. And then, of course, as always, when the market is a bit tougher, a very restrictive approach to costs. So, I would say, nothing new, but the usual things we do and implement when the business cycle is a bit tougher. If we dive into the divisions, Special Steels, weak market in Europe, more stable demand in the rest of the world. I think that the earnings still on a good level. Prices very stable, and they should be stable over time, up 1% compared to Q2 '24. So, I would claim that very good pricing management during weak conditions. So, good profitability given the circumstances. If you look at Europe, we, as always, see a seasonal slowdown versus the second quarter and also a weak apparent demand in Europe. Fairly stable prices versus a second quarter and also, of course, the usual impact from the maintenance outages, which are typically done during Q3 and beginning of Q4. So, all in all, I would say a positive result, but on the low side given the apparent demand and the seasonal slowdown and also the planned maintenance. If you look into Americas, cautious market. As said, the maintenance in Montpelier, the semi-annual maintenance, were done during Q3. Prices came down compared to Q2 with 8% from still a very high level, but still came 8%. The maintenance -- the cost of the maintenance was about SEK450 million, and I would say in line with our external expectations. If we look at two daughter companies, Tibnor and Ruukki Construction, there was, of course, Ruukki Construction impacted by the underlying still very weak construction market. We have been focusing a lot on the renovation segment, which is slightly better than newbuildings. We clearly see the positive effects from the cost cutting program, which is on a yearly basis around SEK150 million. So, we see that if you compare to a year ago or if you compare to Q2. In Tibnor, shipments was impacted by seasonality and weak underlying market and weak apparent demand. The difference between Q3 '23 and Q4 -- Q3 '24 was a combination of lower inventory losses compared to a year ago, but also here, positive effects from cost savings. So, with that, Leena will take you through some more details when it comes to financials.
Leena Craelius: Thank you, Martin. And I'll try to be brief so that you have a chance to ask questions last time from Martin in his current role. But let us start the financial analysis by looking at the steel shipments, which is on top of the graph on the right. This is the sum of all the steel division shipments. And in Q3, the shipments were 14.57 kilotonnes. As already mentioned, you can see from the graph that the seasonality has an impact in the Q3 being lower than Q2 throughout the years. But as the header says, the market sentiment in Europe was rather weak and turned more cautious also in the US. Already mentioned the maintenance outages. We have maintenances during Q3 and Q4. And this year, we had maintenance outage in Montpellier mill impacting the Americas division, and that's good to bear in mind when we do the year-on-year comparison as we didn't do that last year. And then, in case of Europe division, we had outages in Luleå and Borlänge. And also, in the case of Luleå, we had a bit more extensive maintenance this year. The similar scope maintenance we've done last time 2015, so that we don't do also every year. Oxelösund was starting the maintenance audits at the end of the quarter. And already last time we released the result, we mentioned that the production pace has been reduced somewhat to balance with the demand, and we continue to do that also during Q3. So, the shipments compared to Q2 were 11% lower. And if we do a bit of a comparison with the outlook we gave, we were in line with Special Steels being 10% lower. Europe division was slightly lower than the outlook we gave with 13% lower shipments, while the Americas was slightly better, being 9% lower when we were indicating significantly lower volumes. Compared to last year, the shipments were 3% lower, which is then reflecting the market sentiment. The revenue graph next to steel shipments, revenues, SEK24.4 billion in Q3. The reduction compared to Q2 was 14%, shipments being 11% lower, having a big impact, but also prices coming slightly down. And then, if we do the comparison of revenue with the previous year Q3, the reduction is 17%. While the shipments were 3% lower, it is indicating a clearly lower price level compared to last year. EBITDA, Q3 this year, SEK2.3 billion, reduction of SEK1.7 billion compared to previous quarter and then reduction of SEK3 billion compared to last year. But let us look into more details. First, comparing Q3 with the previous quarter, and this is comparing operating result, SEK1.2 billion in Q3 compared to SEK3 billion in last quarter or previous quarter. Deviation, negative deviation, reflecting the story already told, the prices, volumes, variable cost and capacity utilization having a negative impact, while the fixed cost having a positive impact. If we first look at the prices, SEK690 million negative impact. A majority of this is, of course, coming through the Americas, and Special Steels and Europe, already mentioned, were stable in this quarterly comparison. Volumes being lower, SEK842 million negative impact. Now here, the biggest contribution is coming from the Europe division, lowering volumes with 13%, and then also Americas with 9% and Special Steels, 10%, but the biggest portion coming through Europe division, while the Ruukki Construction being the only division with some higher volumes quarter-on-quarter. And the variable cost, here also, the biggest contribution is coming through the maintenance outages. Fixed cost, seasonally, we always see this kind of positive impact in this quarterly comparison. The positive impact with the holiday season, we did some minor adjustment to the bonus programs and also some minor impact of the FX here. And the capacity utilization, already mentioned, coming through the maintenance outages, while we didn't have any of those during the second quarter. Then, in the comparison with the previous year, already indicated that the biggest impact clearly coming from the prices, negative impact of SEK3.5 billion. Special Steels and Europe division, they were both 5% lower in their average prices, contributing then Special Steels, SEK0.7 billion, and Europe, SEK0.8 billion. And Americas prices were 24% lower, thus the biggest contribution, SEK1.8 billion coming through that. Volumes, 3%, 53 kilotonnes lower than last year. And here also, the majority of this coming through SSAB Americas, SEK300 million of that is coming from Americas, Special Steels SEK70 million, Europe SEK10 million, Tibnor and Ruukki Construction, already mentioned, having a positive impact of SEK30 million in this. Positive impact with the variable cost, SEK675 million, and the majority in this case is coming through with the lower raw material cost in the Nordic mills, which is then offset with the maintenance outage cost in US. Slightly lower fixed cost, and here we have a positive impact with the FX, bonus accrual adjustments, and already mentioned the cost savings in Tibnor and Ruukki Construction, and the capacity utilization also more extensive maintenances, as already discussed. If we then have a look at the cash flow, quarterly performance comparison year-on-year, earnings, yes, lower, and the release in working capital, slightly less positive than last year. The maintenance CapEx on similar level, but if you look at the year-to-date figure, you can see that the [R&C] (ph) investments is on a higher level this year than last year. And the other item, the negative item in Q3, that is majority related to purchase of CO2 emission allowances. That was done in Q3 this year. Last year, we did it during Q4. That's why the deviation in that line. Still positive impact in the financial items, interest income and then the strategic expenditures quarterly comparison already illustrating that, that is on a higher level. And if you look at the year-to-date figure, you can see that clearly higher and naturally related to Oxelösund. And also, to some extent, Q4, we will have the higher spend in Luleå project as well. So, the cash flow before dividend positive quarter and year-to-date. And as a reminder, the dividend payout was SEK5 billion and share buyback program impact this year during Q1 was this SEK1.2 billion. Net cash position at the end of Q3, SEK13.3 billion. That is still well in line with the financial targets. And the main deviation with the end of '23 is the dividend payout, SEK5 billion, and the share buyback program, SEK1.2 billion. CapEx plan for this year, we have not changed this since last time we showed it. Still plan is to spend SEK6.3 billion when it comes to R&C and strategic CapEx. Year-to-date, we have spent SEK3.5 billion, but the forecast is higher in Q4. So, there will be more spend in R&C and strategic going forward. Raw material, this is illustrating the iron ore, coking coal price development. Iron ore as well as coking coal prices have gone downwards during Q3. And since the China announced their stimulus package in September, the prices started to go upwards. And the outlook is that the Special Steels raw material cost in Q4 is somewhat lower compared to Q3 because of the low priced inventories, while the Europe division, the cost will be stable, and the reason being that the Luleå will be hit by the increasing price of iron ore sooner than other mills. They don't have the pellet inventory. And then, if we look at the scrap price, it has moved sideways during summer months in the US. Expectation is that it would start to go upwards, indicating that the raw material cost for Americas would be somewhat higher during Q4. Just to remind, the maintenance cost, as this table illustrated in Q3, we had more maintenance than what we have planned for Q4. In Oxelösund, we started maintenance at the end of Q3, and majority of that will be done during Q4. We will have maintenance in SSAB Europe in Raahe. And as a total, Q4 will sum up to 700. And compared to previous time we showed this, we have done some minor update to the cost. So, it will be SEK1.65 billion for the full year. And then, back to Martin.
Martin Lindqvist: So, if we look at the different segments, they are either neutral or weak. If we start with Heavy Transport, we see a slowdown of heavy truck production in Europe, and that continues. We see a stable trend for railcars and shipbuilding, two important segments for our US operations. Automotive, yes, the European market is weakening and the US market is a bit more stable, but we are still continue and expect to continue to structurally grow the advanced high strength steel market for us. So, increasing volumes when it comes to these advanced high strength steel, martensitic steels for mainly cold forming. Construction machinery, weak demand in Europe and a slowdown in North America. China, more stabilizing. Material Handling, we see and foresee a fairly stable demand within mining. Energy, good demand for wind power and other renewables, especially in US. Construction continues to be weak. It has been weak for a while. Renovation market is slightly better than new production, but it will continue in Q4 to be weak. And then, Service Centers, the big swing factor, well, cautious approach both in Europe and the US. If we look at the inventory levels amongst steel service centers, both in, I would say, Europe and in the US, the inventory levels are on the lower side. So, steel service centers are going from hand to mouth. And at some point, they need to see some restocking. So, all in all, I would say, neutral to weak looking into Q4 with the exception of the energy related business, especially in North America. And when we then guide for the outlook, as Leena said, we will have planned maintenance in Oxelösund and in Raahe in Q4. We guide for somewhat lower shipments in Europe and Special Steels and higher shipments in US, because of the outage was done in Q3. When we look at realized prices, we say somewhat lower in Special Steels and lower in Europe and Americas. And this is, of course, an effect of spot prices and also what we typically see, somewhat of a lag effect when spot prices move and until we see it in our P&L. So, if I would sum it up, strong focus on safety is yielding results. We are not as said where we want to be at zero, but we are slowly and steadily getting there. And we have some very good examples, which one is -- one is the Royal Mail (LON:IDSI), where we had a number of years now without lost time injuries. Good levels of earnings in Special Steels. We have been focusing the last couple of years on pricing management, which has also yielded results. The investment programs for Luleå and Oxelösund continues. And we are, as I said, targeting substantial benefits when it comes to cost and flexibility, the platform to further increase our mix with 1 million tonne, more Special steels, more Q&T products, less standard products, the possibility to eliminate CO2 emissions from our operations and also the possibility to meet the growing demand of emission-free products. And we see that also already in automotive, where we are coming into more and more new platforms in advance of also building up the fossil-free steel production. So, my last slide is something that Per presented to me. I was a bit not willing to show this, but then I realized that it's quite funny. I've been releasing 55 interim reports as CEO. And then before that, I had a couple of years in the line organization, but also in addition, 29 interim reports as a CFO. So, after 84 interim reports, me standing here, either as a CFO or a CEO, you will at last get rid of me. But I want to thank you all, and many of you have had contact since I was a CFO. So, just wanted to show this and say thank you. And with that, Per.
Per Hillström: Yes. Well, thank you, Martin, and thank you, Leena. Then, we can get ready here for the Q&A. And just as a reminder, you're perfectly fine to ask more than one question, but please state them one at a time to make the process a bit smoother here. So, with that, I can ask the operator, please, if you could present the instructions?
Operator: Thank you, sir. [Operator Instructions] We are now going to proceed with our first question. The questions come from the line of Adrian Gilani from ABG Sundal Collier. Please ask your question. Your line is open.
Adrian Gilani: Yes, hello. I'll kick off the Q&A for your 84th interim report. I just wanted to touch on the -- you said that you want to structurally grow with the automotive high strength steel volumes. And you've, of course, done well to outgrow the overall automotive market this year, but in terms of the near-term outlook, do you see a risk of a significant drop in these volumes in the coming quarters?
Martin Lindqvist: I think over time, we will continue to structurally grow that -- those volumes in that market. I mean, we have in Borlänge, we have this quite unique line, the continuous annealing line, and we are constantly developing better and better grades, better and better energy absorption, lighter and lighter possibilities. We see possibilities also with within safety for automotive. We see in battery protection and so on. So, how it plays out, a certain quarter is always hard to predict, but over time, we expect to continue to grow these volumes. So, we know that now we're into a number of new platforms the coming years. So, the volumes will, over time, continue to increase.
Adrian Gilani: Understood. And then, I guess your view on sort of the typical restocking cycle that we tend to see in the first quarter of the year, how do you view that going into 2025 considering we are in a weaker market? Do you think we will see the typical restocking or more hesitancy among distributors and customers?
Martin Lindqvist: It's always hard to predict the future, but what we typically see is that we see restocking in Q1, and we have seen that the last couple of years. And that will, of course, be dependent on the underlying market, but as soon as prices start to show any signs of moving up, we will see restocking and better apparent demand. And I mean, if you take hot rolled coal prices in Europe, they are at very low levels compared to what we have seen the last year and also compared to, call it, the marginal costs when you need to take into account also costs for emission rights. So, one could expect a restocking in Q1.
Adrian Gilani: Okay. And a final one from me. I mean, your largest owner, LKAB, they announced yesterday that they're passing their green sponge iron plants in Kiruna. And I understand you're not dependent on sponge iron. You can always use scrap for your EAFs, but does LKAB changing their plans have any impact on you and how you sort of evaluate your transition?
Martin Lindqvist: We take 100% of our volumes from [Gällivare] (ph), what they internally call the southern system. So I don't have a view on Kiruna because we are not taking volumes from there. But they also said that they continue with the transformation in Gällivare. So, no changes for SSAB.
Adrian Gilani: Okay. Perfect. In that case, that's all for me. So, thank you for taking my questions.
Martin Lindqvist: Thank you.
Operator: Thank you. We are now going to proceed with our next question. The questions come from the line of Alain Gabriel from Morgan Stanley. Please ask your question. Your line is open.
Alain Gabriel: Thank you. And Martin, I just want to wish you also the very best in your next adventures. I have two questions from my side. First one is on the permitting at Luleå. You mentioned that you expect to receive the permit in Q4, but we are six or seven weeks effectively left for the quarter. How confident are you in that -- in receiving the permit? And in case you don't, what does that mean for your spending in 2025? That's my first question.
Martin Lindqvist: No. But of course, we need an environmental permit to really start to build, and it's impossible. Yes, we are into the fourth quarter. And I mean, no one really knows, of course, but we are very positive that we will -- and hopeful that we will get the needed environmental permit during Q4.
Alain Gabriel: Okay. And if you don't get it, what does that mean for the spending?
Martin Lindqvist: Then, we can't start the project. So, we need an environmental permit to start to build. It's impossible in Sweden to do anything before you have the environmental permit. But maybe famous last words, but so far so good. And there is nothing pointing in that we wouldn't get it, but we don't know yet. But as I said, we are hopeful, and we need the environmental permit to start the project.
Alain Gabriel: Thank you. That's very clear. And my second question is on the -- you've recently received a grant for more than €100 million. Should we see this grant as an orphan grant? Or do you think this is the start of a few more to come to fund your decarbonization plan? How should we think about these grants that you are receiving? Thank you.
Martin Lindqvist: Alain, the final decision is not taken yet. It was a positive, call it, signal or decision from EU. And now, formally, it needs to be taken also by Sweden [indiscernible], and we will come back to that when they take that decision. And then, what comes next remains to see, and we'll come back as soon as we have more information.
Alain Gabriel: Thank you. And all the best, Martin.
Martin Lindqvist: Thank you.
Operator: Thank you. We are now going to proceed with our next question. The questions come from the line of Krishan Agarwal from Citigroup. Please ask your question.
Krishan Agarwal: Hi. Thanks a lot for taking my question. And before I move on to the question, my all the best to Martin for the next adventure. I have few questions. I'll take one by one. The first question is on raw material cost. So, can you confirm that the raw material cost in the Europe is going to be stable? Does that mean that there is a lag effect for the raw material cost decline to come through? Is it coming into the Q1, or you've already seen that cost decline into the Q3 for the Europe?
Leena Craelius: In case of Europe division, yes, we have actually winter stocking taking place in the Nordic Mills for the coking coal to secure the ice security of the situation in winter. So, we do have quite substantial coke inventories. So, we are consuming during Q4 that material. And then, when we are buying new material, there is a lag definitely in the impact of coking coal. With the pellet prices already mentioned in Luleå, we don't have inventory. So there, the impact will come rather immediately. And if the prices start to go up and continue to go up during Q4, there will be impact in Luleå's case. In Raahe, we do have inventory for the pellets. So there, the delay is approximately one quarter lag with the pellet. And with the coking coal, the lag is even longer. It's a quarter-and-a-half. So, you're absolutely right, the impact will come later.
Krishan Agarwal: Okay. And then, does that mean that the raw material cost and the pellet cost for Raahe in the Q3 was lower, [it was a quarter lag] (ph)?
Leena Craelius: I would say that it's stable or somewhat lower now during Q4.
Krishan Agarwal: Okay. Understand. And then, my next question is on the CapEx. I mean, you maintained the guidance for this year and then you're saying that the CapEx probably will peak in 2026 and '27. And I appreciate that you don't discuss the exact numbers for the next year and the year after that, but is there any way you can give us a sense that where or what will be the ranges for the CapEx to peak in 2026 to '27, just kind of a medium-term CapEx directionally?
Leena Craelius: As it's already illustrated on the slide, the peak in the CapEx is '26, '27. It will go up during next year, and we will actually then give more outlook for '25 during next result release. But as said, still quite many moving elements, so we don't want to disclose closer figures or more detailed figures.
Krishan Agarwal: Understand. And then, next question is mostly on the Special Steels. I mean, the margins for the last, I would say, eight to 10 quarters have continued to be higher. And then, if we look back the history of last five to seven years, there is a clear kind of a rerating going on into the Special Steels margin. How comfortable you would be or how confident you would be to say that, these margins are structurally rerated and then sustainable in the longer period of time versus the margins you had five years back?
Martin Lindqvist: If you take Special Steels, it's two things. I mean, first, I would say the last couple of years, I would call it a better pricing management. So, you see more volumes maybe fluctuating a bit, but stable prices. And that's a combination of better pricing management, but it's also a combination with an improved mix. There is a huge difference between different products in Special Steels as well. If you take your Hardox 450 and then compare it to Hardox 500 Tuf, which is a product that is now growing quite a lot, the margins and the prices are better for a 500 Tuf compared to 450. If you go back a couple of years, we were selling 400 Brinell material or Hardox 400. That's not the case anymore. That's for us more, I wouldn't call it a commodity, but more commodity like. So, it's about also moving the mix within Special Steels, more and more advanced products every year, and that typically takes a number of years to start to ramp up. But I think Hardox 500 Tuf is one of very good -- quite a few good examples. So, it's about mix and, call it, pricing management. And we see that in Europe as well, fairly stable prices. Yes, there is a lag effect, but also a mix effect. And the mix effect is very important, and over time, quite substantial as well.
Krishan Agarwal: Understood. Okay. That's all from my side.
Operator: Thank you. We're now going to proceed with our next question. The questions come from the line of Tristan Gresser from BNP Paribas (OTC:BNPQY) Exane. Please ask your question.
Tristan Gresser: Yes. Hi, good morning, and thank you for taking my questions. The first one is on Europe. When you look at the production adjustment measures, what exactly do you have in mind? I think very early last year when the market was pretty bad, you decided against keeping a blast furnace idle. So, what is your view on the market right now? Does it warrant some more prolonged blast furnace shutdown? And also, on Europe, just a quick follow-up on that. Given the stable cost outlook, would you expect the division to remain profitable in Q4?
Martin Lindqvist: We are not guiding for absolute figures, but I mean, we have, over the years now, worked with quite a few things to internally, we call it, improve low point profitability. It is, of course, as we have discussed already about improving the mix, and that's something we can drive to a large extent, I would say, ourselves. But also, in a, call it, rigid system with blast furnaces and coke oven batteries, introduce flexibility. We have these [indiscernible] system, which is time banks in Sweden. Now we have introduced it in Finland as well. So, we have possibilities to be flexible when it comes to fixed costs and manning. So, a lot of, call it, small but very important step that we have been constantly introducing the last couple of years that will pay off in a tougher market situation, which will -- we will continue to do. And you will see effects of that in Q4. You'll see effects of it in Ruukki Construction and in Tibnor already. So, it's a combination of, I mean, structural things, but also flexibility measures. So, what we try to do is to, every cycle, improve slowly but steadily, what we call low point profit.
Tristan Gresser: Okay. That's clear. And the blast furnace outage at Raahe, when did it start and how long should it last?
Martin Lindqvist: We haven't taken any decisions regarding the blast furnaces. And that will, of course, remains to be seen what happens with the market, but we haven't communicated anything or taken any decision. So, we stick with our, for the time being, flexibility measures and the mix improvement. And I mean, the only thing we know is that the business cycle goes up and down and the important part is to come out in relative terms better and better during each downturn and use the measures we have introduced and the measures we have.
Tristan Gresser: Okay. Sorry, I thought Raahe was part of the planned maintenance in Q4. Okay.
Leena Craelius: The maintenance is in the plate mill.
Martin Lindqvist: In the plate mill.
Leena Craelius: Yeah. Not in the blast furnace.
Tristan Gresser: Okay. Got it. And then, in the US, I think last time when we discussed, you said you expected some maybe some positive inflection in Q4. Now with more visibility to year-end, do you still think that is possible before year-end? And if you can comment a little bit, I mean, plate metal spread have continued to drift lower. Which particular end market has been that weak? Or is it more a question of more supply coming in to the market? And just for the sequential bridge into Q4, you have the alleviation of the maintenance outage from Montpellier. Do you think that's going to be enough to offset the spread compression into Q4?
Martin Lindqvist: What we are guiding for in US for Q4 is higher volumes, and the obvious reason for that is that we don't have the maintenance outage. And we are guiding for a bit lower price. So, I don't know when -- what will happen in Q1, but we have a certain visibility or decent visibility into Q4, and that's what we are guiding for. And then, we will see what happens in -- going into 2025. But as I said, I mean, the big swing factor is, of course, the steel Service Centers segment. They are even more important, call it, in the US market or a more important player than in the European market. So, it is also about the swings in apparent demand. And when they realize with fairly low inventory levels or when they think that prices are starting to go in a different direction, they will act accordingly.
Tristan Gresser: Okay. Perfect. Well, thank you. And Martin, all the best for what comes next.
Martin Lindqvist: Thank you.
Operator: We are now going to proceed with our next question. And the questions come from the line of Tom Zhang from Barclays. Please ask your question.
Tom Zhang: Yes. Hi, morning. Thanks for taking our questions. Two from me. So actually just touching on that, Martin, you mentioned the sort of Service Centers. I see in the end market outlook, you downgraded them kind of from neutral to neutral/weak. I, to be honest, already thought the buying from Service Centers was already very soft. So, question one is, how much weaker did it really get? And did it improve at all after this kind of China stimulus and particularly the move up in iron ore and coking coal [the delay] (ph)?
Martin Lindqvist: So I wouldn't say it's weaker than what we see now, but it is already weak, and we expect it to continue to be weak/maybe neutral. So, they are, if not sitting on their hands, but at least consuming from hand to mouth and have been taking down inventories. We see that in the statistics. So, we expect them to continue to be hesitant in Q4 or until we see a different direction of steel prices. So, we are not saying that it'll weaken, but we'll say it's a weak market, apparently...
Tom Zhang: Sure. Okay. Yeah, maybe I was reading too much into it. Just in your presentations, you obviously have this outlook slide and it's gone from neutral to neutral/weak. So, I was just curious if things could anyway...
Martin Lindqvist: Maybe I was a bit -- my explanation wasn't that good, but I apologize for that.
Tom Zhang: No problem.
Per Hillström: So, Tom, remember also that the yellow for Q3, that was an estimate. I think the market has probably been a bit weak now in Q3. So that could almost explain some of the...
Martin Lindqvist: So, we're actually saying that we were wrong, yeah.
Per Hillström: Yeah, slightly wrong.
Tom Zhang: No, that's fine. Okay. And then, sorry, just the other question was on mix. I think you guys talked a bit about the Europe mix, but if I look in the release on the third page, it sort of says there's 0% impact from product mix at group level versus both Q2 and versus last year. So, I think you talked about European mix being better. Was mix worse in the other divisions that sort of offset that? And how do you expect mix in general to kind of change into Q4? Thanks.
Leena Craelius: That's very rough calculation. What we have in the table, I would say that it was neutral in that analysis. But for sure, we have seen the improvement, and the automotive volumes have been really, really strong and performing really well. So that's a proof of the good mix improvement. So, the table and the calculation is on very rough levels. So, maybe not to make conclusions based on directly from that. And it's always hard also to draw a conclusion of a single quarter, but what we strongly believe is that we will continue over time to see a better and richer mix over time than it go up can go up and down a bit between quarters. But if you look at it in the history and also in the projections going forward, we will continue to grow the mix of advanced high strength steels and Q&T.
Tom Zhang: Got it. But into Q4, that sort of reversal in the auto mix feels likely in Europe. Is that right?
Per Hillström: Yeah, automotive into Q4, yeah, it will be probably weaker market. Yes.
Tom Zhang: Okay. Fair enough. Thank you, and best of luck, Martin. Cheers.
Operator: We are now going to proceed with our next question. The questions come from the line of Johannes Grunselius from DNB. Please ask your question.
Johannes Grunselius: Yes. Hello, everyone. A couple of questions from me. I'm going to start with the Oxelösund-linked question and your latest thoughts on the green steel premiums. I think Martin you have said earlier that you have talked about like €300 per tonne green steel premium. Is that still a relevant number? And I mean, how should we think about in the initial phase when Oxelösund EAF is producing? Should we apply a sort of a significant premium on those volumes? That's my first question.
Martin Lindqvist: No. But the volumes we sell today, which is mainly SSAB Zero, the steel produced in Americas with using biogas, biocarbon and fossil fuel electricity, I think we are up to close to 100,000 tonnes now since we started that. We still apply that premium. When it comes to, call it, hybrid steel or fossil-free steel, we have still we are still using the small plant we have up in Luleå. So, I would say fairly limited volumes, but also applying a premium on that. How that will look over time is, of course, hard to tell. In the long run, my hope and belief is that we will see more and more production, I'll call it, greener steel, and then it will adjust. But it will be a combination of a lot of things, what will be the cost for emissions and cost avoidance and so on for end users. But so far, we are still applying that premium and sale volumes. I think it's up to 100,000 tonnes so far. How that will look end of 2026 or end of 2028? I think it's hard to say, but we see a huge interest and we see a growing demand and we are constantly announcing new partnerships and new applications and new, call it, segments with a huge interest. And we see that, among other things, in Construction. We see it in Heavy Transport, but we see it also quite substantially within Automotive. So, remains to be seen, Johannes, but so far, so good, if I would conclude it.
Johannes Grunselius: Yes. Then, on Luleå, I mean, you've given us the very rough idea of the investment, size, total CapEx, what have you, but after you have received the environmental permit, you will go more into a sort of a different phase in the project. Would you say you will be happy to share more details on the project and essential financial details and data and what have you externally then?
Martin Lindqvist: Yeah, that's the plan. Then exactly...
Johannes Grunselius: Yeah, okay.
Martin Lindqvist: I mean, it will probably, I guess, be during a Capital Markets Day or something, but yes, that's the plan.
Johannes Grunselius: Okay.
Martin Lindqvist: To open up more and make it easier to, call it, understand or describe.
Johannes Grunselius: Yeah. I also wonder about the net working capital release you typically have in the fourth quarter, if you could give us some idea what to expect there in cash flows in the fourth quarter this time?
Leena Craelius: I think the fourth quarter will be really challenging this year. The inventories will not go down as heavily as they did last year. Of course, Martin gave the outlook for the top line. Working capital development, I would say, fairly in line with the performance in Q3. But also, you saw that we plan to spend quite substantial amount of CapEx during Q4. So, I would say that there are some challenges with the cash flow generation, but of course, we focus with the net working capital. We do as much as possible. We have reduced the production pace to keep the inventories in control. And, yes, we still focus in the cash generation and rather look the sort of the over time performance than focusing only one quarter, but it will be tough.
Martin Lindqvist: And with time, there are still possibilities. So then, how it affects a certain quarter is always hard to tell, but last year was a bit special because we entered into the year due to the crisis -- the war in Ukraine and so on, with quite substantial stocks. And that was a safety measures, especially for PCI coal and coking coal, where we had to find new suppliers and test out new material. And that -- those volumes are now, call it, sweated out. So there's still possibilities to become more capital efficient. And over time, we should be that.
Johannes Grunselius: Okay. Understood. And Martin, thanks a lot, and from my behalf as well, good luck with the career outside SSAB now.
Martin Lindqvist: Thank you, Johannes.
Operator: Thank you. We're now going to proceed with our next question. And the questions come from the line of Bastian Synagowitz from Deutsche Bank. Please ask your question.
Bastian Synagowitz: Yes. Hi. Good morning all. I've got a couple of questions left. I'm just going to start off with Special Steel. And here, I'm just curious about gross margins. You're obviously guiding for lower prices and lower costs as well. So, do you think you can keep gross margins stable in the fourth quarter? Maybe a bit of color here would be great. That's my first question.
Martin Lindqvist: I think over time, you should expect Special Steels margins to be more stable than for standard products. That has been the case. And it's, as I said, a combination of mix and pricing management. So if anything, more stable than maybe in the history, but it's constant, over time, call it, struggle and development process with new and more advanced grades in order to reduce weight or increase payload, I mean, the usual stuff. So, more stability. Will they be stable forever? Well, it's still -- the steel industry is still a volatile business, as we all know, but the volatility should definitely be lower in these, call it, more advanced products or niche products. So, more stable than for standard products, for sure, but how that exactly will play out in a single quarter is, of course, dependent on a lot of other things.
Bastian Synagowitz: Okay. So, in other words so I totally understand it's more stable over time, but you say it's basically still hard to say more or less how gross margins will move into Q4 and whether you will see a gross compression after -- basically after all or whether you'll be indeed able to keep it more stable. So, no real color on Q4 at this point...
Martin Lindqvist: No, but the color we give is the guidance with volumes and prices. And then, of course, as Leena mentioned, the raw material costs. So from that, you can draw conclusions, of course, but over time, much more stable than for standard products. Then, of course, you never know, it will be dependent on apparent demand. It will be dependent on production stability and a lot of other things. So, but over time, definitely much more stable. So that's the whole idea behind our strategy to move more and more into, call it, niche products or advanced high strength steel products, where we have a unique selling point with high -- the best quality in the world, strong market positions, good segments, customers that are seeing the benefits of buying a steel that is more expensive per tonne but allows them to do less welding, less bending and buy, in total, lower volumes of steel because they can use thinner gauges in their applications.
Bastian Synagowitz: Okay. Sounds good. Then my next question is on the US, and I guess, if we look at plate prices now which have dropped into the $800s. I mean, just if we work these price deltas, basically through your numbers, I basically get to numbers which get me very close to breakeven for the US business. Now, I wonder, am I wrong here. The current spot prices and I guess you're still selling a lot of material probably on a more contracted basis with a slightly longer leg, which is totally a big advantage for you, but if you look at spot prices, would this put you somewhere close to breakeven for Americas?
Martin Lindqvist: First of all, you're right. We have a lag effect. You can't just put in the spot prices in the P&L. There is a lag effect. And then it's, of course, also a mix effect and a contractual effect. So, I mean, steel prices are coming high down from fairly or very, I would say, high levels. So, where that will take us in Q4, I have an idea, but we haven't said that publicly. So, I'm sorry to say, but you have to do the math.
Bastian Synagowitz: Okay. No problem. Fair enough. And then, yeah, just last one on CapEx. And sorry to keep bugging you here, Leena, but first question is, so how much of the SEK10 million budget for Oxelösund have you spent or will you have spent by the end of 2024? And then again, coming back on 2025, we're also getting very close. I know you're pushing back, but could you maybe at least give us maybe a floor or even a range for the overall budget, to have, like, a rough idea on what we have to work with, i.e., like, in a scenario where, maybe the permit doesn't come, there's still going to be infrastructure work, there's still going to be maybe some leftovers for Oxelösund. So that, obviously, could at least give us a floor and then we know the number could be higher, but at least if we had a floor, that would be quite helpful already. But yeah, those would be my two questions.
Leena Craelius: Well, it depends how you sort of put it in different buckets. With the EAF construction, we have still some SEK4 billion left to spend for -- after this year. And this year, I think in case of Oxelösund, it's around SEK1.7 billion. That is the plan to be spent. And then, this preparation that already took place before this year, there we have some SEK1.2 billion. So, there is still money to be spent. And as said, we will give the guidance for '25 during Q4. So, there we will also give more detailed figures for Oxelösund. So be patient.
Per Hillström: And remember also that Oxelösund is running until the end of '26. So, there is still basically two years to build there as well.
Bastian Synagowitz: And the SEK4 billion, which is left after 2024 you mentioned, is this including the SEK4 billion for the power line, which was running sort of separate?
Per Hillström: That -- it's excluding the power line. And I think for -- you should maybe not expect SEK4 billion for the power line. That's probably on the high side.
Bastian Synagowitz: Okay. Got you. Okay. Sounds good. Great. No. Thanks so much for that. And, yeah, Martin, also from my side, all the best for your -- for the next phase of your career, and stay well.
Martin Lindqvist: Thank you.
Operator: We are now going to proceed with our next question. And the question comes from the line of Andrew Jones from UBS. Please ask your question.
Andrew Jones: Hi, Martin. Just a couple of questions for me. First of all, just on the US plate market. Obviously, Nucor (NYSE:NUE) plate volumes, in their results, were still very weak, so Brandenburg is still a long way off full capacity. I mean, clearly, you seem to be getting close to breakeven in that division, and you're obviously a big player in that market. I'm wondering if we are getting close to a floor, given, obviously, you're struggling to make money in this market. And, if we don't see that demand impulse come through into next year, what is the -- what can you see happening on the supply side? I mean, are there other high cost assets that potentially waiting on to drop out to help the market? Are you still confident about demand coming through? That's the first question. Then, I have a second one, maybe if you can answer that first, Martin.
Martin Lindqvist: No. But if we look at US, I mean, why we were close to breakeven in Q3 was, of course, because we have this semi-annual outage with a cost of [450 million] (ph), and of course, that also gives a lot of lower volumes. So that's one explanation, of course, or the main explanation. Then when we look at the US plate market, we are quite positive over time with this Inflation Reduction Act, with the Infrastructure Bill and all the needs that is coming in North America or in US. We also see that over time, import -- and you need to remember that the US plate market is structurally undersupplied, and we see also over time import coming down. So, of course, what measures will be taken in the future will, of course, be dependent on who takes the seat in the White House. But we also typically see, which is a bit strange maybe for European to understand that we see also wait and see more than an election year, which we typically don't see, at least in the Nordics, because that doesn't affect any markets. But we typically see that in an election year, especially when we're getting close to the election and until the new President has taken the office. So overall, we are still positive, very positive to the US plate market. And we typically have a better capacity utilization than many competitors because our cost position and our quality position. So, you should expect us to come out better over time than our competitors producing US plate. And if the market -- of course, as always, the market dynamics works like you exactly like you said, if the market gets tough, you typically see the high-cost producers taking down capacity. But I would claim that in Montpellier, we have the best cost position of all the producers in North America and the best quality and the number one in the Jacobson survey. So, I'm over time, very positive and optimistic for the US plate business we have.
Andrew Jones: Excellent. And just a follow-up to -- I mean, you touched on it, the US elections obviously coming up. I think there's probably a lot of moving parts potentially for SSAB in a Trump-win scenario. Obviously, I guess, if there were any tariff impositions, your domestic assets would benefit. I guess, people talk about the risk to some of the IRA spending, which might be quite plate intensive in a Trump-win scenario. I guess there's also, maybe some knock-on effects to your European or Special Steels businesses if he's going around slapping tariffs on other markets. I mean, can you just talk us through, net-net, how you see that scenario? I mean, is it beneficial for SSAB? Is it sort of more neutral? How do you see the moving parts in that outcome?
Martin Lindqvist: First of all, the majority of the QT volumes we sell in North America, we are producing in Mobile, Alabama, where we have invested quite a lot in QT capacity and so on. So, it's not 100%, but to a very large extent, we produce it and source it locally for the North American and to some extent, also for the Latin American market. What will happen with different possibilities or to -- the difference between the Democrats taking -- staying in the White House or the Republicans coming in, hard to say for me. I don't have that knowledge. But I think that regardless of who becomes the next president, we will continue to work hard to make sure that we, as call it, relevant plate producer in US with the strongest market share, we'll continue to do good. And I think that if you look at the US market and regardless if you call it Inflation Reduction Act or onshoring, whatever you call it, there are a lot of needs for infrastructure, for renewable energy, wind towers and so on, a lot of projects in the pipeline that are typically projects that will consume heavy plate. So, coming back to our starting point with a strong market position, the best cost position and received by the customers also the best quality on the market, we should be, in relative terms regardless, quite okay.
Andrew Jones: Okay, that's clear. Thank you. And yes, good luck with the next phase of your career.
Martin Lindqvist: Thank you.
Andrew Jones: Thank you.
Operator: We are now going to proceed with our next question. And the questions come from the line of Patrick Mann from Bank of America. Please ask your question.
Patrick Mann: Good morning, Martin. I'll get it out of the way upfront. So, all the best for the future and it's always been a pleasure to interact with you. So yeah, thank you very much from my side.
Martin Lindqvist: Thank you.
Patrick Mann: I just wanted to ask more of a sort of strategic or philosophical question, I think. I mean, given the pressure that European steel companies are under, I think we've seen a few of your peers starting to look as though the decarbonization plans are sort of either unrealistic or unaffordable. I mean, how is your -- and obviously, SSAB is in a different position with your geographic location, with the access to the raw materials with the net cash balance sheet. I mean, do you feel as though you are in a better position overall given how the market has changed? Or do you think sort of the deteriorating European macro overweighs that? I suppose I'm just trying to get a sense of how you think SSAB comes out of this period of pressure to decarbonize, whether you think it's getting better or worse at the margin? Thanks very much.
Martin Lindqvist: No. But as I tried to explain, I think this is much more than just decarbonization. It's about building a cost effective system for the future and avoiding to invest over time the same amount of money in a system that was originally built in the '60s and keep that system with, call it, internal transports of 900 kilometers between the slab machines and the rolling mill. So, building an effective system for the future is one important part. The other important part is to continue in our strategic direction to reduce the amount of, call it, more standardized products and have the ability to produce special steel products, advanced high strength steels for automotive over time, but also, thin and wide, the Q&T up to 2 meters, which we can't produce at all today, and that's where the market is heading. And then, of course, on top of that, avoiding future costs for carbon dioxide emissions with the CBAM and ETS system in place in Europe. But when we look at the market and the interest from customers, you would then think or we, at least, in the beginning thought that this would be mainly a European topic or European focus. Now, we see customers from all over the world and from different segments very interested in this possibility to have, call it, more environmental-friendly products. So, given the size of SSAB, the location where we are with the ability to source very high-quality iron ore and have a fossil-free grid and so on, I'm still convinced that this is definitely the right way forward for SSAB. And hopefully, over time, the rest of the industry will follow and start to reduce emissions because, as you know, I mean, the steel industry as such stands for 7% to 8% of the global carbon dioxide emissions. And that is a problem, whether we like it or not, that we need to deal with in order to fight climate change and make sure that we leave something that our kids and grandkids can cope with or live in. So, I'm not hesitant at all. And as I said, the alternative would have been then to continue to build blast -- to renovate and build blast furnaces and coke oven batteries. And that's quite a big undertaking because if you build a new coke oven battery in the -- in Oxelösund, as an example, you have to live with that for at least 40 years. And the good thing is that these mini mills is nothing new to us either. I mean, we have been running mini mills now in US for quite a few years. So, we know the technique. We know how to deal with it. And we have been testing also in our US mills to run sponge iron and a combination of sponge iron and scrap. So, I think we are very well prepared for this journey. And then, of course, the business cycle will go up and down as always, and that will continue in the future as well. So, this is -- I mean, the Luleå mill will be up and running Q4 2028 and the Oxelösund mill will be up and running Q4 2026. And I guess the business cycle will look slightly different than it looks today.
Patrick Mann: Sure. I mean, it kind of sounds like you're going to end up being the Nucor of Europe, right? And I suppose the follow-on question there would be why do you think the US is so far ahead of Europe on this? Is it just energy costs and access to energy? And is that why the US steel sector looks like it does versus Europe, in your opinion?
Martin Lindqvist: First of all, I would love to be SSAB being the Nucor of Europe, because they are a very impressive company. When I started in the industry, it was -- in US, it was the big integrated guys. And now that the industry has changed a lot and we see this highly cost efficient, highly automated, very flexible mini mills in US. And I think that is where Europe over time will head as well. And it's about cost efficiency, it's about flexibility, it's about lead times, it's about a lot of things. And for us, on top of that, the ability to continue to shift the mix. And if you take the possibility to shift another 1 million tonnes from, call it, more standardized products into niche products or advanced high strength steels, it makes a big difference. So, I think we will see -- and who am I to judge, but I think we see, call it, a similar development as we have seen in US with more mini mills and more high-effective, flexible, high-quality producers in Europe as well. And SSAB will definitely be one of them, if not the leading one. Then, if we end up as the Nucor of Europe, I don't really know, but that wouldn't be too bad.
Patrick Mann: Agreed. Thank you.
Operator: We are now going to take our next question. And the questions come from the line of Anders Akerblom from Nordea. Please ask your question.
Anders Akerblom: Hi, good morning. Thank you for taking my questions. I hope I'm last in line, that many left. But just speaking of the weaker European market, obviously, quite subdued, but I noticed that you mentioned that import volumes have been at high levels. So, could you please elaborate a bit on this?
Martin Lindqvist: But I mean, what is it to say? We see now Chinese material going into Asia and other countries in Asia being pushed out and trying to find other markets around the world. We see I mean, the two, call it, the biggest consuming segments in Europe and also globally for flat carbon is actually construction, and construction in Europe has been for a time now, very weak, if almost non-existing. We see some signs, as I said, in the renovation market that is maybe turning. And then automotive, overall automotive, which is a bit subdued. And so, it is in that aspect, call it, a perfect storm then. But then, of course, you typically see the steel industry start to screen for trade barriers and so on. And I think it's important to remember that over time, what serves us best as a company at least being fairly small but also very, call it, export oriented on top of our two important home markets in North America for plate and strip in the Nordics is a combination of free and fair trade. Of course, if you don't have that combination because the fair trade is also a very important element, then you see disruptions. Then, I would say in relative terms, maybe we're with -- maybe better off because of our product mix and the uniqueness we have in any of our products. If you take the, call it, most advanced high strength steels, martensitic grades for the automotive industry, we are quite unique. And some of the products, we are actually very unique. No one else is producing it. So, it's all about continuing to stick to our strategy and move the mix and come up with more advanced products and better products. And the real uniqueness of SSAB, that is -- sounds boring, but it is the inner cleanliness we have in our steels, which is, I would say, state of the art globally. And that's the whole thinking behind this strategy. So, continue to move the product mix, continue to implement in a very rigid system flexibility measures. And then in the future, with the mini mills, have much more flexibility and continue to take this every day's fight to do things slightly better today than yesterday, a bit better this week than last week and so on. And I think that's the -- maybe it sounds a bit boring, but the recipe of continuing to develop a leading company. And in that aspect, we are far from done.
Anders Akerblom: No, I appreciate that answer. But kind of what I was -- and you touched upon it, but of course, kind of with very weak certain end markets, key end markets, probably doing whatever they can to kind of support earnings. How should we think about kind of the structural premium to market prices that you've had? I mean, in the quarter, this was, I mean, quite healthy. But kind of going forward, if I kind of read your comment right, one should maybe not in earnest extrapolate the current uplift to market prices given kind of the structural overcapacity in China and especially with higher imports then to Europe, to key end markets. Should we see this then trending down a bit more to its previous average, irrespective of mix effects and such?
Martin Lindqvist: No. But I think the big thing here is the mix effect and, call it, pricing management then. That will give more stability. And when I talk about more stability, I'm comparing to standard steel prices because they will continue to be volatile and they will go up and they will go down. And right now, they have gone down. So, you should expect better stability for our niche products. Will they always be absolute stable, the margins? Of course not, but much better stability, less volatility but on a higher level.
Anders Akerblom: Yeah. Thank you.
Martin Lindqvist: I know that, that doesn't answer your question, but...
Anders Akerblom: No, but yeah. No, I hear you. Thank you. And then maybe looking to 2025, I was just wondering a bit on kind of continuing on the cost side and the trajectory there. I mean, I know that you haven't -- it's quite poor insight into this at the moment. So, anything you could say in terms of kind of the cost inflation emanating from -- or the potential cost inflation, I should maybe say, emanating from the kind of EPS and the emission rights? What can you say in terms of this?
Anders Akerblom: No. But I mean, when it comes to emission rights, as Leena pointed out in her presentation, we are buying. This is a benchmark system. So, with us running in the Swedish and the Finnish system, one of the most carbon dioxide effective blast furnace systems globally, we, of course, are in relative terms a bit better off compared to some other producers in Europe and elsewhere. But we still we don't have free allowances to run our production, so we need to buy emission rights. But we have been doing that for a number of years. So, the only thing we know with the current policy in EU, the free allowances will gradually, over time, go away or continue to shrink. But in relative terms, given what we have invested with the PCI and everything in our blast furnaces, the very, call it, effective setup, the very good raw material and so on, we are, in relative terms, much more carbon dioxide effective than our European peers. But of course, it will be a cost and it will be an increasing cost if we stay with the current policy and that seems to be the idea of the new commission for the coming five years.
Anders Akerblom: Yeah. With your previously banked emission rights, I mean, anything you can say in terms of when this kind of is depleted and when you will be buying to cover 100% of your emissions? What would that kind of give on the cost side?
Martin Lindqvist: Well, Of course, the timing of that will be, of course, dependent on when -- how fast you phase out the free allowances. But it will be -- I mean, if you look at today at the marginal cost for any European steel producer on marginal tonnes, you need to take that into account already today. And if you look at the current spot prices, I would say that they are under -- for a normal European steel producer, it should be under the marginal cost.
Anders Akerblom: Yeah. Okay. And lastly, just on LKAB. I know you've gotten several questions on this, but I just want to clarify. You say that this doesn't impact your green steel transformation ambitions. But still, I mean, as I had understood it, you still were planning on getting volumes from Luleå after 2030. And I assume now that the -- I mean, obviously, the input must come from elsewhere. So, how will you kind of work to counteract that volume drop off after LKAB's announcement?
Martin Lindqvist: But what they said, if I read it correctly yesterday, and I have no insight at all, but they are delaying or postponing or not focusing on Kiruna. We are not taking 1 kilo from Kiruna. We take all the volumes from the [indiscernible] system, the southern system. If I read it correctly, they say...
Anders Akerblom: But that's at the moment, right? I mean, you were still planning on getting volumes from there in 2030, but or am I mistaken?
Martin Lindqvist: Not from Kiruna, no.
Anders Akerblom: Okay.
Martin Lindqvist: So they have -- in practice, they have two systems, the Southern system, which is Gällivare where we always took our volumes, and there they said yesterday that no change in plan and then the Kiruna system where we never -- which is typically shipped out to other customers via Narvik. So, two separate systems, and we don't take 1 kilo from Kiruna. And we're not in the future either.
Anders Akerblom: Okay. Perfect. Thank you, Martin, and also for me, best of luck on your future endeavors. Thank you for taking my questions.
Martin Lindqvist: Thank you.
Operator: Thank you. We have no further questions at this time. I'll now hand back to you for closing remarks.
Per Hillström: Okay. Thank you very much. Thank you, Martin and Leena. Lot of good questions. Thank you to the audience.
Martin Lindqvist: Thank you very much.
Per Hillström: And we wish you a nice day.
Martin Lindqvist: As always.
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