* SSAB says weak demand, production shortfalls hit Q4
* Says Europe demand weakened faster than anticipated
* Production problems contributed to decline in earnings
* Orders for Q1 delivery have improved significantly
* Shares fall 3.8 percent
(Adds analyst comment, details, shares)
By Mia Shanley and Victoria Klesty
STOCKHOLM, Dec 23 (Reuters) - Swedish specialty steelmaker SSAB said on Thursday its fourth quarter operating profit would land near zero as lower shipments and production problems ate into earnings while European demand looked weak.
Shares in SSAB, which has been struggling to cover higher raw material costs in full with price increases, slid almost 4 percent as analysts focused on the soft European outlook. Other steelmakers shrugged off the warning.
According to I/B/E/S estimates, analysts had been expecting an average 603 million crowns ($60.5 million) profit for the fourth quarter, above a 430 million crowns result in the same quarter a year ago and after a 289 million profit in the previous quarter.
"It is also an effect from the Swedish crown -- 40 to 50 percent of SSAB's cost base is in Swedish crowns and the crown has appreciated. So they are struggling now to get their margins back," Carsten Riek, an analyst at Morgan Stanley, said.
The Swedish crown has strengthened against the euro on the back of record economic growth and rising interest rates in the Nordic country. It has been trading at the highest level against the euro in 4 years.
"They need to push through the price increases they get from higher raw material costs and the Swedish crown itself," Riek said.
With 1.2 billion crowns in operating profits already reported for the first three quarters so far this year, SSAB will fall far short of I/B/E/S estimates for a 1.6 billion crown result for the full year.
"Towards the end of the fourth quarter, demand in Europe weakened at a faster rate than SSAB had anticipated in the company's third quarter report," SSAB said in a statement.
Its profit warning follows a theme of leaner times for steelmakers around the world after they benefited from an upturn in demand during the global recovery.
A disruption in production at one of SSAB's blast furnaces in Sweden contributed to the decline in earnings though production is expected to return to full operation in another few weeks.
Because of the weak market outlook in the fourth quarter, SSAB brought forward part of a maintenance outage at a U.S. plant that had been previously scheduled for the first quarter of 2011, a factor that further weighed on earnings.
However, there were some hints of improvement.
SSAB said incoming orders for delivery during the first quarter had improved significantly compared with orders received for delivery in the current quarter.
"The order book for SSAB Americas is such that we anticipate full production during the first quarter of 2011, while the picture remains somewhat weaker in Europe," the company said.
"It is of course negative with a profit-warning, but I think that this is not that terrible given two one-off factors and then they are positive about the outlook in the first quarter," said an analyst. ($1=6.844 Swedish Crown) (Reporting by Mia Shanley; Additional reporting by Elinor Schang; Editing by Hans Peters)