(Reuters) -Swedish steelmaker SSAB reported a steeper than expected drop in its second-quarter operating profit on Wednesday, hit by lower prices of standard steel and a weakening European market amid
SSAB Reports Earnings Decline Amid European Steel Market Turmoil
By Marta Frackowiak
(Reuters) -SSAB's earnings fell more than expected in the second quarter, hit by lower steel prices and a weakening European market due to tariff-driven uncertainty, the Swedish steelmaker said on Wednesday, sending its shares more than 7% lower.
High energy costs and competition from Chinese producers have struck Europe's steel industry in recent years, while President Donald Trump's tariffs have brought on fresh challenges.
"The turbulence of tariffs and trade barriers resulted in increased uncertainty," CEO Johnny Sjostrom said in a statement, with the largest impact seen in the weakening European steel market.
The biggest issue is that more shipments are redirected from the U.S. to Europe, Sjostrom told Reuters. "We have a balance between supply and demand normally, but if there's a lot of cheap material coming into Europe, then the prices on the European market will go down fast."
Steel and aluminium tariffs were among the earliest put into effect by Trump. Duties of 25% on most steel and aluminium imported to the U.S. went into effect in March, and they were ratcheted up to 50% for most countries in June.
The direct impact of tariffs on SSAB's Americas business is limited, as it produces roughly 2.4 million tons of steel in its two U.S. production facilities in Montpelier, Iowa, and Mobile, Alabama.
However, the Special Steels division, which produces specialized high-strength steels for customers around the world, is very much dependent on export, Sjostrom said. Therefore, any escalation in the trade war would impact SSAB on a global scale.
SSAB expects third-quarter shipments by the Special Steels unit to be lower than in the previous quarter, along with somewhat lower shipments for the Americas and significantly lower for the European business.
Its operating earnings fell 28% to 2.14 billion Swedish crowns ($224.93 million) in the second quarter, while analysts were expecting 2.29 billion on average.
"The bulk of the miss is Steel Europe which is (around) 30% below consensus ... which has negative read-across to other European Steel names after Salzgitter’s profit warning last week," J.P.Morgan analysts said in a note.
($1 = 9.5140 Swedish crowns)
(Reporting by Marta Frąckowiak in Gdańsk; Editing by Milla Nissi-Prussak)
