Good day and thank you for standing by. Welcome to Outokumpu's Q3 2024 pre-silent call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised, today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Ulla. Please go ahead.
Thank you, Sarah. Good afternoon to all. I'm Ulla Paajanen, SVP, Investor Relations and Strategic Advisory here at Outokumpu. I want to welcome you to our Q3 pre-silent call. Firstly, our CFO, Marc-Simon Schaar, will give you an overview, and then we are open for questions. We are a bit short of time today and have a hard stop at 3:30 P.M. EET. So please limit your questions to one during the Q&A session. Please, Marc-Simon.
Thank you, Ulla, and thank you everyone for dialing into this call, and welcome also on my behalf. In this call, I would like to remind you about the relevant topics with regards to the Q3 results and talk about the current market situation. Overall, the operating market environment continues to be somewhat overshadowed. Applies especially to the U.S. The market has been softer than we expected. The upcoming presidential election has apparently contributed to the softness. We also see some uncertainty in the Mexican market, mainly owing to the recent election, and that is also affecting us as we are the only local producer here. In our Q3 guidance, we stated that the Americas market is expected to remain soft.
The overall demand for BA Americas has indeed been soft across relevant sectors, and if we look at distributor inventory levels, according to third-party sources, they have remained at low level. In the U.S., GDP growth is relatively okay, but it's good to note that the vast majority of this growth is coming from services and not production. Regarding trade protection in North America, both Mexico and Canada are now aligning with the U.S. on the topic of more trade protection, and Mexico is assessing duties on most imports. Although positive, the new tariffs have not yet stimulated demand due to current long supply chains and the attempts of importers to circumvent. But let's then move to the other side of the pond. In Europe, the market is returning to the summer holiday period.
Imports, according to third-party sources, have slightly increased in Q3, and part of the material which is now entering the European market was ordered already during the strikes in spring. Weak demand, combined with higher input from Asia, has led to somewhat increased inventories, which seem to be back to somewhat more moderate levels. If we then look at the end user demand, it continues to be modest. Demand in automotive sector remains relatively stable, but on a low level. With regards to consumer goods, we have not really seen any improvement in demand, and also production remains weak. To have a higher uptick in demand, economic stimulus is required, such as interest rates, to decrease further, and also a question how the Chinese stimulus package is going to turn out.
Regarding our ferrochrome business, we do not have any updates, and there are no changes to the information message which we have already provided when it comes to our [audio distortion] , which have been shut down and the expectation until fall two thousand and twenty-four. So no, no change in that regard. I would then like to say a few words about our volume development. In terms for the third quarter, we stated that we expect our stainless-steel deliveries to remain stable compared to the second quarter. As we have not yet closed our books for September, we of course do not have the final information yet, but we expect to be in line with that, within range.
In BA, we have seen relatively stable, but still slightly positive development, as we have been recovering from the political strike that impacted us negatively in the first half of the year. On the other hand, in BA Americas, our volume development is reflecting the softness in the market, as mentioned earlier. Then a few words on... Well, to mention before, I'm going to start the Q&A. The scrap market in Europe has improved during the third quarter. I want to say that we have not had any issues with the availability as we have good relationships with our suppliers, as already mentioned before. Then on maintenance, we have had a bit more maintenance work in Q3 compared to the second quarter.
As stated already in August, our maintenance costs will be higher by a middle single digit number, and there is no change to that one. In general, I would like to emphasize that we have managed our costs well during the third quarter. As part of our guidance, we also stated that assuming the current raw material prices that we saw then, we expect to realize some net of timing and hedging gains in Q3. And this comment remains valid, but we of course have not yet closed the books for this quarter. Then, as a last point, we have built up capital during this third quarter, as communicated and also anticipated already within our Q2 results and webcast call. We aim to manage our net working capital efficiently, but are also preparing for maintenance work, particularly in Tornio, coming up in the fourth quarter.
And of course, our strong balance sheet allows us to do that. As a result, sorry. As a result of this, our Q3 Adjusted EBITDA to be at a similar or higher level compared to the Q2, as communicated in connection with our Q2 result announcement in early August. So no change to that one. With these words, I would like to close my short introduction and start the Q&A session. Thank you.
Thank you. If you would like to ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. And to withdraw your question, please press star one and one again. Thank you. We'll now take our first question. First question is from the line of Ioannis Masvoulas from Morgan Stanley. Please go ahead.
Hello, Marc-Simon, thank you very much for the presentation and the comments. You spent quite a bit of time talking about the U.S. market in terms of the soft demand backdrop, but could you also provide an update on the operational challenges you had at Calvert earlier in the year? Where do you stand on that front, and how much of an impact should we expect in Q3, and if anything, continues into Q4 in terms of the disruptions? Thank you.
Thank you. Thank you, Ioannis. I can say that we had a stable and good operations in the third quarter so far, and have seen a clear improvement from what we have seen earlier and we're going to do, Ioannis.
Is there any impact?
At the moment, I can't see any impact in here. As the improvements have been made in the Americas, and when it comes to the fourth quarter, we'll get back then during our Q3 really.
Very clear. Thank you for that. I'll leave it here. I'll join back with you. Thank you.
Thank you very much.
Thank you. We'll now take our next question. This is from the line of Moses Ola from JPM organ. Please go ahead. =
Hi there, thank you very much for taking my question. Just a question please, here on Europe and pricing expectations. I know you can never be explicit on pricing, but if I look at the building blocks where you've talked about weaker demand, higher imports, obviously we've seen higher domestic supply as well, following the strike in first half of the year from yourselves and peers. And with inventories now at more normalized level, is it safe to assume that you expect likely some destocking pressure into Q4 and perhaps into Q1 of twenty five, if the current weak demand environment remains the same and you know, then that destocking pressure leads to lower prices? Would that be fair?
Let me say, the current environment, which I explained to you, is then not so much on the Q3 result really, but this is more from an order book perspective.
Just to be clear, in terms of forward guidance into Q4 and beyond, with where inventories are, would you say that there is an increasing likelihood for destocking pressure?
Yeah. When it comes to Q4 and Q1, Moses, we need to come back then in our Q3 release then to give guidance on how we see Q4.
Okay. Thank you.
Thank you.
Thank you, bye.
Thank you. Once again, if you would like to ask a question, you can press star one and one on your keypad. We'll now take our next question. This is a follow-up from Ioannis Masvoulas. Please go ahead.
Yes, thank you for taking the follow-up. Just talking about the Americas again, but this time around Mexico. I wanted to ask about U.S. senators pushing for introduction of tariffs against the Mexican steel imports. To the extent that this includes stainless steel, how do you expect the Mexinox business to adapt? And is there a scenario whereby instead of shipping hot roll to Mexico and then cold roll imported back into the U.S., could you sell hot rolling material in the U.S. directly to avoid a potential tariff scenario? Thank you.
Yes. Thank you. So as we already discussed, I think in the Q2 release, from Mexico back into the US market, are from a group level perspective, not significant. And, of course, I mean, we are delivering volumes from the US into the Mexican market, cold roll it there, and then, also, a large portion is then being supplied in the Mexican market. So, overall, I mean, there is an impact, but I don't expect to have a significant impact.
Thanks very much.
Thank you.
Thank you. As a reminder, it's star one and one, if there are any further questions. It seems there are no further questions at this time, so I'll hand back to the speakers for any closing comments. Thank you.
Okay, thank you very much, then with that one, I then hand over back to Ulla, but thank you very much for coming, joining, listening, and I really look forward then coming back to you in about a month's time, when we report on our Q3 results. Until then, please stay safe and healthy, and I hand over back to Ulla.
Thank you, Marc-Simon . I guess we were really efficient. Maybe next time when Linda is back, this is going to be more inviting call then. But thank you anyway for participating in this Q3 pre-silent call of Outokumpu. Remind you that we will publish our Q3 results on the thirtieth of October. I hope to talk to you then and get connected. Thank you.
Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.