Good morning, ladies and gentlemen, to this presentation of the SSAB Q4 report. My name is Per Hillström. I'm Head of IR at SSAB. Presenting today, we have our President and CEO, Johnny Sjöström, and CFO, Leena Craelius. If we look at the agenda, Johnny will start with an overview of the year and the quarter. Leena will cover the financials more in detail. Johnny at closing with the outlook and the summary. At the end, we will have good time for questions. By that, the floor is yours, Johnny.
Thank you very much, Per. And good morning to all of you. I will start by going through the summary of 2025. First of all, if we look at our safety performance during 2025, we can see that we had, again, an improvement in our lost time injury frequencies. We came down to the level of 0.56, which is, according to me, a good achievement. I think also I want to point out that the total recordable also reduced. And that's also a work that we've been focusing on for quite some time. Now, going over to the revenues, the revenues were slightly lower than they were last year. If we look at the full year outcome, then again, the market has been weak. So it's understandable. There's been a lot of turbulence related to the geopolitical situation, tariffs, et cetera, that has created a lot of uncertainties.
Hence, one of the reasons why we ended up on a slightly lower revenue level. Then if you look at the operating result, we came out on SEK 6.1 billion for the full year. I think that even though the market has been very, very weak, first of all, we have a very strong geographical diversification with significant production in the United States as well as Europe. But also, I think that our premium strategy, selling unique products, generating unique customer value, is supporting us when times are a little bit tougher than they usually are. And then, of course, I think that especially the SSAB Europe worked on the cost side, and we were able to improve their financial performance slightly. We also came out the net cash position for the end of the year ended up on SEK 11.6 billion.
I think that's also a good achievement based on the fact that we have a lot of investments ongoing. We have a very strong balance sheet. I think also I'm very happy with the financing package that Leena was able to put together that strengthened our situation and our position. Then also, the board has proposed that we should have a SEK 2 dividend per share that will be decided in the AGM meeting further on this year. Speaking of premium strategy and direction we're heading, there are a few things that I want to point out. Continuously, we develop new grades for certain applications or environments. One of the grades that we have developed recently is a grade called Hardox HiAce. It is designed for wear resistance in application where you have sort of a corrosive environment targeting the stainless steel grades.
It comes with a superior hardness, but also a superior wear resistance in aggressive environments. And it's very, very cost competitive because it's much leaner compared to stainless steel. I also want to point out the investment ongoing in Mobile to increase our capacity of unique grades. Not long ago, we extended the QL6 furnace, giving us more capacity. But we are also currently investing in what we call a tempering loop to be able to produce more of the advanced SIG grades. Even though we had some turbulence last year when it comes to tariffs and the challenge to import material from Sweden into the United States, we were still on a higher level when it comes to advanced high-strength steel to the automotive segment. So I think we came out pretty much on the same level as 2024.
We haven't seen much of the reduction of volumes being sold in the United States so far. I think also that one of the things that I want to point out is that we have developed tailor-made an AHSS grade for the automotive segment, which is the Docol High Edge, which comes with a high-edge ductility. So when it's stamped or processed, we have edges which are much, much cleaner and you don't have those kind of splits you can get for advanced high-strength steel. So tailor-made for certain applications in the automotive industry, highly appreciated by the market. And then also we launched a new complex phase steel. It's a collaboration together with Gestamp. I think what's unique in this case is that we're sort of targeting to increase the strength in the chassis, which is quite new, actually. So the chassis will then have a higher strength.
With the higher strength, you can actually reduce the thickness of the sheet material, making the car lighter, but also you consume less material, which is also good for the environment, but also good from a cost perspective. Then last but not least, I want to point out that we have, for our color-coated steel, produced by SSAB, but then further processed and sold by Ruukki Construction, that we are now continue to develop our sort of environmental offer to the market. And here we were able to produce a coating using sort of what we call a rapeseed oil, which is quite unique, and it makes it very, very bio, very much environmentally friendly, which is also an area we are continuously working on. Very pleased about that.
So there has been a lot of talks about the tariffs and the turbulence we have related to it. It creates a lot of uncertainties on the markets, of course. But once again, I just want to highlight that we have significant production in the United States, and we have significant production in Europe. And that makes us less vulnerable to these kind of initiatives. I also want to point out that CBAM was implemented in Europe from the 1st of January. That will have a positive impact. It increases prices, but also will change some of the trade flows because it will be difficult for some of the countries to actually export to Europe. And then again, we also have on the table of the European Parliament to decide on the safeguards. And that will also, what we believe, have a positive impact on the European market.
I also want to highlight the transformation projects that we have ongoing. What you see on the picture to the right is the transformation project in Oxelösund. Here we are replacing old blast furnaces with a new electric arc furnace. The building you see to the right is actually the electric arc furnace building. It is developing really well. I think that we have done a good job when it comes to project completion. We have planned a production startup in the beginning of 2027. If we look at the Luleå project, which is a larger project, it is also a way for us to reposition SSAB Europe to produce and sell more of the unique premium steel grades, primarily for the automotive industry. We have done the groundbreaking ceremony. We got the environmental permit.
We also continue with agreements with both customers as well as suppliers. One thing I want to point out is the sort of the agreement to get our hands on high-quality scrap. One of the things that we signed in 2025 is the Volvo Cars agreement, which is also seen as a highlight for both parties. For them, more the circularity, but for us, it's more getting our hands on a premium scrap material. Then going into the divisions, looking at Special Steels, we believe that the shipments, even though they were somewhat lower than Q3, then again, we had a very extensive maintenance outage during Q4 in Special Steels that had a big impact on our ability to ship up material. But still, I think that we delivered on a higher level than we did Q4 last year when we had the same situation.
Special steel can also see some improvements in the activities on the European market. I think that's quite positive. The market has been quite on the low side for quite some time. And now gradually we see some positive signals on sort of the European market. And that has been identified by Special Steels particularly. And of course, we have an increasing demand for protection steel because of the market situation. The operating result came in on expected level. Then again, I mean, if you have a maintenance outage, it comes with a cost and it comes also with higher unabsorption. So this was expected, so nothing strange. We also have to say that prices went down a little bit, but we also have some exchange rate effects on that. Leena will get back to that in her presentation.
And then if we move into SSAB Europe, I think that first of all, the market for SSAB Europe is weaker. They are more sensitive to the spot market and the hot-rolled coil prices than other divisions. But despite that, I think that delivered above our expectations when it comes to shipments. And they had higher shipments in Q4 compared to Q3. And we were a little bit concerned about their operating result, but they did a lot of measures, first of all, cost-saving measures, but they also improved the capacity utilization, hence giving us a better performance than we expected. Looking at SSAB Americas, I think that also they came in, we had a maintenance period as well as SSAB Americas. And normally the sort of the shipments go down. But I think that they had a great achievement, especially in December, shipping out a lot of material.
They've had a strong order intake, hence they were able to sort of fulfill the demand and ship out as much as they could. A great achievement by the whole team in Q4. They ended up now on an expected result level. I think that they have been suffering from a weaker U.S. dollar if we translate this into Swedish kronor. Otherwise, the outcome would have been much better. Then for our two subsidiaries supporting the business plan for SSAB Europe, we can see that the shipments for Tibnor were slightly higher than Q3, but still it's a very weak market. We also have a very strong seasonality in Tibnor, just like we do in Ruukki Construction. Of course, the operating result came out on a lower end.
We were expecting the volumes to be higher, hence it has a negative impact on the result. That's exactly the same situation for Ruukki Construction, where both the volumes and the lower volumes have a big impact on the operating result. That's mainly due to the weak market conditions. We have high hopes for 2026, where we hope that and think that the construction segment is going to improve. Once again, I want to highlight our strategic direction and also the uniqueness of our grades. This is an application, not a big application, but it shows that our grades are unique. This application is for a power booster to charge cars.
And if you are on a sort of remote side, on the countryside where the sort of power lines are maybe not as strong, you're not able to actually charge the car very, very fast. But with this power booster, you can actually gradually use the power to transform it into kinetic energy. So you have a rotating part inside of this container. It rotates extremely fast. And with these loads and with this velocity, you need material that has a very good fatigue strength. And that's exactly what our material can offer. Hence the reason why they choose our material. I think in this case, it was pretty much the only material that they could use. Otherwise, they would have fatigue cracks very, very, very fast.
But it shows that we are selling into unique applications, but also that our products are unique and create a lot of unique customer value. With that, I leave the word over to you, Leena.
Thank you, Jonny. From the fascinating product description to fascinating financials. Let us start by looking at the shipment volumes first. Q4 performance was 1,515 kilotons. And it was actually improvement compared to Q3, as also illustrated by Jonny already. The improvement was 49 kilotons and 3%. And then comparing to previous year Q4, improvement was even further, 67 kilotons and 5%. And if we reflect against the guidance we gave for Q4, we were actually spot on with Special Steels and Europe division, and even slightly better in SSAB Americas. If we then continue to analyze the revenues, the Q4 revenue performance, SEK 22.1 billion. Compared to previous quarter, a reduction of 4%.
Compared to previous year, Q4 reduction was 6%. This is indicating that the prices have developed downwards. I will dive into that more in detail shortly. EBITDA performance Q4: SEK 1.8 billion. A reduction compared to Q3, which was SEK 2.9 billion. However, improvement compared to previous year Q4, which was SEK 1.6 billion. In relative terms, this means that the Q425 was 8% improvement compared to previous year level of 7%. Let us walk through the analysis related to operating result. This is now comparing Q4 with the previous quarter. Q4 operating result: SEK 756 million compared to SEK 1.9 billion during previous quarter. Here illustrated in the graph, we have a negative impact with the price development.
On average, prices were 3% lower. The biggest contribution here coming through Europe division, which is over SEK 500 million negative impact, followed by Americas SEK 240 million Special Steels SEK 165 million.
Tibnor prices were flat and Ruukki Construction prices slightly lower. As already Johnny mentioned, here we also have a slight impact with the FX and also with the product mix. But that's illustrating rather the seasonality during Q4. Volumes were 3% higher and positive impact, net SEK 115 million. Europe division 41 kilotons higher, Americas 10, and special steel volumes were flat quarter-over-quarter. Variable cost positive impact. Raw material costs were lower. However, we have offsetting effect here with the maintenance outages cost. And also maintenance outages cost impacting the fixed cost. But to remind that these are also seasonally higher during Q4 compared to previous quarter, which was the vacation period. And also to highlight that yes, we did have saving actions both in Q4 and Q3. So perhaps the year-over-year is illustrating better the savings performance.
But here the net effect is SEK 570 million negative impact on EBIT. During Q4, the production activity was higher and thus the positive impact related to capacity utilization. And this is mainly now related to the Europe division rolling performance. Maybe to remind that during Q3, the maintenance outages were in Raahe, Borlänge and Luleå. And during Q4, the maintenance took place in Oxelösund, Mobile and Hämeenlinna. And the cost of the maintenance was quite much higher during the fourth quarter. Similar comparison, but now year over year, Q4 performance 25 over Q4 2024. Performance Q4 2024 was SEK 487 million. And the only negative impact coming through with the prices, while all the other elements having a positive impact, prices were 8% lower. Europe division, special steel division, both contributing over SEK 600 million negative impact, while Americas had a positive impact.
But as already mentioned, the FX did have a big significant negative impact in prices. Total FX impact in this analysis is negative EUR 840 million, which on the other hand is having a positive impact in the variable cost side, but on a lower level. Volumes already mentioned 5% higher. And here the biggest contribution coming through special steel division, 17 kilotons higher volumes, followed by Europe division, 28 kilotons, and Americas 12 kilotons. So all steel divisions performed better year-over-year. Variable cost positive EUR 345 million. Raw material costs were lower, but this partially offset by the maintenance cost. And this year it was slightly higher than the previous year. And already mentioned the saving actions. And here illustrated well that the fixed cost year-over-year were lower EUR 430 million.
We had the time banks in use and a lot of saving actions throughout the organization and the outcome illustrated here in this graph. Production activity was higher and a positive impact with the capacity utilization and the revaluated balance sheet items also just below EUR 70 million positive impact. Cash flow, if we first look at the quarterly performance over previous year Q4, EBITDA, as already described, slightly higher than last year. Very similar trend when it comes to working capital, a positive impact during both years. And here to remind that we have the seasonal impact. We have winter stocking taking place during Q4. So rather large raw material invoices posted to Q4, which will be paid out in Q1, which will then lead that Q1 will be seasonally negative impact.
R&C CapEx, maintenance CapEx, slightly higher, but well in line with our guidance, just below SEK 3 billion the full year. The other line here is related to the CO2 emission allowance transactions. During Q4, it was a positive. Financial items here, as you can see during this year, we do have the cost related to Luleå financing, the prepayments and premiums being paid out. This has a cash flow negative impact. However, we are activating these to the balance sheet, so not the same effect in the P&L. Of course, also the cash position is slightly lower compared to previous year. To remind that the interest rates have also developed lower when it comes to interest rate on cash. Strategic investments are significantly higher. Here, of course, the driver being the Luleå investment project.
On full year level, to remind that the dividend was during 2025 lower. In 2025 Q1, we still had the share buyback program ongoing, which we didn't have during 2025. This leads to net cash position SEK 11.6 billion at the end of 2025. And this is still very well in line with our financial target when it comes to net debt equity ratio, ±20%, as the outcome is -17%. If we do a short bridge over previous year and cash position versus the outcome this year, we start from the SEK 17.8 billion. And then we add the cash flow from current operation, SEK 6.5 billion. And then we subtract the strategic investments, SEK 7.2 billion, the dividend SEK 2.6 billion. Then we need to take into account the revaluation of U.S. dollar related items.
As Jonny already mentioned, this Swedish krona has developed during 2025, around 20% stronger versus U.S. dollar. So that does have an impact in the net cash position as well. The proposed dividend is SEK 2 per share. That will be proposed to the AGM and then paid out in Q2 2026. Raw materials prices, market prices have been developing slightly downwards during second half of 2025. That is also illustrated in our savings in variable cost. We don't foresee that the prices would develop upwards, rather remain stable. Our consumption cost as well or slightly even downwards. When it comes to iron ore, to remind that the lag in the cost impact is one quarter. With coking coal, it is slightly longer. It is one and a half quarters. It's a bit different view with the scrap prices.
They have remained flat during the second half, but have started to increase towards the end of 2025. We have seen that they have continued to increase. They will have an impact in the margins for the Q1. Maintenance cost. This table is illustrating the plan for 2026. The outcome 2025 was SEK 1,410 million. On the similar level planned to be for 2026. The difference with the 2025 and 2026 is the schedule when it comes to U.S. mills. During 2025, we were maintaining Mobile Mill, while during 2026, the plan is to maintain Montpelier Mill. Thus a bit different spread over the quarters three and four, but on very similar level. Then the guidance, CapEx guidance. This we have already presented during our capital market day. The performance during 2025 was just above SEK 10 billion.
That was well in line what we have been guiding for this year. Strategic CapEx landing on a level of SEK 7.2 billion and maintenance just below SEK 3 billion. Plan is to have similar maintenance CapEx for 2026. However, increase the strategic CapEx, which will be SEK 10.5 billion for 2026. If I split this, sorry, if I split this SEK 10.5 billion to major strategic projects, just below SEK 3 billion belongs to Oxelösund, around SEK 6 billion to Luleå, and just below SEK 2 billion to other strategic projects. Also refer to the emission allowance plans for 2026. Our estimate is that the cash flow impact will be very similar during 2026 as it was during 2025.
The impact during 2025 was SEK 724 million and around SEK 740 million we have estimated to be the impact on 2026. We also want to point out that we have started our digital renewal project to modernize our IT landscape.
Of course, this is needed and also this is supporting the strategic investments, especially Luleå Mini Mill investment. We started during 2025 to do the design phase for these digital projects. Now we are progressing with the build phase. These projects will be followed under the other division. They will be posted as operating cost. We cannot capitalize all of it. Our estimate is that on annual level, the increase in the operating cost when it comes to other division is around SEK 200 million. This is the annual estimated impact of these projects. But with this, I give it back to Johnny.
Thank you very much, Leena. I will try to give you a short outlook for 2026. I will start by going through the customer segments.
I think besides this, I think the largest impact on the European steel industry is going to be the safeguards decision done by the European Parliament, as well as, of course, the CBAM, which is already implemented. But besides that, I think for SSAB, we believe that the heavy transport segment is going to sort of remain neutral for us. We believe that there is some strong upside in the shipbuilding, not only here in Europe, but also in the United States. So that is clearly a sign. But also we see the rail transport in the United States is stable or maybe a little bit stronger than stable. That's what we see. And then we have the automotive segment. We know that our Advanced High-Strength Steel sales are increasing.
And now when we might need to move some of the sales that we do shipping material from Europe to the United States, that might be moved to European customers as well. Since we have a limited capacity, we will be able to sell this to European customers. I'm not so concerned about that because there is an interest for Advanced High-Strength Steel where they are able to make the cars much lighter. So there is a sort of a demand for it. But of course, so the red part of it is the uncertainty regarding the tariffs and the turbulence related to the United States and the timing here. And then we have the construction machinery. We see some improvements in North America. It's been also very turbulent and production being moved from Mexico to the United States and so on.
A lot of our customers are a little bit confused, but it's stabilizing right now. We see sort of an increased demand. And that's also helping us. I think material handling, which is mainly related to mining, that is a very strong segment, has been strong for quite some time. It is a very important segment for us and also especially for special steel, where I think that maybe more than 50% of their sales is related to sort of mining in some one way or another. And that is, and it's upgoing with the gold prices, the silver prices, rare earth metal prices going up. New mines are being opened up everywhere. So even though it says neutral here, I think it's on a higher level. And then we have the energy segment where we see a strong demand, especially in the United States.
We see we've never had as much pipe orders as we have right now, mainly related to oil and gas. But we also have energy transmission, which is also very, very strong. And here in Europe, we have sort of the renewables, wind power, etc. The construction segment is on the lower side. We are carefully thinking that the segment will improve in the second half of 2026. But right now, it's rather low activity. And then the service centers, they have a low inventory level in the United States. It's likely that they will be restocking, which is the seasonality that we see, the pattern that we see. And to some extent, the inventory levels in Europe are somewhat high. I think that a lot of service centers took the opportunity to buy some extra material before the CBAM and potentially also the safeguards.
But of course, those inventories will not last forever. So what we're guiding for Q1 2026, and here we have a very strong seasonality. So we're quite confident when we look at the shipments, same pattern as last year that the shipments will be significantly higher for Special Steels. It will be higher for SSAB Europe and then somewhat higher for Americas. And prices remain stable for Special Steels, but we expect the prices to somewhat increase in Europe for Q1 and then the same thing in Americas. Remember that there are some lead times to order intake price and when we actually get the invoiced price increase. And then to conclude, we have a weak market situation for some time, but we are mitigating it with our strategy, our very clear strategy to develop and sell more premium strategy, more focusing on generating unique customer value.
But we also have a geographic diversification that supports us when there are tariffs, let's say, in the United States. And we have done cost measures that resulted in a positive outcome. We have had a strong focus on safety and that also given results. And we had stable earnings, especially in SSAB Special Steels that continue to develop even if the market is sort of tough. Our strategic investments are according to plan. And then last but not least, the board are proposing a dividend level of SEK 2 per share. So with that, that's my conclusion, my summary, Per. So I leave the word over to you.
Thank you, Jonny. Thank you, Leena. We can then prepare for the Q&A. And there might be here, we have an extensive queue, I think. So I suggest that we limit the first round to two questions per person.
And then you can come back later on in case there is anything outstanding. So yeah, and if you have more than one question, please take them one at a time. So by that, operator, please present the instructions for the Q&A.
Thank you so much. Dear participants, as a reminder, if you wish to ask a question, please press star one, one on your telephone keypad and wait for your name to be announced. To withdraw a question, please press star one and one again. Please kindly limit yourself just for two questions at a time. Please stand by, we'll compile the Q&A rules today. This will take a few moments. And now we're going to take our first question, and it comes to Leena of Kaleb Solomon from SEB. Your line is open. Please ask your question.
Hi, thank you.
First, maybe on your price guidance for Americas, it was somewhat higher for Q1 despite sort of significant currency headwinds, given that the dollar is going to continue to weaken this quarter. So can you just clarify, is that based on U.S.D spot prices? Meaning, does it exclude translation effects?
In the price guidance, we don't speculate with the FX impact. So we are discussing in that aspect only the underlying pricing activity. So no speculation on FX.
Okay, thank you. That's clear. And on Nucor's call yesterday, they sort of mentioned the EAF ramp-up cost totaling around $500 million for 2025. And I know that's across a few projects, but can you give us any sort of indication of what that figure could look like for Oxelösund?
You mean a specific cost for the ramp-up phase? Is that what you refer to?
Yes.
Yeah, we've been talking about a little bit double manning, but we haven't specified. Yeah, we have a clear plan. We know exactly what the costs are going to be, but that's not something that we go out with public. It's a part of our sort of cost structure where we will have some double manning. We'll run the blast furnace as well as electric arc furnace for a period of time. So we have a clear plan for it. We also know exactly the impact of it that was taken into account when we did the budget for 2026. But we haven't really published any numbers related to it, and we prefer not to do it either.
Okay, that was two questions. So I'll get back in line. Thank you.
Thank you. Now we're going to take our next question.
And the question comes to Leena of Adrian Gilani from ABG Sundal Collier. Your line is open. Please ask a question.
Yes, hello. Just starting off with a follow-up question on the Oxelösund transition. Not so much on the cost, but rather the timeline. How long do you expect to actually for it to take to ramp up the electric arc? And how long do you plan to run the two furnaces in parallel?
No, I mean, I think the difference between other projects is that we're only replacing sort of the melting part, the primary part of the production. So it's replacing the blast furnace with electric arc furnace. Hence, the other processes doesn't need to be qualified. As long as the chemistry is right, the qualification period is going to go pretty fast.
So we have, can I say how much time we're planning for, or is that something we can?
Yeah, we can indicate in the process.
So the plan we have is six months for the total qualification of the new grades. And for the grades that we are producing in Oxelösund, there are not as strict customer qualifications. So it's more what we can promise to the market. So it is easier than it normally is to other sort of segments and applications. So hence the reason why we're very confident on the time frame here.
Okay, understood. That's helpful. And then another one more short-term on the Q1 guidance for Europe, where you guide for 0%-5% higher prices.
Just looking at the market indices and factoring in your typical lag effects, it doesn't seem like you're realizing the full uptick on the market price, at least in your guidance. Can you say a few words about why that's the case?
I think what you said as well is just the delay and the lag. So normally when we enter Q1, most of the orders have already been planned for. We have already agreed with the customers. We have a lot of quarterly pricing and so on. So hence the reason that the effect will be postponed. So we will rather see a bigger impact in Q2.
And as Johnny mentioned, we have these quarterly contracts and annual contracts. So those are not priced according to spot pricing. So not the full spot price development can be impacting the Europe division.
Okay. In that case, that's all for me.
Thanks. Thank you. Now we're going to take our next question. The question comes to Leena from Alain Gabriel from Morgan Stanley. Your line is open. Please ask your question.
Yes, good morning and thank you for taking my questions. Back to the Q1 guidance, Johnny, the special steel pricing, you're talking about flat Q on Q, which, and I guess which reflects also the weak-end markets that you've touched on. But can you give a bit more color on why prices are not following the upward trends in European HRC? And is that a mixed effect as we head into Q1? That's my first question.
Yeah, I think for the specialty pricing, it doesn't really follow the hot-rolled coil pattern at all. It's more related to what kind of segments they're planning to sell to and what kind of geographies they're planning to sell to.
Special steel is different compared to the other two divisions because they have global sales and active in a lot more segments. I think that the indications that were given now for Q1 is because we believe that we will be selling in sort of other geographies that we know that the average prices have been somewhat lower. So that gives you some explanation. We believe that we do have some potential to increase prices both in Europe and also United States going forward. For Q1, we pretty much know what's going to happen.
Okay, thank you. Then my second question is on the Oxelösund startup as well. I think the wording in your statement is heavily caveating the power connection and the appeal process.
Should we interpret this as suggesting that you are less confident about the startup date as compared to last quarter, for example?
I mean, first of all, I just want to address that the project is following and developing according to our time plan. And we're doing a great job with that. But we are dependent on getting the power to the site. We're dependent on the company erecting this power line, which is 72 km long. And we can only listen to what that company tells us. And they tell us that it's according to plan, and that's all we know for the time being. We know also that there has been some appeals for some of the permits, and that's also what we included in the report. The consequences and effect of that, we cannot really assess at this point.
So we thought it was vital information, so we added it into our report.
Thank you. That's very clear. Thank you.
Thank you. Now we're going to take our next question. And it comes from Reinhardt van der Walt from Bank of America. Your line is open. Please ask your question.
Morning, Johnny and team. Thanks for taking my question. I just want to go back to your comments around inventories. So you mentioned that inventories are somewhat higher. Can you just give us any details around which specific grades and products you're seeing those elevated inventories in? And then can we also just get a read on what you're seeing in January so far and whether the inventory build you think has been more CBAM-related, or is this maybe some kind of demand anticipation?
Our interpretation, at least, is that it's probably more CBAM-related, especially in some areas and from some geographies. We can see that there was a massive pickup of inventory. One of the areas I want to point out is the color-coded. We saw a significant amount of color-coded material coming in from especially Korea to Europe because they knew that the CBAM would have a negative impact on the prices and so on. That's just one example, but we could also see that on hot rolled coil to some extent, rolled color coil as well, especially in Italy for some of the countries delivering where they were a bit concerned about what's around the corner. But I guess that's all I can go into right now when it comes to details. Otherwise, it's going to take too much time. But like I said, the inventory will not last forever.
So this is probably a quarterly effect or a quarterly consequence.
Yes, that's fair. Thank you. And can I just check on construction? You mentioned a neutral outlook. We have seen some of the leading indicators in the construction industry pick up and in some cases quite sharply. So is the neutral Q1 outlook just because of some lag, some delays in that activity coming through? And can you maybe just give us any sort of read on at least where you see the trajectory of construction activity maybe as the year goes on?
Now, well, especially for Q1, we have a hard time to see that there's going to be any great improvements for Q1. However, with the Germany infrastructure project and so on, there are a lot of things ongoing. There are a lot of things around the corner and things are about to pick up.
And when I speak to the CEOs of big construction companies here in Sweden, they are more pointing at that it's very likely that things will start to happen more in the second half of this year. And that is also what we are sort of hoping for or seeing as well when we're assessing the market. But for the time being, we don't think there's going to be any rather any pickup in Q1 at least. That's our take on it.
That's very helpful. Thank you so much.
Thank you. And the next question comes to Leena of Tom Zhang from Barclays. Your line is open. Please ask your question. Excuse me, Tom, your line is open. Hey, sorry. I was muted.
Thanks very much for taking our questions. So both on the U.S., the first one just on your raw material cost guidance.
I guess you've guided to 0%-5% higher raw material costs, but we've seen scrap sort of add $50-$60 year to date, basically. So is that 0%-5% higher raw material costs already baking in spot scrap prices, or was that set maybe a little bit earlier because they would have seen scrap up at least 10% already?
Yes, sorry, Tom. There is no, when it comes to the percentages that refers to the prices, when it comes to raw material or commentary, it's a bit more loose and it's not related to these percentages. So just by start there, it can be a little bit deviation from what you see on the price guidance, which is much more stricter.
Okay, okay.
But still, you're saying cost of raw materials are expected to be somewhat higher compared to prior quarter and spot scrap is up 13%. I guess my question is, is somewhat higher raw material costs in Americas consistent with what you're seeing in spot scrap markets?
For the quarter, I would say yes. And what we do is we look at reports and make a lot of assumptions based on those reports. And then we have the seasonality. Typically, the scrap prices in the United States go down in Q4 and then it goes up again with the demand in Q1. The scrap market is very supply and demand sensitive, like most of the business in the United States. And the demand is now increasing, hence the reason why the prices are going up.
Okay, fair enough.
And then just on U.S. pricing and plate pricing, so you flagged a bit of demand now coming back in energy. You flagged low inventories in the U.S. I guess imports have started to come off in Q4. So the pricing dynamics that we've seen, I guess kind of make sense, plate prices coming up. But then it looks like it's mostly just been offsetting these higher scrap prices so far. Do you see the room for actual plate spread expansion through the next couple of quarters? How quickly do you think that can come? Or do you think demand is still just a bit too muted? Yeah, thanks.
No, I think that we have room to increase the spread. I think that when we announced our price increases, we were not aware that the scrap prices were going to go up as they did.
So I think that we were going to work on pricing going forward. I think there are room for us to sort of increase our spread. That's what we think, at least.
Okay, understood. Thank you. I'll turn it back.
And now we're going to take our next question. And it comes from Igor Tubic from DNB Markets. Your line is open. Please ask your question.
Thank you. And thank you for the presentation. I just wanted to ask you about Special Steels in the Q3 guidance. You indicated that both prices and raw material costs would be somewhat lower. But given that volumes were relatively flat in Q4, margins still declined. So could you please elaborate a little bit around the drivers behind this and what we should expect going forward?
Yeah, I think special steel is probably the division that has the longest sort of lag between purchase price and consumption price. So it's extremely long. Maybe sometimes it's six months, seven months before we buy raw material and then the consumption price. And when we do this kind of guidance, we're looking at sort of the purchase price compared to, and I guess that's where it gets a little bit confusing, but that's really what it's related to.
Okay, thank you. And the other question is, have you seen any with regards to the CBAM, had there been any impact on volumes, or would you say that import levels remain broadly unchanged compared to before?
I think import levels now in the beginning at least have slightly been reduced. There's a lot of confusion on how to do it.
And also if you're qualified and get also the approval for sort of importing into Europe. Hence the reason why the import level has reduced somewhat. I mean, eventually, of course, importers will learn and they will understand how it's done. But we also strongly believe that the import supply chains will change significantly. And there will be some countries that will go down to almost nothing. It's very, very likely. So there will be a time now where supply will change, supply flows will change. Also some time for importers to understand how it's done. And also how do you pay for it at the end? When do you buy the certificates? A lot of confusion right now. And that's, I guess, beneficial for the European steel producers.
Okay, thank you. That was it.
Thank you. And now we're going to take our next question. The question comes to Leena from Anders Åkerblom from Nordea. Your line is open. Please ask your question.
Yes, hello. Thank you for taking my question. So firstly, I wanted to ask just high level on EU safeguards. If we see the sort of reduction in the magnitude that might be expected, could you share anything in terms of what market share gains you expect to have versus competitors? And also how quickly you can adjust production to sort of capture these volumes?
First of all, SSAB's utilization level has always been quite high. I think European utilization in general has been rather low. I think it is communicated to be around 60%-65%.
We are way much higher than that, which means that if, let's say, that this decision is made and the safeguards are in place, of course, we will be able to ramp up a little bit, but we already have a high utilization level. I think the big impact will be the price changes and the supply and demand change. So there will be a period of time where the demand will be high and the supply will be limited because during the last 2-3 years, blast furnace has been closed down, capacity has been closed. Hence, there's going to be a gap between supply and demand in the beginning. And hence the reason why we believe that there's going to have an impact on prices. And that's, of course, is going to be very beneficial for SSAB.
I think, did I cover all your questions there or your question?
Yeah, yeah, you did. Thank you. With regards to a lot of tariff questions, but in the U.S., Section 232 tariffs, could you share anything on your sort of long-term plan for Docol, AHSS exports to U.S. automotive? Will you continue sharing costs with customers, requalify with European OEMs, develop domestic U.S. capacity? Anything there would be interesting.
Yeah, so we're looking at all of those options, of course. And first of all, when it comes to this continuous annealing line in Borlänge that we have where we can actually produce these unique products, it has been pretty much fully utilized for the last 4-5 years. We have decided to sell this capacity into the United States, some of this capacity into the United States because the margins have been higher.
But it's not like we have to. There is a demand for it also in Europe. So there is a list of potential customers that we are now talking to and we also have been qualified to supply to them. So when there is a sort of lower demand from the United States, we will shift it over to supply to European customers instead. And that is sort of in the making as we speak. And then, of course, there is still a demand for our products. And we don't really understand where they're going to get these products from because you cannot produce it locally. So they either have to downgrade or, I don't know, some other solution. We are, of course, looking at all options, but the volumes are not big enough to do any large initiatives, especially if you can sell this capacity to someone else.
Yeah, we're looking into all options and see what we're going to do on that.
Okay, perfect. Thank you very much for taking my questions.
Thank you. Now we're going to take our next question. It comes from Cole Hathorn from Jefferies. Your line is open. Please ask your question.
Good morning. Thanks for taking my question. Just two on my side. The first one is on the order books for your plate business in the Americas. We had Nucor talking about a substantial improvement in their order books. I'd love comments around what you are actually seeing in your order books there. Then secondly, it's just a follow-up on how do you think the wider industry is going to adapt to the import quotas?
I mean, you've been quite clear that you've got higher operating rates versus the industry and you're going to benefit from the pricing. But if we're going to need an incremental 10 million tons of domestic European production to displace imports over time, where do you think those 10 million tons of production is going to come from? Is Europe in a position where we can ramp up the volumes to meet that need? Thank you.
Yeah. And I mean, if you go back 10 years ago, for sure we had that capacity in Europe. And then some of the factories and some of the blast furnace have been idled. And I honestly don't know if they can be restarted again. It's likely they could. But I'm thinking that there will be a delay. There will be a gap.
It's going to be hard to fill that you still need to import some volumes into Europe. I'm not so sure that we will be able to ever fill the full gap because of the time that we've had with limited prices or margins to support sort of some of the production in Europe that we've had. To answer that question, I think your first question was related to U.S. order book. U.S. order book, okay. And for SSAB, and maybe I'm revealing something that wasn't in the quarter report, but we have been fully utilized in the United States in our two factories. And our utilization levels are extremely high. So of course, we are continuously working with operational excellence. We're working with AI to optimize our output.
We have been quite successful during last year, enormously successful, I have to say, to get more material out from the factory that we are using. I think the difference between us and Nucor is that they have a new factory where they have sort of a lower utilization. For them, this will sort of have to make a difference. I think, again, coming back to what I said about Europe, I think what is the main driver for us is the price increase that we will see around the corner.
Thank you.
Thank you. Now we're going to take our next question. The next question comes from Maxime Kogge from ODDO BHF. Your line is open. Please ask your question.
Hello. So first question is on the cold weather conditions in the U.S.
Yeah, I was wondering what kind of impact it would have on your shipments and your scrap procurement in Q1 if all of that was already incorporated in your guidance.
No, I think that we learned a little bit last year where we had some impact from extreme weather that had an impact on transport of scrap to Montpelier. The consequence was only for a few days. But since we have sort of this lean concept and try to keep the inventory levels as low as possible, I think we learned from that. And we built up a slab inventory that was much, much, much higher than it usually is. And that was a safeguard just to be on the safe side just in case something happened. So to ask your question, we are more prepared for it this year than we were sort of last year.
Okay.
And the second question is on the defense business. If we take stock of 2025, how are volumes compared to 2024? Are you perhaps going to increase transparency on volume the same way as you do on auto for this business? Because there's a lot of market expectations on this topic. And yeah, just related to your recent Rheinmetall contract, are you facing any limitations in terms of quality due to the use of windsteel? That would be my second question.
Yeah, we haven't decided yet whether we're going to reveal the volumes and be that transparent on it. And we also need to be a little bit cautious because we don't want to say to potential terrorists or whatever where we produce and how much we produce. It might have a negative impact.
However, we know that companies like Rheinmetall, KMW, we also have Patria in Finland and Hägglunds in Sweden. They have tripled their capacity just to be able to supply what the market needs. And even if they've done that, they still have very long lead times. This will have a positive impact on us going forward. But the delay and the lag here is much longer than you might think. It takes years until we actually start supplying to these kinds of projects. Because they want to secure that they have cabling, semiconductors, computers, all of that before they start ordering the steel plates. And I think they've had some challenges in the past. I think it's been resolved a little bit right now.
But if you ask me in two years, the situation is going to look much, much better when it comes to deliveries and a major increase, I guess, in protection steel compared to now. But even though it's better than 2024, we believe it's going to be much better in a couple of years.
Okay, thank you.
Operator, just reminding of the time. We have time for one more question.
Yes, of course. And now we're going to take our final question for today. And the question comes to Leena from Bastian Synagowitz from Deutsche Bank. Your line is open. Please ask your question.
Yeah, good morning all. And thanks for squeezing in and taking my questions. Just maybe a quick one on specialties.
Just from the demand you see in the customer conversations you have, would you be confident enough to say that 2026 will be the year when you will get back on the growth track you are aiming for the business? Or is it just too early to say? That would be my first question.
No, I mean, I've learned after Russia attacking Ukraine and after the pandemic and after the tariffs, I've learned that it's really, really hard to predict what's going to happen in the future. But if there aren't any geopolitical issues or topics, then I'm very optimistic that we will have a growth. And this growth can come fast. It's just a stability on the markets, then the growth will come fast.
Okay, great. Thanks for that, Johnny. And then one more question on the FX side.
We've seen significant volatility and maybe one for Leena, but from the presentation, it seems like we have not seen much of the effect in your results yet. But from the activities you provide, I guess this could be more than a $1 billion impact given that it's mostly a dollar market and there would obviously be some impact from translation. So could you please help us to understand how far you are hedged short term and how we shall expect the effects to flow through your numbers? And maybe also can you help us to understand how your commercial approach works, particularly in the business like the specialty steels business where you're obviously doing a lot of, I guess, overseas business. So which percentage of your invoicing here is actually in dollars and euros versus kronor? That would be very helpful. Thank you.
I don't have the percentage to give you, but you're absolutely right that Special Steels sales currencies are sort of in U.S. dollars, euros, and also other exotic currencies. And we do hedge the net cash position with accounts payable and receivable. So we are hedging, but we don't do, for example, equity hedging. And as already mentioned, the benefit with the prices or the negative impact of effects in prices is to some extent then offset by the positive or negative impact in raw materials because we are purchasing a significant amount of raw materials in U.S. dollars. So the combination of all these then is sort of the hedging policy that we have. And what is roughly the duration in these hedges? Is this the 6-month? Is it a 12-month rolling or? No, we do it on an ongoing basis. But how long?
Like, for example, we have had obviously roughly an 8% move in the currency in the course of the fourth quarter. So how long would it typically take then until we see this coming through via the translation effect?
I don't have that kind of answer to give you.
I think what Leena also said in her statement is that I think the biggest impact comes from the natural hedging, which is that we purchase so much in U.S. dollars. We purchase in U.S. dollars for the European production. If you talk about iron ore or coal or whatever it is, all of that is purchased in U.S. dollars. But then for Europe, we sell in euros. So we have a very strong natural hedging.
Yes. Yeah.
And the fact that you're guiding for stable input factor prices, I guess dollarized or SEK terms for iron ore and coal obviously have been down 16%-24%. So are you fully hedging the raw materials as well?
No. No.
You're not?
No. We have a very small portion of commodity hedging, but that's very, very limited. So I wouldn't even mention it.
Yeah. And hedging coal is at the cost as well.
But then why are you guiding for flat cost in Q1?
Because most of it we've already purchased and agreed on.
Yes. It is the consumption cost that we have for the inventory.
Exactly, Bastian. It's the estimated consumption cost. You can say slab cost now looking into Q1.
Yes.
Okay. All right. Sounds good. Okay. Thanks so much for your help.
Okay. Thank you. And that concludes then today's conference. Thank you, Johnny.
Thank you, Leena. Thank you to the participants. Thank you. We wish you a nice day.