Acerinox sees drop in stainless steel demand

Acerinox S.A., a Madrid-based stainless steel producer, says it shipped less metal in this year’s third quarter, citing “weakness in apparent demand once the inventory rebuilding process was completed” among some of its customers.

“The change in our customers’ expectations has caused inventories to be high in most markets, starting a regularization process, which we expect to be completed by the beginning of 2023,” Acerinox CEO Bernardo Velázquez says.

In the United States, where the company operates the North America Stainless (NAS) mill in Kentucky, Velázquez says, “The outlook for the American market, our main market, is positive, while the European market is dominated by uncertainty due to the war and high energy prices.”

The CEO adds that “the high-performance alloys market continues to develop positively,” with the company’s earnings presentation citing the oil and gas, chemicals processing and aerospace markets as the largest buyers of those alloys.

In the third quarter, the slump in Europe took a major toll on the company’s output. Acerinox says in the August through October period, its melt shops globally made slightly more than 500,000 metric tons of metal. That figure is 22 percent lower than output in the third quarter of 2021 and 19 percent lower than output in the prior quarter.

The combination of reduced output and high energy costs in Europe damaged the bottom line of Acerinox, but the firm has nonetheless reported profits.

The company reports earnings before interest, taxes, depreciation and amortization (EBITDA) of 241 million euros ($240.8 million). Acerinox says that result is down by 18 percent compared with the third quarter of last year and down 54 percent from the prior quarter. “The EBITDA margin amounted to 11 percent” in this year’s third quarter, the company adds.

Looking ahead, Velázquez points to NAS and VDM high-performance alloys operations in the U.S. as a likely bright spot in the fourth quarter of this year and into 2023. VDM Metals, which Acerinox acquired in 2020, operates five specialty alloys melt shops in Europe and two in the U.S.

“Our main market, the United States, maintains a better tone than the rest of the markets,” Velázquez says regarding the near-term outlook for Acerinox. “This is expected to continue in the coming months.”

“The European market is suffering from the uncertainties arising from the conflict in Ukraine and the energy crisis and its consequences for European industry,” Velázquez adds.

Regarding the VDM melt shops, Velázquez says, “The high-performance alloys sector continues to improve steadily, and the backlog situation allows us to remain optimistic.”

Despite the slowdown in this year’s third quarter and a forecast for the fourth quarter of which Velázquez says, “EBITDA will be lower than the third. The 2022 results will be the best in our history, demonstrating our ability to take advantage of the good moments in the cycle and the level of competitiveness achieved.”