Swedish steelmaker SSAB Thursday said underlying demand for steel was expected to pick up somewhat in both Europe and North America in 2016 although profitability across the sector as a whole would remain low.
The negative effects of increased exports and low prices due to overcapacity in Asia were making it difficult to achieve satisfactory returns, CEO Martin Lindqvist said when releasing the company's third quarter results.
"Although SSAB considers free trade to be important with regard to development of the global steel industry, the current situation of unhealthy competition means measures are called for to preserve the steel industry in Europe and North America," he said.
SSAB said global crude steel production over January-September was down 2% year on year at 1,213 million mt, with China's output falling 2% over the same period, EU28's flat and North America's down 7%.
Capacity utilization for the global steel industry stood at 68% at end August, down almost 4 percentage points year on year, it added.
SSAB said the North American steel market remained weak in Q3 due to destocking at distributors, a seasonal downturn and high import volumes.
In Europe, demand for heavy plate was seasonally weak in Q3 as buyers continued to maintain a wait-and-see stance. "Inventory levels at distributors and end-customers in Europe are considered to be in balance," SSAB said.
The domestic steel market in China deteriorated further during the quarter with a large portion of its excess production exported with government subsidies, it added.
Looking ahead, SSAB said cautious demand in North America for heavy plate was expected to continue into Q4, along with destocking by distributors.
"Underlying demand at end-customers is considered to be relatively stable, but also to reflect a certain seasonal downturn towards the end of the quarter," SSAB said.
In Europe, while some destocking was expected in Q4, no major change in inventory levels was anticipated. Demand was seen to be stable.
"Demand for high-strength steels is expected to be unchanged during the fourth quarter. Overall, SSAB's shipment volumes during the fourth quarter are expected to be somewhat higher than during the third quarter," SSAB said.
SSAB's shipments totaled 1.544 million mt in Q3, down from 1.632 million mt a year earlier.
The company posted a Q3 net loss of SEK285 million ($34.2 million), increasing from a SEK168 million loss a year earlier.
