At ‘Outokumpu Experience’, the company’s global event in London, UK for customers, partners and analysts, Outokumpu launched its latest addition to the duplex stainless steel product family, the FDX platform.
It also introduced a new pricing model and commented on its strategy progress and the divestment of the Terni plant in Italy as a requirement of its recent acquisition of ThyssenKrupp’s stainless division.
The new FDX product family exhibits a combination of price stability, high strength and substantially improved formability. FDX is a totally new material for applications where the formability of current duplex grades has been insufficient. Like all duplex grades, FDX platform delivers significant material savings and lifecycle advantages compared to traditional stainless steel grades.
The FDX family comprises of two product variants: FDX 25 and FDX 27 with corrosion resistance and formability properties similar to 304 and 316 austenitic stainless steels respectively, but twice the mechanical strength.
Its characteristics make FDX grades well suited for applications with high demands on formability such as plate heat exchangers, flexible pipes and pumps, where strength, formability, durability and long-term service are required. The new grades complement Outokumpu’s already wide duplex offering. Outokumpu has a global market share of more than 40%.
Daily alloy surcharge
Outokumpu plans to introduce an additional stainless steel pricing model –the ‘Daily Alloy Surcharge’ that would build on the traditional Monthly Alloy Surcharge mechanism. The new Daily Alloy Surcharge model is designed to address the weaknesses of the monthly model as it would react far quicker to changes in the volatile alloy costs.
The daily alloy surcharge mechanism is a method well tested in other industries, such as aluminium, where customers benefit from daily pricing offered by the producers. In regions such as Asia-Pacific, stainless steel manufacturers already give daily full transaction prices to their customers.
Outokumpu believes that a Daily Alloy Surcharge would decrease volatility and speculation and thus provide better delivery reliability for customers. Outokumpu’s customers would potentially also have the flexibility to decide whether to fix the Alloy Surcharge on the day of the order or only closer to the delivery time. Exact details of the planned model will be developed further based on the customer feedback and findings.
Outokumpu reiterated its expectations of a soft first half year with improvements in underlying EBIT expected during the second half 2013. This is mainly due to the major ramp-ups of Ferrochrome operations at its mine in Tornio and the former ThyssenKrupp integrated mill at Calvert in USA.
Company reiterated its savings targets of EUR 200 million synergy savings related to the Inoxum acquisition by 2017 as well as additional EUR 150 million savings by end of 2014. The Krefeld melt shop closure is progressing ahead of schedule and will be closed by end of 2013, contributing EUR 50 million to the above mentioned synergy savings from 2014 onwards. In its Stainless Coil Americas Business Area, company continues to target for a positive EBIT for the full year 2014.
The Company also confirmed its decision to start a strategic review of its VDM high alloy business unit, with the aim to improve company profitability and strengthen the balance sheet. During the review, Outokumpu will evaluate strategic options for VDM and consider how best to drive continued growth and profitability for the business, within or outside of Outokumpu.
The timeline for the Terni divestment required by the EU competition authorities has been extended.
Outokumpu CEO Mika Seitovirta said “The bids Outokumpu has received so far are not acceptable. We are working with the European Commission towards a solution which we believe will permit us to manage this situation toward an outcome that respects the interests of both Outokumpu and the European Commission.”
Outokumpu has agreed with the European Commission and the parties involved in the divestment process not to disclose any details of the divestment process. Outokumpu expects to give an update on the divestment process in at its second quarter results.