Cuts fail to save stainless-steel producer from massive losses

The Finnish group described 2009 as "a historically difficult year" for stainless-steel producers as the global recession wrought havoc on the industry, especially in Europe.

Outokumpu implemented widespread production cuts in an effort to cope with plunging demand, but dramatically lower order volumes, combined with fixed costs, resulted in heavy losses for the year ending December 31.

The group made e185m of savings during the year, which led to the loss of 150 jobs in Sheffield.

Jamie Allan, a member of the executive committee, told the Yorkshire Post: "We have seen unprecedented utilisation of capacity in stainless-steel industry since the end of 2008.

"There was an immediate and dramatic reduction in activity and markets and we have seen capacity worldwide in the order of 60 per cent.

"The effects have been worldwide and all parts of our business have been affected.

"Historically, we have seen capacity in 70-80 per cent. It generally needs to be back towards 80 per cent to make reasonable returns.

"It is an unprecedented period. It has been extremely tough.

"We have done the things we should do. We have tried to take care of our customers and employees."

The group said stainless-steel deliveries for the year totalled 1.03m tons, down 28 per cent from 2008.

Average reference base prices were slightly down but transaction prices, which also include raw material costs, dropped 27 per cent.

The average price of nickel and ferrochrome plunged by 31 and 52 per cent respectively.

Because of a heavy decline in both volumes and prices, Outokumpu's sales totalled e2.6bn, down 52 per cent.

Mr Allan, who is executive vice-president of supply chain management, said: "In the short term, we do not yet see any evidence of a sustained improvement in end-user demand, although in recent weeks there has been a significant upturn in market activity.

"But there remains a question-mark over whether that is a spike or a blip or whether that is sustained improvement in end-user demand for stainless steel.

"I don't think we can say yet. It might be restocking the supply chain. If that's the case, it will die down again.

"It's hard to be overly optimistic." In the fourth quarter, the group recorded its first profit improvement compared with the previous year, with an operating loss of e29m compared with e271m in the same period of 2008.

Outokumpu said it saw "no major improvement" in the underlying demand for stainless steel. The group made an operating loss of e63m in 2008.

Juha Rantanen, the chief executive, said: "Our priorities are clear for 2010, restoring profitability, continued safety improvements, strategy implementation and delivery of our excellence programmes.

"These longer-term initiatives build the foundation for our future results."

Outokumpu in Sheffield

Outokumpu's interests in the UK are the result of a long process of consolidation in the stainless-steel industry lasting many years.

The Finnish group, which took ownership of the operations in 2005, has two sites and 530 employees in Sheffield.

At Shepcote Lane, it has a long products business, melt shop and finishing facility. It is also home to the UK distribution arm. In Stevenson Road, the group manufactures stainless-steel rods

Outokumpu supplies to, among others, the catering, glass, chemical, petro-chemical, energy, transportation and construction industries.