Spanish steelmaker Acerinox (ACX.MC) anticipates a resurgence in steel demand in the coming months, following a significant decline in net profit last year.
Net profit plummeted by 58% to 228 million euros ($246.31 million) in 2023, following record highs in 2021 and 2022 driven by robust demand and escalating prices.
Chief Executive Bernardo Velazquez attributed the decline to a market adjustment initiated in the latter half of 2022, which resulted in diminished demand for stainless steel and subsequently lower prices.
Velazquez foresees a turnaround as early as the second quarter of the year in the United States, but not until the third quarter in Europe.
He noted that while the European economy lags behind the U.S., lower interest rates could stimulate spending on household appliances and automobiles, potentially revitalizing demand.
The European Steel Association Eurofer echoed Velazquez’s sentiments, stating earlier this month that the anticipated recovery in the steel market for 2024 will likely be slower than expected due to subdued industrial output amid an uncertain economic outlook.
Velazquez estimated a 20% decrease in steel consumption in both Europe and the U.S., while highlighting the resilience of the alloys business, which contributed 22% to Acerinox’s revenue in 2023.
Capitalizing on the buoyant alloys market and the swifter recovery anticipated in the U.S., Acerinox recently announced its acquisition of alloys manufacturer Haynes International (HAYN.O) for $798 million, aiming to bolster its presence in North America, where it already generates approximately half of its sales.
However, Velazquez refrained from providing a profitability target for the year, citing ongoing labor strikes at the company’s Cadiz steel mill, which commenced three weeks ago and has resulted in an estimated daily loss of 180,000 euros.
This strike impacts approximately a quarter of the company’s production.
Despite these challenges, Acerinox intends to propose a dividend of 0.62 euros per share, drawn from its 2023 profits, representing a 3% increase from the previous year’s dividend payout.