Facing up to challenging times

Europe was already facing up to challenging times as we emerged from the Covid-19 pandemic. Now we are facing further major disruption to supply chains following Russia’s invasion of the Ukraine. This came as a shock to many of us and the consequences for the Ukrainian population are devastating. Following the invasion, four massive sanctions packages against Russia have been introduced by the EU. It is therefore likely that we will see increased transport costs, delays in deliveries and a shortage of goods and components.

Securing production and maintaining a viable business

Currently, the economic effects on Sweden and Finland are limited. But the situation concerning increased energy prices, as well as turbulent capital markets, may deteriorate. This would have extensive and serious consequences for the world economy. We have already seen energy prices in March reaching record levels as a direct result of the war. In the first days of March we saw the price of electricity reaching five times its historical average. Similarly, the price of natural gas was at 12 times its historical average. That makes steel production totally unsustainable at current price levels. In addition, we are seeing very high inflation in many areas, putting further pressure on our cost base.

conditions, it is simply not possible for Ovako to carry the burden of these extraordinary, unexpected and unforeseen energy prices. Therefore, to secure our capability to produce at the economic levels essential to maintain a viable business, we have to balance these unprecedented increases in the cost of energy. That is why we are now forced reluctantly to implement an energy surcharge. This is to cover the increased cost above historical peak energy prices.

By implementing this energy surcharge, we can guarantee continued production and deliveries to our customers. We have contacted our customers asking them to understand and accept this measure as a vital response to exceptional circumstances. At the same time, we are also seeing a rapid increase in the demand for our steel. To help each other through this extremely difficult situation we are also asking our customers to contact us immediately regarding any changes in their needs.

Our business is founded on strong industrial ownership

We do not anticipate any specific financial risks for Ovako as a result of the sanctions, including the exclusion of certain banks from the SWIFT (Society for Worldwide Interbank Financial Telecommunication) banking systems. At Ovako we have no owners or financial stakeholders in Russia (investors, institutions, etc.). Furthermore, Sanyo Special Steel, our owner, is based on strong industrial ownerships as well as environmentally efficient steel production. That means our focus is long-term, and we are here to stay. This also means that we look at our customer relations from the long-term perspective. We want to build robust and sustainable supply chains, with the aim to develop steel solutions that build a better future.

Ovako’s portfolio gives our customers the added convenience of choosing from the world´s widest range of specialty steel products. Global production and supply also ensure the reliable deliveries they need. In addition, the joint strength of our R&D resources accelerates innovation, boosting competitiveness. Finally, through our environmentally efficient production, strong industrial ownership, global supply and worldwide customer support capacity, we ensure an unrivalled level of sustainability and availability.