Decarbonization And Electrification Will Unlock Fossil-Free Steel Markets

Key Takeaways

• SSAB's unique products, fossil-free leadership, and strategic partnerships position it for premium growth, margin gains, and pricing power beyond current market expectations.
  
• Rising demand from resilient sectors, operational efficiency, favorable trade dynamics, and sustainability trends enable stable, recurring high-margin growth despite industry cyclicality.
  
• Regulatory, market, and input cost pressures combined with demand shifts and overcapacity challenge SSAB's margin stability, revenue growth, and the pace of green transformation.

Catalysts

Engages in the production and sale of steel products in Sweden, Finland, the Rest of Europe, the United States, and internationally.

• While analyst consensus views SSAB's transformation of the Mobile facility as merely increasing advanced special steel capacity, this significantly underestimates the global step-change in demand; SSAB's unique grades and already-constrained capacity point to rapid premium sales growth that could drive both sustained top-line revenue expansion and industry-leading margin acceleration as new capacity comes online.
  
• Analysts broadly agree that the fossil-free transition and Luleå project will unlock higher margin opportunities, but the market further underrates SSAB's first-mover commercial advantage in fossil-free steel-early partnership deals with major OEMs (like Volvo Cars) suggest rapid market adoption and price-setting power that could meaningfully outpace current estimates for EBITDA and net margin uplift.
  
• Defense, energy transmission, and critical infrastructure construction-end markets facing global long-term growth and geopolitical prioritization-are showing rising, contract-backed demand for SSAB's specialized and armored steels, putting the company in position to capture recurring high-margin volumes in industries that tend to be more resilient and less cyclical, thus supporting both revenue stability and profitable growth.
  
• SSAB's rapid cost-optimization, digitization, and use of flexible production tools are driving structural improvement in operational efficiency, and recent margin performance despite weak volumes signals significant bottom-line leverage when industry volumes recover and cyclical upturns occur, outpacing consensus on normalized net profit margins.
  
• Industry consolidation, tougher global trade measures (like US/EU tariffs and CBAM), and customer preference for traceable, low-CO₂ steel are transforming the competitive landscape in SSAB's favor: the company is increasingly insulated against dumped imports, able to command better prices in protected regional markets, and positioned to win premium contracts as sustainability becomes hard-wired into procurement-supporting long-term revenue growth and profit expansion well above what most investors currently expect.

SSAB Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on SSAB compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming SSAB's revenue will grow by 4.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 5.0% today to 7.6% in 3 years time.
• The bullish analysts expect earnings to reach SEK 8.9 billion (and earnings per share of SEK 9.71) by about July 2028, up from SEK 5.1 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 11.2x on those 2028 earnings, down from 11.6x today. This future PE is lower than the current PE for the GB Metals and Mining industry at 13.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.83%, as per the Simply Wall St company report.

SSAB Future Earnings Per Share Growth

Risks

• Overcapacity and aggressive pricing by subsidized Asian producers are driving down standard steel prices in Europe, causing margin compression and making half of SSAB Europe's sales highly vulnerable, which may have an ongoing negative impact on SSAB's revenue and net profit.
  
• The company faces significant regulatory and market pressure to decarbonize its operations, but high capital expenditure requirements and delays in its Luleå and Oxelösund green steel transformations create uncertainty around both the timing and return on investment, raising risks for free cash flow and future earnings.
  
• SSAB's dependence on cyclical sectors such as automotive and construction makes it exposed to prolonged industrial downturns or structural shifts away from steel in core markets, which would weigh on both revenue growth and margin stability if these cycles remain weak.
  
• Volatile and rising input costs, including for raw materials like scrap and iron ore and for energy (notably electricity in the Nordic region), threaten cost predictability, and attempted pass-throughs to customers are frequently offset by adverse foreign currency developments, pressuring SSAB's net margins.
  
• Increasing substitution and adoption of alternative materials (such as composites and aluminum) in key customer sectors, alongside secular shifts to circular economy models, risks eroding long-term demand for traditional steel and could slow SSAB's volume growth and impact future revenues.

Valuation

• The assumed bullish price target for SSAB is SEK85.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of SSAB's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK85.0, and the most bearish reporting a price target of just SEK51.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be SEK117.2 billion, earnings will come to SEK8.9 billion, and it would be trading on a PE ratio of 11.2x, assuming you use a discount rate of 5.8%.
  
• Given the current share price of SEK59.2, the bullish analyst price target of SEK85.0 is 30.4% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.