Swedish engineering steel specialist Ovako says that markets for its range of high performance steel products remain fragile. Looking ahead, markets show signs of uncertainty into the second quarter, the company adds.

In a statement in its Q1 2016 operating report sent to Kallanish, the steelmaker says that it expects “… the market for engineering steel in Europe to be characterised by continued uncertainty during the second quarter of 2016. Ovako’s deliveries in the second quarter are expected to be in line with the corresponding quarter of the previous year.”

A key factor in this uncertainty remains the state of the oil and gas market, traditionally a bedrock sector for engineering steel producers. Demand from the sector in Q1 2016 was weaker than last year, the company says.

In his comments ceo Markus Hedblom says that, “Ovako has continued to develop its operations in the first quarter 2016 in order to compete more effectively in the challenging global market. Low industrial activity and increased imports into Europe put additional demands on Ovako's activities in both production and sales.” The steelmaker however has seen some respite with stronger demand for truck components and new orders for the company from the automotive and bearing industries.

The company’s restructuring programme, launched in H2 2015, aims to reduce the groups costs by €45 million ($50.9m) by 2018 and is proceeding according to plan, Hedblom adds. The company’s re-organisation, announced earlier this year, will also contribute to cost down benefits by reducing the number of business units from five to four.

The company saw quarterly sales volumes slip slightly year-on-year in Q1 2016 by -2% to 184,000 tonnes. Net revenues saw a bigger fall by -12% to €201m, explained by lower scrap and alloy surcharges, but also by a weaker sales mix. Net profit reduced therefore from €8m in Q1 2015 to €1m in Q1 2016.