Swedish steel manufacturer SSAB carries out short-term credit transactions in a large number of emerging markets around the world. Their regular export markets include Nigeria, Ghana, Russia, the United Arab Emirates, South Africa and South America. More often than not, for SSAB, trade in these markets would be a non-starter without EKN’s guarantees for payments.
One of the main challenges facing SSAB is that their current export growth is particularly strong in some of the most challenging emerging markets.
“We cannot simply sell whilst taking all the risk ourselves. So either we don’t sell, or we sell and use some kind of risk mitigation”, says Henrik G. Welch, Vice President, Head of Group Treasury, SSAB.
This also allows them to offer their customers more favorable credit terms. And advantageous financing conditions for customers mean greater competitiveness for SSAB.
“We would definitely miss out on sales opportunities if we didn’t use EKN’s risk coverage” says Welch.
SSAB typically uses EKN when private credit insurers either refuse or are unable to offer them cover, as can be the case in certain markets. According to SSAB, the costs of any other alternatives would be prohibitive.
“If you ask the customers for pre-payment, they would need to obtain finance locally, which is often extremely costly. And if you request a letter of credit, their banks often first demand payment upfront. In addition, we also see that using EKN in connection with an L/C transaction also enables banks to get involved in transactions they otherwise would not be interested in touching at all.”
EKN’s risk coverage has been an integral part of SSAB’s credit insurance policy for several years now.
“There are two main reasons we use credit insurance. Firstly, to cover our sales against risks and secondly, to outsource, to a certain extent at least, credit checks on our customers. We use it for all our transactions from the Nordics”, says Welch.
SSAB, with head office is in Stockholm, is a highly-specialized, global steel company and a leading producer of advanced high-strength steels, quenched & tempered steels, strip, plate and tubular products, as well as building solutions for the construction industry.
SSAB’s steels and services provide end products that are lighter, stronger and longer-lasting. SSAB has approximately 15,000 employees in over 50 countries. The company’s production facilities in Sweden, Finland and the US have an annual steel production capacity of 8.8 million tonnes.