Outokumpu Oyj (OUT1V) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome to today's Outokumpu Pre-Silent Conference Call Fourth Quarter 2020 [Operator Instructions] I must advise you that this conference is being recorded today, Monday, the 4th of January 2021. I would now like to hand the conference over to your speaker today, Linda Hakkila. Please go ahead.

Thank you, operator. First, I would like to say happy New Year all of you, and welcome to Outokumpu's Q4 2020 Pre-Silent Conference Call. My name is Linda Hakkila, and I'm Investor Relations Manager here at Outokumpu. With me today, we have our CFO, Pia Aaltonen-Forsell. The purpose of this call is to summarize the key points of the fourth quarter. We will first start with Pia's comments, and then we are happy to take your questions. But now I will hand over to Pia.

Thank you, Linda. And dear participants, I hope you are all keeping safe and well and that the year has started in a good way, at least here in Southern Finland, it seems like a snowy day today, so winter has really arrived. And I think that that's actually a nice thing to experience right now. Also, this pre-silent call is on the back of the revised guidance also issued in December. So on December 15, we gave more positive news about our view about the fourth quarter. So during the fourth quarter, we've really seen a market recovery in the stainless steel sector. It was stronger than we had initially expected, and this was especially true for the standard grades. So I do think we have discussed earlier both about sort of an improved demand in both appliances and automotive, but this is very clearly visible now in the fourth quarter and also sort of throughout the standard grades. Also, when we look at some of the sort of special events that we had during the quarter, we announced our strategy on the 5th of November, and also, at the same time, as one of the core elements of our strategy was the EUR 200 million EBITDA improvement -- run rate improvement by Q4 of 2022. We also launched a number of cost-saving actions, including personnel negotiations. And those negotiations have been carried out through the fourth quarter. We have now completed the negotiations in all of our key countries in Finland, in Sweden and in Germany. And I think we are proceeding with the earlier plant reductions as we announced. And obviously, this was also one of the risks that we had in the fourth quarter. This was quite a significant reduction planned, up to 10% of our personnel and now clearly, looking back, we have been able to, I would say, handle the situation in a very professional way and in a good cooperation with our personnel and the unions. If I then think about some more important drivers for the quarter, obviously, on the back of the improved outlook and demand, we also increased our EBITDA guidance. And now we are then looking at an EBITDA that is higher than in the third quarter. And we also talked there about improved cost effectiveness and also some raw material effects. Obviously, during the fourth quarter, we have seen really increases in nickel price, especially. And I think one of the impacts of that will be both sort of on timing and hedging side. Usually with this sort of a change that we've seen during the quarter, that should result in some level of positive impact, especially on the hedging side that I think is more. Now that we know the closing rate, I don't think that there are any significant impacts. But still, if there are any, they should be more on the positive side. And metal effects also, otherwise, we have been already initiating a number of cost-saving actions. Those also include yield improvements and kind of further pushing up the scrap ratios and at least during the fourth quarter, I think we have very much proceeded according to the plan. And I think our scrap ratios will be really good in the quarter as well. Maybe still a few more words sort of from the balance sheet perspective. For the full year CapEx, we have guided the EUR 180 million. And I think that's still solid EBITDA figure that we are looking at. Then also on working capital side, you may recall that already by the end of the third quarter, we reported of the improvement of EUR 100 million in working capital being achieved. Actually, the figure in Q3, I believe, was EUR 177 million cumulatively from January to September, but that did also include the Finnish VAT deferral that was close to EUR 70 million in Q3. And based on the sort of amortization schedule, it will stand at EUR 60 million deferral at the year-end. So we have sort of reached that targeted EUR 100 million improvement for the year and our plans for Q4 were to keep the working capital level stable, and I think things have been working out pretty much according to our plans there. And then finally, 1 or 2 words on the funding. I was actually sort of looking through the full list of funding activities for the year. It's been a really, really, really active year for both extensions and also then the new convertible in the summer. So we started with the pension loan where we extended the maturities to even up to 10 years. This was north of EUR 100 million in March, convertible bond in July EUR 125 million, then the VAT deferrals. And then still during Q4, we've had the EKN, which is the Swedish ECA backed funding of SEK 1 billion, so it's EUR 100 million. And then finally, just before Christmas also the extension of the RCF, so there, we have EUR 532 million where we now extended the maturity with 1 year. So all in all, a very, very active funding year that I'm happy to report about. But I think in short, that concludes my opening words for this call, and now I would be really happy to take your questions. So operator, we are ready for the Q&A session, please.

[Operator Instructions] Your first question today comes from the line of Luke Nelson from JPMorgan.

Happy New Year. Just to dig into your updated guidance from last month a bit more. Is it possible to quantify sort of what level higher actually means quarter-on-quarter in terms of shipments? Also maybe just any color between regions, if you can, Europe versus Americas? And also you touched on it very briefly around end segments, autos, appliances, et cetera. But it'd be good just to get a bit more color just on what you're seeing in terms of end markets as well.

Indeed. Thank you, Luke, and happy New Year. So the first one was on shipments, and then the second was on Americas, but particularly which angle, I'm sorry, I didn't hear that.

Sorry, it was just on the shipment guidance, just whether there was any differences between the BAs?

Yes, indeed. Okay. Okay. Fair question. So for the shipments, I mean, our updated guidance said that we are looking at between 5% to 10% improvement versus Q3 and sort of based on how the quarter has proceeded and whatever happened since December 15, I think we are still currently behind those figures. I would say we are probably a little bit closer to whether it's the midpoint or kind of the lower end there. But we are still sort of getting through the final figures for December. So that guidance of 5% to 10% improvement versus Q3 still holds. And then in terms of geography, here, I would say that at some point earlier through the year, I've actually said that, yes, we could also see that when COVID started, Americas was really a market where kind of decrease happened or the way down was quite quick and it also really seems that when the rebound happens, that there is a lot of dynamics in that market and it happens quickly. But when we look at the sectors, when you asked about these end segments, automotive and appliances, in particular, that we have asked -- that we have discussed, but I would say it's also throughout kind of the standard products we've seen these improvements. And that is true both for Europe as well as for Americas. So I would say, at this point, I should not say that there are any significant differences between the geographies. The significant difference from Outokumpu perspective is the fact that still during Q4, we really saw the improvement more in the standard grade. And when it comes to the more value-added grades, we couldn't see that rebound in volumes yet during the first -- fourth quarter.

Okay. So does that mean just in terms of mix effects, quarter-on-quarter, given the sort of improvement in more standard grades, should we be expecting negative effect in the waterfall quarter-on-quarter?

Yes. I don't think we have any -- we probably reached sort of the low point in order intake for the value-added grades during the third quarter. We haven't sort of seen a further decline. But obviously, just as you suggested, I mean, mathematically, when we haven't seen the rebound in value add, but we have seen in standard from an overall mix perspective, of course, that should drive it to a somewhat weaker mix.

Okay. Perfect. And sorry, last question for me. Just on Ferrochrome. The last couple of quarters, there's been more of a negative mix effect from higher shipment -- spot sales. Can you maybe give an indication on how that has been trending in Q4 and maybe the mix effect from that Q4 versus Q3?

Yes, yes, yes. Good question. So I think during the fourth quarter, the sort of Asian spot sales have been at really low levels. And I think this sort of goes hand-in-hand with the fact that with improved internal stainless steel deliveries, obviously there, we haven't had sort of the same need of moving volumes to external spot sales. And also, you may recall that part of the strategy launch, one of the things that we also said for Ferrochrome is that we really have to work with the mix. To some extent, it's really even kind of CapEx and investment-driven, and it's not there yet with maybe sort of expanding a bit the range of grades and how we can sell it. But to some extent, it's, of course, also ensuring that we have sort of the right customer base and make sure that we don't have spot sales to any significant amount. But in Q4, I would say that the improved stainless steel deliveries also internally have then meant that these Asian spot sales are very, very limited.

And your next question comes from the line of Ioannis Masvoulas from Morgan Stanley.

Just a couple of questions left from my side. First of all, can you elaborate a bit on the cost efficiency and raw material effects, which seem to be a tailwind in Q4? Is that largely a reversal of the headwind we saw earlier in 2020 or is it part of the -- your strategy and how that bears some fruit into Q4 and possibly into the next year? And then the second question, just thinking about Q1 2021, you clearly suggest that some of the standard grade business is doing better than you expected a couple of months ago. How much of that do you expect to carry into 2021? And if that's the case, how should we think about working capital effects that could have set some of the earnings upside?

Excellent. So first of all, on the cost efficiency and the raw material effects, I would maybe just like to to first say that there is an element of the cost efficiency that simply is attached to better utilization rates. So obviously, that comes to sort of the fixed cost part, also the fact that we have been reducing inventory during several quarters, whereas now we've been more targeting overall working capital to remain stable in the quarter. So it means that in terms of fixed cost absorption, it's a better quarter, typically when you see these dynamics. And then as well, even from the perspective of variable cost, just with better utilization rates, usually, there is a somewhat better variable cost efficiency. So I think that's sort of one element of it. But then the big element, obviously, really comes with a range of metal impacts and raw material effects. And I think it's fair when you are saying that if some of these sort of kind of bouncing back or getting something back from earlier headwinds, and I think that there is an element -- there are kind of maybe 3 sort of core elements here. One of them is the scrap ratio. I would actually highlight that a lot because I think the scrap ratio improvements are aligned with our strategy. They are aligned with our sustainability thinking and obviously as well with then sort of cost -- overall cost reductions. And we really pushed the envelope on the scrap ratio, particularly in Tornio during the fourth quarter. And this is one sort of element of our strategy. But then there are also other elements yield is important but could vary by product category, obviously, emphasizing a lot the standard maybe sort of gives a bit of a hint of how this could play out there. And then finally, when we look at metal costs, obviously, the market dynamic, how the rebates or the intrinsics work, et cetera, that is maybe the element where I would say there can also be deviations between quarters that are, well, I don't know if I would use your word to say it's sort of gaining something back from earlier quarters, but it's just that the market dynamics can vary between the quarters there. So those are maybe the elements, and I would say that especially the scrap ratio is really sort of based and supporting our strategy work there as well. Then on to your next question, which was on the standard business gaining more momentum now during the fourth quarter and how that plays into the next year? I would say that usually, the way -- if I look sort of historically of our lead times, looking at maybe 6 weeks or a bit more than 6 weeks in Americas, now I'm talking standard grades here, 8 weeks plus in Europe, so under any circumstance, what we see in order intake now obviously translates into Q1 and sort of even starting to go a little bit sort of beyond that because we are seeing improvement in the demand for these standard grades. And so when you are asking that how that translates into 2021, I think where we have visibility is the early part of the year and, obviously, I would be just generally cautious of them saying what comes beyond that. I guess there is some point in time that we are all expecting when life will go back to the old normal and we will travel and maybe use our household money on travel instead of buying a new dishwasher. But still, at the moment, it seems that the demand for appliances is very, very high. So I hope that gives some color, but obviously, I mean, there is still a lot of COVID-induced uncertainty even into 2021. So we'll have to see. And then finally, your question on working capital. I think it's a relevant one because if you look at our working capital performance as a group over the year, what we've typically seen is that Q1 has meant some -- always some investment into working capital because that's typically seasonally, Q1 and Q2 are more sort of high-volume quarters compared with Q3 and Q4. And that also means that there has been some investment into working capital and then again kind of starting to balance towards the end of the year. So I don't think that we can sort of completely avoid this seasonal impact. But obviously, we are constantly developing our capabilities of supply chain and working capital management.

Understood. That's very helpful. And if I can ask 1 more question on the Americas business. I guess when you formulated your strategy, you didn't necessarily expect one of the competitors to exit the market. So now, we have the news just before Christmas about ATI looking to exit the standard business over 2021. How is that possibly going to change your strategy, and how you're positioning your business to potentially gain some market share there?

Yes. I think it is obvious that sort of from a product segment or from an orientation that we have currently, it is clear that there is some opportunity for us. I mean, obviously, there is some opportunities for others who are in standard grades as well. But there is clearly some opportunity for us. And I think it just kind of boosts the elements of the strategy that we already had in place because, obviously, some of the fundamental cornerstones of our strategy in Americas was really a lot on the sort of commercial excellence side. We worked through several years with really balancing kind of the costs and getting that operational stability and earn the credibility with our customers. And I think based on the customers, we have clearly started to gain that momentum. And I think that, that just means that we are well positioned. I mean, we have that operational stability. We still have an opportunity to offer our customers more and also to expand from that perspective because if you sort of look at the capacity figures that we are showing then versus the volumes that we've had, especially through the COVID period, there is still some room.

And your next question comes from the line of Anssi Kiviniemi from SEB.

Happy New Year also from here. Three questions, I will take them one by one. Let's kick it off with contract pricing and volumes for 2021. Could you talk a bit on the committed volumes and prices comparing them to 2020, are they up or down? Or kind of what are the dynamics that you are seeing on that side of the business?

Yes. Anssi, happy New Year, and a good question. And I would maybe, first of all, say that just looking at the price development has been -- there's been quite a big delta between what happened in Americas in 2020 and what happened in Europe during 2020. And obviously, the price development in the market will then impact the contract business for the next year. So if I take Americas, it's clear that we've had sort of a more smooth development through the year, no sort of major events there. And that sort of also then takes for maybe sort of a more smooth process of whether it's rollover or -- I don't think I would expect anything very dramatic to happen under those circumstances. And just given sort of our strategy and with the commercial excellence that we are targeting with our strategy in the Americas, it's clear that we have taken this season of committing to annual contracts really seriously. It's a good base. But at the same time, obviously, we don't want to overstretch with commitments. So I would say things have proceeded definitely according to our plans. And in Americas, nothing sort of dramatic around the prices. Then for Europe, you've sort of seen throughout the year 2020, the price deterioration, and I think it goes without saying that this has also impacted sort of the dialogue with our customers. I don't want to give any kind of definitive figures yet. Obviously, a lot of the contracts have been concluded by now, maybe there is still something that is kind of up for kind of finalizing the dialogues. So I still think that from an overall perspective, it is sort of a core element of our business to have a sufficient number of either annual or otherwise long-term contracts as a base, and there is a certain customer group that we would then typically interact with and we have continued to do so, but in Europe with some price pressure.

Okay. Then second question is on Brexit. Have you seen or do you see that there will be any material impact from the changes in trade? Now I'm referring to logistic issues, raw material availability, et cetera.

Yes. I think it's -- there's been a number of people scratching their heads with all the new VAT registrations and just how to take care of all the bureaucratic red tape. So I don't want to sort of play down too much. I think there's a sort of bureaucratic element here that is not to be ignored. And it could also have some impact early on in the year, maybe so when I think about long products, in particular, where we have some of the change involving the melt in the U.K. and then maybe sort of further handling the material in, for example, Sweden and in the U.S. So we have this change, but just sort of have to work. And obviously, we also have customer relationships where some customers have been kind of concerned that how can this be managed, et cetera. So it is a question, but I think as far as to my knowledge today, we are able to manage these supply chain issues and bureaucratic red tape. So I really don't have anything of substance that I could sort of share with you to say this is an issue or this is a problem. But I do think it's a concern.

Okay. Then the last question is on scrap. How's the availability been? And we're seeing scrap prices coming up. Is this visible already in your Q4 result? Or do we see kind of a lagged impact from the higher scrap prices for your result?

Well, I would say, what would be more typical is a somewhat lagged impact. So maybe that's kind of as far as I can stretch my answer right now. But I do think it's -- this is a market that obviously is dynamic and on the back of the improved outlook in stainless steel. It's the market reacting probably to that. And then I also want to say that we have had -- we have really good long-term relationships with our sort of key scrap suppliers. We haven't had any availability issues to date, and I expect that, that is how we will be able to continue as well.

Okay. And during the past year, you have put focus on basically managing your supplies and the pricing of supply. So when we look at the scrap market, the spot market, then see the prices up, is this something also that effectively you see in your purchasing operations? Or are you able to keep the prices slightly more, let's say, stable?

It's -- this is a sort of a delicate system with a number of sort of local, even -- obviously what happens in Americas and what happened in Europe is connected. But if you compare week-to-week, you could see some small deviations, et cetera. So I don't think it's possible to go sort of immune from the impacts in the market, but we have various ways of whether it's with the contracting with the length or otherwise optimizing that we are then trying to use, obviously, to kind of smoothen this. But I don't think that there's -- in terms of our cooperation with scrap, it's always long term. But in terms of being able to delay impact, I mean we are talking about some delays. We also obviously use hedging, et cetera, for what we have in inventory. So we are trying to smooth and stabilize the impact of metal prices, but I don't think that we have any way that we could work kind of against the market on long term.

Your next question comes from the line of Carsten Riek from Crédit Suisse.

Happy New Year to everybody. Two questions from my side, pretty much follow-ups. One is on the long tail business and the Sheffield side in particular. You clearly mentioned that Brexit doesn't make it easier because of the bureaucracy behind it. You already had the review of this business, I think it was in February '20. Could this kind of complication not lead to another review of this business because it's clearly now outside the EU, and it makes it even more vulnerable if I look at the potential renegotiations with other global areas and the implications for potential material coming into U.K. over that kind of line. Why is it so important to keep that business? And is there more restructuring charges to come over time in order to turn it if you want to keep it?

Indeed, indeed. I think it's a relevant question. In terms of the strategic review, we initiated it in February of 2020, and it was sort of a big undertaking to assess a range of options for us. And I would say Brexit was kind of a topic as we did that. I mean we didn't know what the definitive sort of agreement between EU and the U.K. would be. But obviously, kind of it was coming, it was on the agenda. So what I would say is, we solidly assessed various options from also the perspective involving Brexit. And looking at the options available, it was quite clear that we needed a significant turnaround program that we believe that we can really manage within a time period of, let's call it, 2 years to maximum 3 years. So it's an accelerated turnaround program that really goes through costs in a significant way. We have already, by now, carried through quite significant personnel reductions in Long Products. We are also looking into a number of other things to make sure that we have the right cost structure, that we have also the right approach to the market, that we have sort of the appropriate range or the full range of products to be sold. So it's a really holistic turnaround program that we are working with now. And I think in terms of value creation, it's clear that we are very committed to carrying through this program, and we also need to do that. And I think that will then give us sort of better opportunity to assess sort of the long-term view when we have completed the turnaround.

Okay. Fair. The second question I have is more on the raw material gains. We always seen the nickel gains. And we hear from some of the peers that it had quite an impact on the fourth quarter already. Could you just give a little bit of color what the underlying performance would be without the raw material gains, or in a different way and what kind of magnitude could we expect the raw material gains, either way?

Yes. So I think when I use -- sort of explain the metal impact, including the raw material gains here, I want to include everything, both the sort of elements that go through -- just through higher scrap ratios or better yields. I mean we are really improving kind of the underlying cost position. And then we also have the more short-term impact of kind of inventory gains and losses and hedging gains and losses that we would see. And if I think about the magnitude, for example, compared with the third quarter and just sort of looking into metal timing, which is sort of, if I just call inventory gains, gains and losses, I think clearly, with such an improvement or increase in the nickel price, I mean, usually, that would indicate a positive figure. Also from a hedging perspective, I know that this dynamic for us should imply a somewhat positive figure. So I go sort of positive, positive, but at least on the hedging, it's not a significant number. I would say then sort of on the inventory side, what we have seen historically is impact of both on the positive and negative side of maybe EUR 10 million, maybe EUR 15 million in the quarter. So that's maybe as sort of far as I can stretch just sort of looking what it has been kind of historically. We've had a lot of quarters with actually negative inventory impact. So now again kind of the direction is different because we've really seen these increases in nickel sort of through the quarter. So that maybe kind of on that really just sort of valuation sort of perspective, which is maybe the one that you asked about. So I would say that when I discussed it earlier, I also wanted to bring out that there are other sort of positive metal impacts that are maybe more derived from our work with our strategy.

And your next question comes from the line of Harri Taittonen from Nordea.

Happy New Year, Pia and Linda. And I have been sort of following up, quite a few good questions already tackled. But one remains on the sort of the European imports and the pressure from there. What have you seen? And are there any early indications on the how this sort of investigation into the cold-rolled side? I mean, how that might be having an impact on the import behavior or pressure?

Yes. Thanks, Harri, and Happy New year. Certainly, I do acknowledge the import. I think this is really important, this investigation. And I think maybe I could use some words like we are ready to receive more questions, I mean, with the sort of -- we've given a lot of information. And I checked it the day before Christmas, and then we were more in the state of we are ready to receive questions we can answer more, give more details whatever is needed. So I think from my perspective, the latest I know is just that the work is ongoing. And then when you are asking how it could impact the dynamic, I think, obviously, sort of through Q4, we have the November stats, we've seen lower imports in November. But this may be still on the back of other impact. What we could see is the typical quarterly impact where October imports were still higher and then it clearly decreased to November. So that seems to follow the new quarterly pattern that we have seen this year. And then on the other hand, as well, the demand in Asia has been higher. So I'm not sure whether that impact is really what we see yet in the import figures.

Okay. Interesting. And then the other thing on the sort of -- I mean, you will probably talk more about the inventory kind of the cycle among distributors later when we report that. I mean, is there any comment that you could make on the sort of inventory kind of building behavior? What you saw in there towards the end of the Q4?

Yes. Well, I think sort of what has shifted sort of clearly on the back of the improved demand is also distributor behavior, particularly we saw this really unwillingness to sort of hold inventory earlier, and especially in Americas, where you know that improved nickel -- increased nickel prices wheel through our surcharges sort of almost automatically also then impact the pricing for the customer. So that means, obviously, that kind of provides an incentive, of course, as well to do some stocking. In Europe, I don't think that we see quite similar impact, but inventories in Europe never went as low as they did in Americas during, for example, Q3.

And your next question comes from the line of Bastian Synagowitz from Deutsche Bank.

Happy New Year from my side. Pia, I have got 1 quick follow-up on Ferrochrome in the question, which Luke was asking earlier. So what you explained here probably means that we should get a major step-up in earnings from the Ferrochrome business in Q4 because I guess you never really realized the step-up in the benchmark price from around $1 to $1.14. Is that fair?

Yes. Thank you, Bastian, happy New Year. And I think it's fair to say that we had -- we really had some negative impacts from the mix when it comes to more spot sales, both in Q2 and in Q3. Whether that would be -- had gone kind of totally wiped off out the earlier improvements in benchmark price, maybe that is a little bit too harsh of a judgment. But I think sort of the direction is clear that with now a better mix in the sense of less spot sales, we really -- we -- I think definitely, that can only be positive.

And I guess, also forward looking, if we look at the dynamics on Ferrochrome now, the next benchmark is up again to $1.18? And I guess the prospects also for the next quarters are probably not that bad, given that volumes seem to be in a recovery mode and probably like what we've seen in the other parts of the metal and steel sector where capacity is coming back slowly. We're facing the same situation in Ferrochrome, probably the near-term prospects are pretty good. So I guess that should probably be good for your general position and your mix also when we look at -- when we think about not just Q1 -- Q4, but also Q1 and Q2, I suppose.

Yes, yes. I agree with few additional comments. I mean, just to sort of paint a more -- try to be as holistic as I can. So first of all, just to make the comment that even though we really don't have any significant or any spot sales with sort of the Chinese book prices now, when it comes to the pricing mechanisms, obviously, the European benchmark price is an important one. But even though it wouldn't be spot sales, there could be some other pricing, pricing that contracts are inked to as well, and I don't think we have really disclosed what is the percentage of various types of pricing. But sort of just to put it out there that obviously, the European benchmark pricing is an important indicator, but it's not the only indicator. And then more generally, I think it's really interesting on the back of really improved stainless steel outlook in Asia already over a period of time that despite that, we've seen a very, very stable pricing in Asia with the spot there. And obviously, I think that has raised some question that why is the market dynamic not working. Some answers have included that there's been a lot of inventory but we'll see sort of how that will play out going forward. Obviously, one of the reasons behind that long-term stability of the pricing could be kind of an almost sort of increased purchasing power as a lot of big steel players have really sort of joined forces in Asia. And then still looking at the dynamics, obviously, the South African announcement of potential sort of export tax on the ore was a really interesting one. But I don't have any follow-up on that. I don't have any exact amount. I don't have any timing. I guess nobody knows. So this is also one of those kind of things to watch out for in the market that could then potentially have an impact as well.

Okay. Pia, then 1 question also on the maintenance charges you've been guiding for. In your fourth quarter outlook, you said you'd expect EUR 10 million negative impact from maintenance relative to Q3. So should we understand this as EUR 10 million more than in Q3, i.e., EUR 25 million in total, given that you had already EUR 15 million of maintenance charges in Q3 from the Ferrochrome operation?

Yes. Yes. I should be a little bit more specific. I think we wanted to mention that there was really scheduled something maybe typical for Q4, but still some more significant maintenance in both Tornio and Avesta, but that was sort of for the stainless steel part. And if I look at Ferrochrome, I mean, we certainly have not repeated the big maintenance from Q3 there. So now I don't have the exact wording in front of me so that I could just easily quote that. But the intention was to say, we do something more in Tornio and Avesta compared with Q3 because we wanted to do some significant maintenance there, particularly in Tornio. However, obviously, the Ferrochrome one was unique for Q3 only.

So then the sequential impact is actually you're going to get a relief from maintenance charges. Is that how it holds?

Yes.

Okay. Understood. And then just also following up on the discussion around scrap, and you touched on that already. But I mean, just to understand, we've obviously seen this massive rally in carbon steel scrap prices and that had several reasons, but China has obviously now dropped the import ban for scrap. Has that already impacted the dynamics for stainless steel scrap as well as far as you could see it towards the end of the year? And again, like, do I understand you correctly that you carry a little bit of extra inventory load at the moment to hedge yourself?

Yes. I think I would then maybe emphasize the word a little bit. So overall, our inventories are on a rather low level. But I think you are right in the sense that we haven't seen any significant impact of this during the fourth quarter, but I wouldn't rule out, it certainly can have an impact going forward.

Okay. And then my very last question is just on 2021 more broadly. You're already said, obviously, you will cut a lot of headcount, and most of that will be pretty much done by the end of 2021. So when you say that, how much of the savings, I think, EUR 70 million, EUR 80 million in total, will you already realize -- not just realize actually from how much of those will actually benefit in the course of the next year already. Is it going to be EUR 30 million, maybe EUR 40 million, is that the right number to assume?

If I think about sort of the run rate, I think that it's actually going to be a really significant part of that because how it is planned today than really by the end of the year we will have the most significant portion of the layoffs being completed. So that's how it's planned at the moment, and that would really imply that it's only a small share that sort of from a run rate perspective that starts only in 2022. But as communicated earlier, the -- this takes place sort of through 2021. So what would the actual annual impact be for 2021? That I don't think we have communicated. But obviously, to be sort of a bit prudent on it, I think that we will see. Obviously, we will see this sort of happening through the year and then with a significant part of the EUR 70 million being sort of run rate there at the end of the year.

[Operator Instructions] Your next question comes from the line of Seth Rosenfeld from Exane.

A couple of quick follow-up questions. You've already covered quite a lot. First on lead times. I think you referenced earlier what you call kind of historic average lead times in Europe and the U.S. Can you confirm where current lead times are in the 2 regions?

Thank you, Seth. And I can confirm that they are longer than those at the moment. I don't have sort of in front of me right now exactly how much longer, but I think this improved demand has now led to prolonged lead times.

Okay. And then secondly, with regards to maintenance outages, can you please confirm if there or -- if possible, over the next 4 quarters or if not just for Q1, if there are any unique maintenance outages that we should be forecasting over the coming 1 to 4 quarters, please, akin to what we saw in the second half in '20?

Indeed. Yes, that's a really good question because the sort of sequencing of the planned maintenance breaks in our Ferrochrome operations is such that every fourth year there will be a year without significant maintenance. And that's actually sort of -- according to the normal sequence, that is what I would expect in 2021. So this kind of EUR 15 million impact that we had in Q3 of this year. I would not expect to repeat during 2021 based on the best knowledge that I have today. I have, however, to say that the sort of final planning for these long outages, I guess we will come back and really confirm that once we sort of really have every detail penciled in. But then when it comes to the stainless side, I do think that compared with this year, I cannot see any significant increase or decrease based on 2 things. First of all, during 2020, we have had lower volumes in Q2 and in Q3, and we have also reduced some maintenance or postponed some maintenance based on those lower volumes. At the same time, as part of our strategy, we are also working a lot to improve the planning and the execution of our maintenance. So we would -- I would also expect that to some extent, we can make these decreases in maintenance costs permanent. And so you would have sort of maybe some increase, but then at the same time more sort of structurally and long-term also kind of bringing the levels down. So therefore, on the stainless side, I don't really want to say that there would be any significant changes to 2020.

Okay. That's very clear. And 1 last question, please. Just with regards to the new corporate strategy and the cost savings, I know you just answered some question for Bastian about the headcount reduction. But what level of transparency should we expect going forward quarter-by-quarter as you try to quantify the benefits of these new measures?

Yes. So I think we have committed to reporting on the progress of the EUR 200 million EBITDA improvement each quarter starting from 2021. So we have now set up a very detailed measurement system based on kind of unique and individual projects. As we speak, I think we have more than 2,000 initiatives recorded, more than 700 individuals assigned to these initiatives being accountable. So it means that we will -- we are building up this ability to monitor and then also to report progress. So I would say what we can commit to is starting from Q1 reporting on the progress of the run rate EBITDA improvement. And then I think we will provide more detail, as you know, how would I say, as applicable in a way, I mean, there will be a tremendous amount of detail in the background, but we'll obviously try to sort of present it in a way that also makes sense and makes it understandable.

We have 1 more question in the queue, and the question comes from the line of Veikko Silvasti from Nordea.

Happy New Year. So just 1 question from my side. Regarding the long-term contracts for 2021. So which pricing mechanism is mostly used for your long-term contracts? And if it's effective pricing in Europe, is there any possibility to adjust the pricing upwards if the nickel price keeps on increasing and maybe it's taking the scrap pricing with it?

Yes, yes. No, that's a really, really, really good question. And maybe sort of rather than answering really directly to your question, I want to say that, yes, well, Americas, as you know, is still very much an alloy surcharge-based market. Europe obviously has moved a lot into effective pricing, but we still also do alloy surcharge-based pricing. So obviously, it would be quite typical that your more sort of long-term contracts would fall more in that category of alloy surcharges. And if they do not, then our hedging policy also says that if we have committed contracts, then we need to hedge appropriately. So there is, I would say, few mechanisms to ensure that we keep the metal risk under control. But we certainly also still have alloy based -- alloy surcharge-based pricing for longer term contracts, in particular.

Okay. Okay. And then maybe just a reminder, whether in Europe the contract volumes would be somewhere around 60% of all volumes?

Well, I'm not actually sure -- yes, yes. I'm not actually sure if we have disclosed it to that level of detail. And I think also, to me, that the figure seems a little bit on the high side. But let us check if we have actually provided that historically. And if we have, then we'll make sure to circle that back; if not otherwise, then in our next report.

There are no further questions at this time. I will hand the call back to you.

Thank you, operator, very much. Linda, please go ahead.

Yes. So before we close the call, I would just like to remind you that we will step into our silent period tomorrow, on January 5, and we'll then publish our financial statements release on February 4th. And at the end of the call, I will thank you all for participating in this, and have a great week ahead. Thank you.

Thank you. That does conclude our conference for today. Thank you for participating. You may all disconnect.