Outokumpu Oyj (OUT1V) Earnings Call Transcript & Summary

Ladies and gentleman, thank you for standing by, and welcome to Outokumpu pre-Silent Conference Call Q3 2021. [Operator Instructions] I would now like to hand the conference over to your speaker today, Linda Hakkila. Please go ahead, ma'am.

Thank you, operator. Hello all, and welcome to Outokumpu's Q3 2021 Pre-Silent Conference Call. My name is Linda Hakkila, and I'm the Head of Investor Relations here at Outokumpu. With me today, we have our CFO, Pia Aaltonen-Forsell. We will again first start with a short update from our CFO, and then we are happy to take your questions. But now without any further comments, I will hand over to our CFO.

Thank you, Linda, and good afternoon, good morning, everybody. This is Pia Aaltonen-Forsell. And Let me take you through a few of the highlights of the quarter, and then I think we will fairly swiftly move over to the Q&A to address your specific questions. But if I start with the market situation, I mean, this has been a strong market. The market environment has continued on a strong level through the quarter and our order book has remained strong. We currently have a very long order book. I mean, when we talk about the European flat business. We are already booking into late first quarter of next year, early second quarter. So our order book is there at 6 months duration at the moment. in U.S. as per sort of the normal practices, it is more on this sort of 3 to 4 months duration, but the market situation also remains really, really strong in the U.S. as well. This has been visible in the prices. So CRU data indicates that stainless steel prices have continued to increase also during the third quarter, as I'm sure you all know. And we have seen this in our order intake. What I also want to say is that we see strength throughout market segments. And we also now in our order intake start to see the more investment cycle-driven value-added grade demand to come back. Still, I want to say that when we see something right now in our order intake, then due to this very long order book that we have, we will see that realized as deliveries then only clearly into 2022. So that also means that the realized prices that we will see in our deliveries during the third quarter are the ones where we booked the orders probably late in Q1 or early in Q2. So that's sort of the way to think about the delay from what we see in order intake and in CRU statistics related to prices and then what we actually see in our deliveries and also then through the invoicing in our P&L. So I think those were some encouraging sort of facts when it comes to the top line. Obviously, when we look then at some of the challenges in the quarter, I would clearly say anything around logistics, availability of trucks, et cetera, continues to be something of the sort of daily operational battle. As you know, we are very regional in our approach. So many of the sort of huge challenges of global supply chains have not been top of our list. But some of these logistical bottlenecks, et cetera, have also been fairly regional. And if nothing else, I think it's at least visible then through the cost pressure that could also come through in transportation. Other well-known when it comes to cost pressure are, for example, around electricity and energy. And obviously, as a very big electricity consumer, we do have our practices for contracting for hedging, which means that we are normally sort of well protected for those immediate spot price changes or they impact us only for a part of our electricity consumption. But obviously, this is something more to also keep an eye on going forward. There's also inflationary pressure in other parts, whether it's coke, ferrosilicon, et cetera. I think these are fairly well known facts through the market. And as there also, I would say, by sort of inventory management and contractual arrangements, there's always some delay before that hits the P&L, but certainly topic to be aware of also going forward. Then when it comes to our other BAs, let me talk just very briefly on ferrochrome, first of all. I mean, obviously, still in this quarter, we know the benchmark price was stable at the $156. And then going forward, for the fourth quarter, we now know that we will have an increase to $180, may be more about that than later when we also talk more about Q4 when we publish our Q3 results. And then maybe still a final point on the balance sheet. It is clear that the emphasis on deleveraging, strengthening the balance sheet, which in practice now means also further reduction of debt. I mean that is still an important part of our strategic direction and remains a focus. What we can see is, I think, a continued discipline when it comes to, for example, CapEx and all of the items that we may have discussed also earlier. When it comes to working capital, there is certainly still the final sort of stretch of the year, which usually brings us a fairly significant decrease in working capital. I think this year will be a bit different on that part and particularly similar also in Q3, we do see -- we see a good top line. We also still see some pressure when it comes to, for example, metal prices upward and all of this does increase also the working capital investment still somewhat during the quarter 3. But with that said, I think I would rather go next to the Q&A and then answer your specific questions when it comes to our third quarter performance. So operator, could we please move over to the Q&A session. Thank you.

[Operator Instructions] We have the question from the line of Sandeep Peety from Morgan Stanley.

So I have two questions. One is energy prices. It's no secret. And as you highlighted, it's increasing in a straight line. So against that backdrop, can you provide some earnings sensitivity to rising energy -- electricity and natural costs? And also any color on hedging strategy would be beneficial.

Yes. Yes. And on the hedging strategy, sorry, just to check what that also on the energy and the electricity, or was it around nickel? I'm sorry, I didn't hear.

Yes, so it was around electricity and natural cost -- natural gas prices, so both have increased. So if you have any hedging strategy in place? And how long is that for?

Yes, indeed. Thank you very much. Maybe I'll start with the hedging policy because I think that also, to some extent, explains the sensitivity question there. So with the hedging policy, what we basically have in place is, first sort of a base load of long-term strategic agreements. And one of those -- an example of those is the wind power, 10 megawatts agreement that we signed very recently and also released some information about that was with Gasum very recently. So first, we would sort of make sure that we have a number of these more long-term strategic contracts. And then we would usually look at our electricity contracts on something between a 24- and 36-month rolling basis. And here, I think the trick why it's a bit difficult for me to just give you an easy sensitivity calculation is that there within this range of 24 to 36 months, we could then have a bit of a falling curve. So trying to make sure that we are more protected sort of in the short term and then the longer in the future we go, we would have room to maneuver how high or high low percentage we would then drive there the electricity contracting. So our policy there gives us some room to maneuver even though it clearly sort of sets the tone of ensuring that we do have sort of a fair amount of commitment that takes us pretty far into the future. Let me sort of make that a little bit more concrete how I see sort of the here and now. I would say what it means is that when we talk specifically about Q3, there would have been sort of only a top layer of a very small percentage of our overall electricity and energy consumption that would not have been contracted in advance of the quarter. It still means because there still is a big part of our annual cost. I mean this is somewhere between above 10% of our costs, I mean, to sort of give you a big round number, I mean, we are certainly talking kind of north of EUR 200 million per year. So it definitely means that when we are then seeing this fluctuation very sort of rapid increase in prices during the quarter, it will be a high single-digit number, negative impact in the quarter. Yes, could even be sort of just above the EUR 10 million mark for the quarter. And I still need to be a little bit specific and say, we do need a lot of the electricity consumption also, particularly the figures that you may have from Finland, obviously, it is our ferrochrome mining and smelter activities are also taking a significant share of that. So sort of just to have a bit of a sense between the BAs. And with that being said, then that is sort of the best hint of the sensitivity I can give today. I'm sure that it's sort of easy to calculate that from a cost base per se, you can sort of imagine what the sensitivity would be. But the challenge is then that I cannot give you sort of 1 answer on what the hedging policy is. I think as this now has such a big impact, it's probably something that we just need to be more transparent on for sort of the upcoming quarters that how we would then see as part of our sort of outlook going further than how we see that.

Okay. That's really helpful. So it's like EUR 50 million per quarter, which implies 20% increase in the energy cost for this quarter, which sounds a bit significant since you mentioned that you had -- you have already 24 to 36 months of rolling contract. Okay, okay.

Yes, we have rolling contracts. But just to be clear, we don't have 100% of rolling contracts. I mean, we have it sort of with more emphasis on the short and then we sort of take value step down in that as well.

Okay. Okay. That's very, very clear. And just second question on net working capital. So the previous guidance was between EUR 100 million to EUR 150 million of net working capital build during the entire year. And you clearly pointed out that prices have increased even ferrochrome is up and nickel prices are higher. So what should we expect for full year, and more specifically for Q3, if you can point out?

For Q3, I can be a little bit more specific because just the normal sort of seasonality for us would have been already to get some of this -- usually cash out for working capital Q1, Q2, some cash in Q3, and most of the cash in Q4, that would have been sort of our historical pattern. And now I think that it's like a wave that we are sort of pushing a bit -- always sort of moving is a bit sort of ahead of us with the increasing price levels. And what it means is that I would say that when normally in Q3, we would have expected already to have some cash in, I think that is less likely now because this sort of tying in more capital just because also of the higher prices will continue into Q3. And then for the full year figure, I will come back when we had the Q3 release. But I would say that for the very same reasons the range that I have given before, I think we will need to factor in the higher prices. So the range could be somewhat lower, but we will need to come back with more clarity with that then in our Q3 release.

We have the next question from the line of Luke Nelson from JPMorgan.

A couple. Firstly, just on shipments, obviously, you got down 0 to 10%. Can you maybe just give a bit more color on how that's tracking? And if at all, any granularity on by region or by BA? That's the first question.

Yes. Thank you, Luke. So the guidance was 0% to 10% down, and that was maybe raised quite a lot of questions of why do you say that, I mean the market situation has remained good. Certainly, it has remained good. But clearly, we still keep that same guidance. And I think it's very much just sort of looking from the business environment. This is much more a European question. I mean, we typically do not see the seasonality in America. So just sort of on the back of that, I would say it's very much sort of looking how the business develops in Europe. And I would say we have had still the same pattern, especially then also we had to take annual maintenance that we had in flat stainless in Tornio as I would say, sort of the most significant stand deal. That is already now behind us, and I think sort of everything went well and according to plan, but did impact the quarter. So I would say we are going to see -- I would always be sort of most comfortable being approximately there in the middle, but I think it's middle or a little bit sort of more on the low end there, depending on now how really the last days invoicing goes. And it's really not a demand question. It's more really how much we can actually push out to the market in these conditions as well with the maintenance breaks. And then also, I would say, logistics tends to be by now sort of a daily. I still call it a headache and not a problem, but a daily headache for sure.

Okay. That's interesting. Can I just -- maybe just on the demand side, you touched on them and to the prior question on power, maybe looking at it a different way. Are you having any incoming or discussions with your customers around them potentially rationing their production schedule and that's sort of pushing up towards how you're thinking around production maybe into 2022. Would the folks that were...

No, I would -- yes. Like briefly, I would really answer no. I mean the questions are really on availability. And then I think that's sort of the first and foremost focus of any customer. Contact would really be around the availability, and that's really the sort of primary focus area. And then there have been some disturbances when it comes to the semiconductors that everyone knows. And despite that, I would say, throughout our segments, really the main focus area, the main attention area is on availability of steel.

Okay. And 1 final question before I come back in line. Just on maintenance, which you touched on in Tornio. I think the prior guidance was a EUR 10 million increase quarter-on-quarter, that's still happy with that? And then...

That is -- yes, Yes. Absolutely happy with that. It's around the EUR 10 million figure. And if anything, it could be just slightly lower, but the EUR 10 million is a good figure.

And that is all basically in BA Europe?

It's very much in BA Europe. I'm not saying there would be absolutely nothing. I mean there is some smaller stuff happening all the time. But if we really talk about the increase, it is BA Europe.

And then sorry, just a follow-up then, looking into Q4, is there any sort of -- any maintenance schedules that we should be aware of in the division?

Yes, yes. I think we will still refine our really sort of final plan. So with that said, I think you can appreciate that there's nothing like super significant plan because if you have a really big start plan that needs to be planned like year in advance. But we will still take some maintenance, certainly. I would say, even through the BAs, it's quite difficult that something is still happening in like November, December. And I think it will happen now too. There will definitely not be an increase in maintenance cost quarter-on-quarter. I think the question more is then that how significant can the decrease be in an environment where still there will be some maintenance. We also really need to prepare for Q1, which sort of seasonally usually is the quarter where we do not want any maintenance that can be avoided in that quarter. So...

The next question is from Rochus Brauneiser from Kepler Cheuvreux.

Yes. It's Rochus Brauneiser from Kepler. Maybe just a brief add on the demand comments you just made. Can you give us a bit of a sense what kind of differences you're observing in demand from the end customer business versus the distributors? And how do you think about inventory levels in the industry, both for Europe and U.S., please?

Yes. Yes. Thank you. I think what I sort of -- I would start with where I see a little bit of difference, which is really around the inventory levels. I mean when it comes to distributor inventories, both in the U.S. as well as in Europe, I mean, here, we usually have some facts and some figures. And there, I can say that all of the latest figures that I have still seen points to lower than average inventory level. So the restocking sort of steel hasn't happened. I mean we are still definitely, especially I tend to follow the inventory days, and they are still clearly below the historical average levels. Then for the evidence of the end users, I would say I have at least anecdotal evidence that their inventories might be getting a bit more sort of closer to some sort of normal levels. But here, the sort of challenge for me is always that the evidence still is more anecdotal. So and obviously, it's from customer talks, it's sort of hearing through the organization. And in some cases, from facts and figures, but more of than just from sort of the dialogue. So there, I can say there may be some anecdotal evidence of inventory levels being kind of normalizing or at least not as low as they have been sort of in the post-pandemic recovery. But with those differences, then I would say, I really could not point to anything significant. I mean we still see the segments that started out strong in the COVID recovery, appliances, automotive. They continue strong. And our visibility, of course, is as long as our order book. So that is what I can comment. But also I think a lot of evidence is in what the true orders are, and they certainly still show the strength. If there's anything, then I would say that it seems that beer kegs and stuff like this, the catering, cutlery sort of thing really seems to be sort of at the high end. But that's only kind of a subsegment of a bigger segment. So it may be more sort of just mentioning you need to see it seems people are kind of more back to old habits somehow or at least that sort of being foreseen, which is, of course, sort of super encouraging. And then as I said before, I mean, we do see now a better order intake also when it comes to the more value-added grades. So we are not talking scrubbers here. I mean we are talking other sort of big industrial projects, also oil and gas projects there, which are clearly not in invoicing. I mean, the invoicing will be there more in '22 and perhaps not even Q1 could be even Q2. But sort of bouncing back there clearly on the project activity.

Okay. You mentioned the only pocket of weakness being automotive. Would you say that, that kind of volume shortfall has been more compensated by the restocking? Or would you say this is still more the end demand from other areas, which continue to be pretty good.

Well, I mean, this has, for sure, been a year of rebound and restocking. It's just that there has to be end demand as well because the inventory levels are not creeping up. I still want to be really specific and say I don't even see automotive as weak. I mean, I still see the order intake here, good and our orders are being good. But they clearly have been -- I mean, automotive -- specifically automotive, but also some other segments have suffered from semiconductor issues. However, that has been -- there's obviously been some ways of mitigating that has still led to a situation where I couldn't say that it shows sort of a weakness towards our demand. But clearly, there are sort of the -- the signs are in the year that it's not -- there are issues around semiconductors clearly in that industry.

All right. Maybe briefly on pricing. When looking at CRU data. So obviously, we have moved above the EUR 1,800 level on the spot market. Is there anything you're noticing in terms of pricing mechanism? Energy is now a hot topic. Are there any discussions about energy surcharge? Or shall we expect that all that kind of inflationary cost items you mentioned before, these are just kind of implicitly baked in the base price number?

I think it's an interesting question because as I'm sure you know, I mean, historically, they have obviously been sometimes successful and sometimes not really sort of fruitful range of surcharges. But I would say that I'm -- at least not that I would be aware of, then I'm not saying that I'm sort of in every sort of commercial discussion. I think there is sort of clarity around sort of the alloys being really then part of the alloy surcharge. And then on top of that, we have the base price that should then react to other inflationary pressure. And certainly, we have this other inflationary pressure right now. Of course, then as well, we have had based on the order intake, also improved base pricing. So -- and maybe I have mentioned it before, but I'll just repeat it as well that I think that by Q4, we will see sort of the return also based on the existing orders that we have, then the invoicing also in Q4 will return to the sort of old balance, the historical balance of being really pricing on the base price and alloy surcharge. But of course, there are still some types of business that are done on effective price exactly as it also was historically, but we will be back on that historical balance by Q4 invoicing.

Right. And then maybe last point on realized pricing. So in order to get the head around this, the one thing, obviously, is the long order book to 6 months where we have to factor in a time lag of this. The second thing is the contract structure. Maybe can you update us how much of the U.S. and European business is subject to the kind of annual contract agreements?

Yes, yes. And I would say, let me really put these in, let's say, 2 really different categories because the U.S. market has a certain dynamic, a certain sort of pricing mechanism, et cetera. And if I could just summarize that, I would say that we tend to see sort of a faster cycle of seeing either price increases or price decreases really sort of carried through in invoicing. Of course, that's already on the back of the order book that typically is 1 quarter ahead. So that's sort of the obvious sort of answer there. But it is also as to sort of the nature of how contracting is done. So even with let's say, a fairly significant part of, for example, annual contracts or half year contracts, you would still have a range of mechanisms that would ensure that the pricing actually moves sort of along with the market pricing pretty swiftly. But then the European situation is a little bit different. It's also the sort of market dynamics. The market structure is different. As you know, we also sell a lot more directly to end users in Europe, whereas the Americas sort of typically is much more of a distribution market. So that's why we have more sort of a mix of different types of contracts in Europe, and it's more difficult to just give this sort of 1 overarching answer. And we also typically have more stability that if you have agreed on a certain pricing type, et cetera, I mean if the contract duration is a period then you would typically stick with that for that period. So it means that there is like more stability from those long-term contracts. And that's, of course, exactly also what we have targeted with those. So we have never really given exactly in Europe that X percent. I have read interesting sort of various reports where there's been sort of speculation on those numbers. And I'm sure that there's some sensing sort of in the market of what that could be. But I would still say it's clearly less than 50% that we have sort of on a long-term contracted basis. So it means sort of in theory, we have quite a big percentage there, more subject to the kind of spot pricing. But then in practice, you still have this almost kind of 6 months delay. And I think that really needs to be factored in right now. So then I would say that what it also implies for Q3 is clearly that -- we took these orders in predominantly still even during Q1 or perhaps early during Q2. So it means that we are sort of having these price increases in the order intake. I mean, they are sort of only gradually realizing in the P&L. And I think you saw that in our Q2 P&L as well. I mean there was already some price increases in that, but we are here also sort of pushing that wave in front of us.

We have the next question from Krishan Agarwal from Citi.

My question is more towards your guidance for the flat EBITDA in Q3. When I look at your competitors, I mean, they are increasing, they are publicly announcing the price increase this time around, particularly in the U.S. market. So I'm assuming you're sort of getting similar kind of a price increase for your portfolio as well. So we are looking at a situation where, I mean the ferrochrome is sort of flattish because of the pricing, but better volumes. Europe is looking better because of the price increase coming through and the U.S. price increases are also coming through. And on top of that, I would assume that there is an inventory mark-to-market sort of gain on a positive side. So then I think the overall picture, I mean, I know, I mean, there is a little bit of lower volume in the Europe, but my sense is that your guidance is looking a little bit conservative for third quarter. Is that the case? Or you would say that, no, no, most of the upside will be realized in the fourth quarter and guidance is as good as it gets?

Yes. Well, I clearly think that this pricing -- the pricing and the long order book that we already experienced also earlier, it does explain why some of these improvements are clearly still ahead of us as we already can see now that we have the orders. They are waiting there to be delivered, but that higher price will realize later. So I guess that one of the really big questions then is that in the future, realize invoicing exactly from which time periods will those deliveries be? When did we take that order? What was the price level that was set then and how will it realize? And that's obviously something that we will see once we get sort of the final result figures, we'll sort of also have that sort of final certainty on that. And you are, of course, right, if I just sort of take this a little bit BA-by-BA ferrochrome obviously, I mean, the flat pricing per se, maybe on the negative side, what I did flag earlier was around the energy prices increasing, which clearly ferrochrome is one of them that kind of has to pay for that. But still, generally, of course, sort of nothing kind of for super big happening as you know the pricing there was flat. And then really looking at the dynamics of the market that we just discussed during the previous question, it is clear that we will see -- in the invoicing we will see some improvement there on the back of the orders received already earlier and then just how much that sort of pushes the price upwards. Then I would say you are right on this inventory mark-to-market. I mean we sort of split it into what we call timing differences and heading differences. There's not much to be said about hedging. I mean sort of fairly small amounts at least on the group level, like nothing I would really write home about. And then after this inventory or timing differences. Yes, I would agree that we saw the price levels continuing to push up and also on the metal side, ferrochrome side, I think usually that would indicate that, that would be more on the positive side. So again, I don't want to give any sort of like really big number there. But clearly, that will be somewhat positive, for sure. And then we have this maintenance that took a little bit of toll in the quarter as well, which you noticed still in Tornio, et cetera. So yes. All of those factored in, I just have to say, we gave the guidance sort of when we published Q2 sort of based on the best knowledge that we had then and many of those attributes we have discussed today. So that's what we have.

I understand. Just to clarify, the total maintenance cost for the quarter is only EUR 10 million, right?

No, that is the sequential increase versus the previous quarter.

So it's EUR 20 million, then EUR 10 million plus EUR 10 million.

Yes. Yes.

Okay. Okay. Understood. And then finally, slightly longer term. So you mentioned about 24 to 36 months sort of a time lag into the power cost increase. So you must be having discussions with the power suppliers as of now. So how much confidence do you have that even if you were to allow the increase into the power pricing, the spot is probably not the indicator of the level of increase you will take into those contracts. Probably the increase will be much more muted than what the market is implying. Is that a fair you're thinking?

Well, I think that sort of at least historically, what we would have seen. Obviously, there's a lot happening in the energy markets, part is really sort of more typical availability, low levels of water or sort of the hydro power being impacted by that. And then you have all sorts of troubles with cables being disrupted between the U.K. and France and what have you. So I think there's been a number of sort of very sort of physical or like extremely tangible reasons, but there's also a lot happening in the whole area of emissions, emission reductions policy, et cetera. So I mean this is sort of -- this is a really big and complex overall picture where I guess sort of guessing at what the future prices would be is not the best medicine. I think the best medicine is for us really to make sure that we have a sort of longevity in our thinking that we also don't lock ourselves up completely because there is certainly always something that where you sort of need to ask yourselves like how likely is this level going to persist for a long period of time, and that is absolutely what we are doing. So I still feel that I want to sort of make it sort of even more clear that is 24 to 36 months, it doesn't mean that we are 100% locked for 24 to 36 months. It means that we have these strategic projects that would be even more long term as a base. And then we look 24 to 36 months ahead, and we have some room to maneuver within our hedging limits that how much we contract for that period. So it doesn't mean that we are 100% covered for that period.

Okay. Slight clarification on that. So even if you have these rolling contracts, these contracts are much more your discretion rather than any kind of automatic reset, right?

Yes. Yes, that's another way of what I'm saying. So -- and with rolling contractual. So I would say -- yes. I guess I'm getting into too much detail. It's just getting more complex.

It's okay. It's okay. That's all from my side.

We have the next question from the line of Sebastian (sic) [ Bastian ] Synagowitz from Deutsche Bank.

Pia, I just wanted to get back briefly on the annual contracts, which Rochus already asked about. So first of all, can you just explain to us how does it actually work in terms of the volume commitment here? Because I remember, I think at some point in the past, some of the customers if I'm not mistaken, actually jumped off some of those annual contracts to basically just buy cheaper in the spot market. So can the customers basically -- do they have a very wide volume range they can choose from? And can they just pick sort of best of 2 worlds? Or is this actually like a very narrow corridor in terms of the volume numbers which are penciled down in these contracts? That's my first.

Yes. Yes. Thanks, Bastian. It's a really good clarifying question, but I mean we also -- when we peel the onion, we sort of bring more and more complexity also into sort of getting the -- sort of understanding this. And I would, first of all, say that, yes, indeed, because of sort of historical patterns where for a range of reasons, customers may have jumped ship from certain contractual obligations. I think we have really sort of tightened this up to have more sort of clear contractual arrangements. But I see sort of theoretically and contractually, that really shouldn't be the case anymore. I can say contractually, it's not the case anymore. Still, however, I want to say -- I had, for example, the pleasure this week of visiting a customer who said, indeed, we have actually cooperated for such a long period with Outokumpu and it's predecessors, it's like 111 years. So you know that sometimes you have customer relationships that you want to protect. So I'm not saying that this could never ever happen. I just think that contractually, we are probably very well protected.

Okay. I think that's pretty good news that you did take that opportunity to tighten up. Now, just on the timing, and you said it's obviously there's not like 1 single contract structure timing probably. But is it still fair to expect like most of these contracts are mostly renewed in January when it comes to the annual ones?

Yes, yes. In terms of when is the sort of the reset date of the pricing, the frame, the volume, everything, it's typically 1st of January. Of course, we could have some contracts that would be half year contracts, et cetera, where you wouldn't have sort of 2 dates. And I think there are, let's say, 2 differences compared to previous year, this year. The first one I would say is that due to really the main focus being on availability, we have had a lot of customer interest to conclude annual negotiations earlier than normal. So we have already -- we have concluded a large number of annual contracts by now, where typically you would sort of go into Q4 and late into the year to really sign on those. And we can see indeed that the annual contracts are reflecting the current price development and you know the improved pricing environment. So therefore, I do agree that this sort of 1st of Jan date then for kind of the reimplementation of the contract is it's an important -- from that perspective, it is an important date. Do you think maybe still worth mentioning that it has also been our intention then to accommodate for needs from our important customers, et cetera. So it also means that we are probably going for a bit higher volumes also for '22 when it comes to the annual contract than before.

Okay. Okay. That's great. And just a very last question on this, and I promise it's going to be the last one because you have been giving a lot of quick color here already. So just on these contracts, which you mentioned you've been rolling over ahead of schedule already, will this come into effect as of now? Or will those come into effect as of January, i.e., you started early, but the contract will start in January or you start -- the early contract will start right now?

Yes. Yes. contract will start in January.

We have the next question from Luke Nelson from JPMorgan.

Just I'd be interested -- I've a couple of questions on ferrochrome. Firstly, just on price realization. Any additional color on the sort of usual sensitivity that you've given in the past, given which obviously volumes have improved a bit. So can we expect maybe more towards the EUR 10 million per EUR 0.10. And I suppose has there been any opportunity to maybe take advantage of pretty strong spot pricing, given what we've seen in the Asian market? So that's first question. And then secondly, just any color you can give on what you're hearing from suppliers maybe around power interruptions on ferrochrome production in China?

Well, indeed, I mean, yes, really good questions. And I -- as a CFO, I think I learned a little bit of a hard lesson in the last quarters, this sensitivity and the EUR 10 million for the EUR 0.10 per quarter has not quite realized and I guess we are probably looking at least sort of -- I probably need to be a little bit more conservative around that figure. I don't have a new sensitivity figure for you right now. Of course, for Q3, per se, I mean, it's not super relevant, but I mean, I do understand the question. So maybe I just need to say, I need to be a little bit careful on that figure. Perhaps I'll need to -- I usually don't like to change these figures too often because sometimes you have these impacts of the whether it's some specific contractual arrangements, whether it's some delays or whether it's in some cases, some kind of even deployments. I think we had sort of a bit between Q1 and Q2 that we saw some of the kind of price benefits already in Q1 rather than in Q2. But I think sort of my lesson learned this year is just that I should probably be sort of a bit on the conservative side there when I'm sort of talking about the sensitivity. Let's see if I give a new figure or if I just say it used to be EUR 0.10 probably be a bit careful with the figure this year because of the kind of very -- it's a very special kind of COVID recovery year as well. And then I would say sort of on what we hear from the supply side here, and I think this is really the theme that certainly has impacted the market a lot and just sort of continuing to hear about the energy and sort of coal-related challenges for the energy supply, particularly in the Mongolia and China. But like this really being at the moment, still a topic. I mean, this was a topic I'm sure like last time we spoke, but this continues to be a topic. So yes, I don't know whether I should say unfortunately or fortunately, maybe I'll just leave it that it seems that it's still a topic and still an issue and certainly also leads to somewhat restrictions than in the supply of ferrochrome in China, in particular, as we speak. Sorry, Luke, did I answer all your questions? Was there still one...

Yes. That's it.

There are no further question at the moment.

Pia, would you like to see say a few words? Or should we close the call?

Well, at this point, I just want to say thank you. And then Linda, maybe I'll hand it over to you for closing remarks and when we'll talk again next time.

Thank you. And thank you all for participating our Pre-Silent conference call today. Before we close the line, I would like to remind you that we will start our silent period on Tuesday, October 5th and will continue until our Q3 2021 result is published on November 4. But now thank you once again, and have a great weekend.

That concludes the conference for today. Thank you for participating.