Outokumpu Oyj (OUT1V) Earnings Call Transcript & Summary

Good afternoon, all and welcome to our webcast where we will discuss about Outokumpu's plans to strengthen its position in the U.S. My name is Linda Hakkila, and I'm the Head of Investor Relations here at Outokumpu. With me today, as our main speakers, we have Tamara Weinert, President of our Business Area Americas; and then Pia Aaltonen-Forsell, our CFO. As per usual, we will first start with our presentations. And after that, we have a full Q&A session. Please note that questions can be asked through the conference call lines and also by using the webcast platforms chat function. But now without any further comments, I would like to hand over to our CFO.

Thank you, Linda, and good afternoon and good morning, everybody, and I do hope you are all keeping well and safe here at the start of the autumn. So let me start here with Outokumpu situation. I think we've been on a really successful journey the last 3 years since we started this strategy execution in the late 2020. And we have created a good situation to now start looking forward. And that's really what this webcast and presentation is about today. So looking forward, starting to plan for our strategy, Phase 3 and particularly, I'm really happy that we can focus on Americas today as we have also there really successfully demonstrated that we have indeed already improved our performance and earned our place in the market. I'm sure Tamara will come back to that. So let me start my presentation first with a bit of a recap on the 3 phases of our strategy. And as I said, I mean, we are already firmly here in the strategy execution Phase 2, it means that right now, we are paying a lot of focus to our current businesses, our current operations and how to make them even better. But you know that we have also introduced really important themes, sustainability, our commitment to the climate change and the goals, reducing climate change and the SBTI goal of 1.5 degrees that remains an ongoing theme since our strategy Phase 1 and it's, of course, going to continue and we stay committed to that. And you know that also for the Phase 2, we introduced an element that is really important to me, that is that we are now focusing on having a stable and growing dividend. And I just want to put this in the context of what it takes then when we also enter into our growth phase. Of course, the first thing it takes is that we have the right starting point when we start the growth phase, and I will return to that. But what it also will take from us is continued capital discipline. And I think what it means in practice is here for Phase 3. You know that we have talked about a number of topics that we are looking into and that we find really, really important and interesting. So Americas growth, of course, focused today, but also our competitiveness in Europe, the continued sustainability leadership and, of course, also our value chain leadership. So here, a lot of the important themes. And as we move towards the Phase 3, we will find the right path, how to do this while maintaining a capital discipline. And maybe there, one of the most important measures then is also that we have said that our financial target is to keep the leverage under 1x. So those are, let's say, a few cornerstones of our thinking. And all of this, of course, moving towards our vision to be the customers' first choice in the sustainable stainless steel. Let me go through a few proof points of the progress that we have made so far. I think most important, of course, for being able to enter a more growth-oriented phase in Phase 3 is that we have derisked the company and that we are much stronger in terms of our current platform. So at the end of last year, we already reached a really strong position. We don't have net debt. We actually -- it's a little bit negative, which is really good. And that means, at the moment, our leverage is, of course, 0x. And I think also external parties have recognized that Moody's have, for example, given us the credit rating now of BA2, which is the highest we have ever had. We have here a comparison to 2019 like the starting point of our strategy. We were then at B2. And actually, we even got a little bit lower during the COVID times. So I think we have made great progress to that respect. We have also improved our EBITDA and improved it both through better market conditions, especially kind of the COVID rebound, but also our own improvements. And you may remember that from the first phase of the strategy already, we had more than EUR 250 million, which was our new target. We had EUR 260 million of run rate improvements. And now in the second phase of the strategy, despite the market conditions being more challenging, we have already by now come up to EUR 82 million of run rate improvements. And I think we are on a really good journey here towards the EUR 200 million improvements that we promised as run rate improvements in strategy Phase 2. I'll still point out a few more of the proof points that we have of the current success. Of course, what we've written here is successful exit from long products, but that really means is that we have a focus on our core businesses. And with that focus, it then also will allow us to have the focused growth in the selected areas. And as a part of the way of renewing the company, we have, of course, looked a lot into our organization but also improved ways of working and a continuous focus on cost and capital discipline that at least I really am really proud of what we have reached. And especially, it's important for the kind of cyclical industry that we do operate in. I was thinking also of a few really important things in our current way of operating and managing the company. I think we have a modern leadership style, we are a fairly Nordic company, Nordic culture. Of course, you know we have operations in a few really key locations of -- we have in Finland, we have in Sweden, in Germany, in U.S., in Mexico. And of course, we have a culture that reflects this international footprint along with, I would say, really healthy Nordic values. And maybe one of the things we have not talked so much about, but also improving the company from the inside through important investments into, for example, IT infrastructure there, but also digitalization. So many ways of just continuously improving and making the company better. And maybe most importantly here, Americas business area has demonstrated a really good and sustainable performance. So Tamara will speak more about this, but certainly, the performance there has been very well on track for what we have also said as this strategy goal to be sustainably at least on this EUR 200 million EBITDA track. So that, I think, is the most important proof point for the discussions today. So next, what I still wanted to talk about is why are we talking about this now? So sort of to put this a bit in perspective. As I already discussed at length, we have a strong track record, and we have created the environment where we have the ability to start to kind of look forward. One of the things is also that we now have a great team in our business area Americas that really has the ability to start to look forward and think about what could be our growth. And looking at the current cycle, I have got a lot of questions about this. So Pia, we all see around us that there's a lot of macro uncertainty right now. The cycle is not that great. And I have, of course, to agree with that. I mean, if we just look at the current conditions, the current trading conditions, we see that this macro environment with high interest rates, there's just a lot of general uncertainty. And perhaps we are moving to a soft landing. Perhaps we are moving to a recession in the U.S. I think that the question is not can we steer the macro, of course, we cannot, but can we be resilient as a company, yes, we can. And I think that's sort of the turn that we need to sort of acknowledge here and say that we have now the ability also to look over the cycle. With our strong balance sheet, we do not have any specific issues going through the low point in the cycle that we have right now. And I also promised to Linda that I will not take too much time really deep diving into the current business performance that we have because we will have a pre-silent period call in about 2 weeks' time. But I still -- I cannot resist to just take this chance for just a few really general comments, because we are in a difficult market environment. I mean this is true for Europe. I'm sure Tamara can say a few words for U.S. where it's also a more challenging period due to the macro environment. But in Europe, still, I think it's important to look at a few of the facts that we know. So we know that Q3 is also typically seasonally a really weak point. We also know that from a pricing perspective, what you already saw in the published figures for Q2 was that prices started to decline even with quite rapid speed during the second quarter. And I think already in terms of received orders and just looking backward now, I think we can say that we are sort of past that bottom point when it comes to pricing. But that doesn't mean that we would have entered into some kind of strong market environment. I still think that the sort of jury is out there to say when can we sort of truly see that restocking point. You know we have talked a lot about this. We are sort of past that typical point where destocking should stop just based on inventory stats, but we really haven't seen that strong rebound on restocking yet. But I'm sure we can come back to that more in the pre-silent call. All in all, there's still one more important point to keep in mind, and that has really to do with the geopolitical tensions and the sort of changes that there have been in the geopolitical environment. And I think that's maybe the page that I really want to end my presentation on before I hand over to Tamara here. And it is to say that we are seeing already the distinct blocks forming geopolitically, we are certainly seeing that trade flows are already changing. So just during the last 2 years, it has been a period also where I think even historically, really a lot of changes can be observed. And what we are seeing right now is, of course, that China as one of the pillars somehow of the world economy keeps growing, but the growth is slowing down, and there are many factors kind of in the background why that is happening, population decline, even unemployment at this point in time. But also the economy has been really export driven. But now the trade flows are somehow or somewhat changing. And for example, the export to U.S. are being lower. And of course, the geopolitical tensions are here in the background. All of us know also the problems in the European Union. The energy transition could be -- this green transition that could be an opportunity and a positive change. But at the same time, there's also been an energy crisis. There's still a war in Ukraine. This has highly impacted energy cost and through that, of course, competitiveness. There's a lot of discussions about the competitiveness of Germany at this point in time and with all of the changes that are happening. And of course, population is declining. And then you see that when I come to this list of U.S. and Mexico. Suddenly, I have a lot of the pluses here. And I'm sure Tamara will talk more about them, but we do have better dynamics underlying on the macro level. We have also inflation reduction like many other very supportive trade policies in the U.S. and the population is growing. So there is like a more positive boost. There is -- there are industries that are returning back either to U.S. or closer to U.S. So Mexico has perhaps had most of the kind of positive influence here from the nearshoring and there's also been some recent tariffs actually to protect somehow here, the steel industry. So I think all in all, also with this geopolitical view here, perhaps it's easy to agree on this statement that there's more positives on the U.S. and Mexican side and Outokumpu has a unique ability to benefit from that. So with those words, I would now like to hand over to Tamara.

Thank you so much, Pia. Ladies and gentlemen, I'm very excited and happy to be here today and speak about the Americas and the unique position in which I think we are and why it's a very, very good timing to invest in the U.S. I am Tamara Weinert, I'm the President of Outokumpu in the Americas. I'm there since 2020. So let's start off by having a look at our market growth projections. If we have a look here at the chart, you can see that while 2023, a little bit of a low point, we feel that, and you may have seen that in some of our volume numbers since quarter 4 of '22, we do expect the market to grow. And there's no doubt, we are a cyclical industry and its volatility. So it will not always go in a straight line. But we do feel that the long-term outlook for this market is a really good one. At the moment in the U.S. MCA, the local production is not sufficient to supply all of the demand. So imports are needed. As the market grows, if you don't catch up with the production, which is made locally, the import door will go open and more and more imports will come in. And that is, of course, something we would like to perhaps rather participate in ourselves. You see our projections going forward are very positive, where this gap is concerned, where we are undersupplied in the market with local production and this gap is growing over the next couple of years. And I think that must really said, the regulatory environment in the U.S. and in the U.S. MCA is extremely positive. And I would like to look a little bit more into the details of where this positive support from the regulation comes from. So we have, of course, the Inflation Reduction Act, EUR 891 billion. The U.S. infrastructure bill, EUR 1.2 trillion. We have built America, by Americas provision in most of the regulation, which we have seen come out and also, of course, in the past already, which is very supportive for the local industry. We have the U.S. MCA, which specifically on the automotive sector is supported as well. The Chips and Science Act, the Section 232 tariffs, of course, since 2018 also helped very much to support the local industry and give an overall positive environment for us to work in. And of course, that can be also then seen in our financial performance. So we really see here in our markets a very, very good support and a very good protection to create a level playing field that is fair in which we can compete profitably and have a good return on our assets. And it's not only the U.S., which I have focused here on other than the U.S. MCA, but it is also Mexico. And Pia already spoke a little bit about that. We are in a very unique position there. We're the only stainless steel producer in Mexico. And at the moment, Mexico has a very, very unique opportunity. The tensions on the geopolitical side between China and U.S., some of the fragility of the supply chains, which we have seen during the COVID time definitely meant that there is some near-shoring, on-shoring diversification of supply chains, that is very much ongoing. And we can already see that in the numbers. And we think and we see it already also in the data that Mexico is a really, really big beneficiary of that development. It has replaced China as the #1 trade partner of the U.S. at the beginning of 2023. It has a positive GDP outlook. There's a lot of activity ongoing. So a very, very unique opportunity in this market. Long border with the U.S., a long relationship with the USMCA and Mexico also does its part with recent actions around tariffs to make sure that the level playing field is as much as possible, not only in the U.S., but also in the wider region, which is really a very good environment for us to be in. So are we well placed to participate in that growth? I guess that is one of the big questions, which we would like to answer today. So let's have a closer look at our own position in these markets. We are the second largest stainless steel producer in the U.S. We have two production facilities. You can see them on the map. We have Calvert in Alabama and San Luis Potosí in Mexico. And there was a time when perhaps it was said, "Oh, your position in the south not so positive, you have disadvantages." I actually think that position is changing very, very rapidly. As you can see, we have a very good supply chain connection into San Luis Potosí. We are having a good port in mobile, where we get our scrap, we get our raw materials. And so the position that all the instruments also that, at the moment, go into the south of the U.S., I think we're in a very happening marketplace, and our position, our geographical position is actually a very, very good one. If we look at Calvert, we have a good product portfolio there, which is well suited for the U.S. market. We are, of course, the newest mill, the newest stainless steel mill in the U.S. that makes us very proud. The melt and pour, all of our hot material is in Calvert, and we shipped that then down for cold rolling into Mexico and our own cold roll facility in Calvert, Alabama. You also know we did a ferritic investment, which increased our capabilities, and that also is very useful in the market in which we act, and we're really extremely happy that this is operational and gives us a lot of benefits in our market. San Luis Potosí, Mexico, there, we have a bright annealing line. We have cold rolling, very much specialization around ferritics, also coming from the customer base, and it is the only stainless steel mill in Mexico. And we are there since many, many years. I think it must be now 50 years that we are there. We have a fantastic team there. We understand the market very well, and we understand very well how to do business in Mexico, because of our very long association there. So extremely happy and proud of our team down there, which is doing an excellent job with a fairly outdated mill, which we, however, have kept nicely updated and our Phase 2, on which I speak a little bit later, also made some further improvements into our assets in Mexico. If we look at Calvert, it's, of course, a very modern stainless steel side. We have here a very good position in the market. We have worked very hard on that over many, many years to be a trusted, reliable supplier to our customers. And as I understand, if I look at our stable market share, we have done a good job around that. Our commercial strategy has improved a lot. So overall, our position in the market is a very accepted one and a very good one. It is one of the strongest markets in the world when it comes to stainless steel. So it is important for us to also have very good customer relationships, of course, hugely important. We are very cost competitive. We are efficient. We are reliable and our production runs very, very smoothly. We also have a very good team in Calvert and we're really doing a fantastic job in Alabama. Our supply chain team, I really have to shout out to them. If I look back at the COVID times, when there was a supply chain issue really every week, they have done fantastically. We were not standing still a single day in the U.S. because of supply chain challenges. They kept us running every day. We also, as I already said, we have the port in mobile, all the scrap comes from there. We source all of our scrap in the U.S., a little bit from Mexico. So very good also here linkage into where the scrap supply comes from, which is really very positive for us. And our high-performing and flexible workforce both in Mexico and in Alabama makes a huge difference. As I already said, we have a cyclical -- we have a volatile industry. So it is important that the workforce has a lot of agility as well that we are able to go from full production mode into cost-efficient mode really very quickly in the turnaround and the teams are doing that. The team, specifically also in the U.S., what I see is very solution-oriented, very hard working, flexible and this kind of entrepreneurial go-get-it spirit, which is fantastic to work with. And I can only tell you it's every day a huge pleasure to be there and work with the team that is so very highly motivated both in Mexico and in the U.S. I would like to give you a little bit more insight into our site setup in Calvert next. So here, you have the picture. If we start on the bottom left, you can see the river terminal. That is where the scrap comes in, where the raw materials come in. And from there, we move the material into the scrap yard and then further on into the melt shop, of course, for the melting. And if I just stop for a moment around the scrap, we have a good supply of scrap in the U.S. market. As I said, a little bit for Mexico, and we're extremely proud on our sustainability journey as well, because we manage between operations and our procurement team to really get a very, very high level of recycled content. And I know we have the average yearly numbers, which are, of course, most important, but if I just pick July, we managed to have a recycled content of 98%. And that is absolutely fabulous. That is world-class. And so between procurement and our fantastic melt shop team, they're really keeping us running on that. And this helps, of course, with the cost, but it very much is a cornerstone of our sustainability journey as well. You can see then the hot rolling mill. This is, of course, from our neighbors, AMNS, where we have the tolling agreement. We hot-roll it. It moved then over to the hot annealing and pickling line. It goes through cold rolling, then back through the cold annealing and pickling line into the finishing. That is the process which we run, and then we move the material out of the site. So there's three ways for us to get it off the site: Can go back via the river terminal for material, for example, which we move into Mexico. And not so visible on the slide is actually on the top where you see now the text. That is where the highway runs, but there also is a rail connection. And if you remember back, what I presented at the Capital Markets Day in 2021, 1.5 years ago, I said we will work on getting our rail usage up to get the non-truck delivery, as we call it, down and really increase on our sustainability journey what we ship out via rail or via [indiscernible] through ship as well. And that has happened. We are in an extremely good journey there, and the situation in which we are the geographical situation is very much helping by that. We also have a good road connection, because the majority of our material still, of course, goes out via truck. And on the right, you can see our tiny little headquarter there. For many, many years, we worked out of containers. They got a little bit dated. So in 2020, we moved into our little headquarter, and that was a very good improvement, I think, for the morale of the team as well. Now let me come next to my very favorite slide. Pia already said that most likely I would show that. And yes, I do. So here, you can see how the BA Americas development was over the last couple of years. We have done remarkable commercial improvements. We have done very good cost efficiency programs. The mill runs efficiently, the sustainability journey is underway and you can see how the team has come together to deliver the performance you see in front of you. First breakeven here in 2020; '21, profitable; '22, profitable. And if you look at the first half of 2023, really also very good performance despite what I said earlier, volumes since quarter 4 of '22 and quarter 1 and quarter 2 of '23, not really the greatest, but we still manage a really very respectable performance here. And if you look at the delivery line, which is below that, you can see that it's not more delivery, it will bring more profitability. You get the mix right, you get the customer right, you have the right commercial strategy and that all helps, of course, to show the performance, which you see in front of you. And you can also see with the head count that we will always, in our business, focus on efficiency and running as competitively as we can. Having a look a little bit more into our customer base. We are well positioned to serve both distributors and end user customers. In the business area Americas, our split is end users roughly 30%, distributors 70%. In Mexico, end users is a bit higher and in the U.S. distributor share is a little bit higher than that. This is the average of our both markets together. So in the U.S., you have a very distributed focused market, and that is really an extremely good match to our asset base and the way we run our assets. So we're very happy with these relationships, which we have with our main distributors and we work very efficiently together for the benefit of both parties. The supply contract structure in the U.S. is very much frame agreements, so not really protecting us much from the volatility. What protects us is that we're agile, that we can move from high volume to lower volume really quickly that we understand the market very well and that we have these good customer relationships, which keep us running in good as well as in not such good times. The pricing in the North American market is very much base price plus alloy surcharge. That is our main pricing mechanism. And so overall, I think this portfolio, which we have both in Mexico, a bit more end user and distributors, in the U.S., is very well suited to these different mills, which we have Calvert high volume, big runs and Mexico, much more end customer focused. If I have a look perhaps and recall what we spoke about at the Capital Markets Day 1.5 years ago on our Phase 2. The target was to increase the cold rolling capacity by 80,000 tonnes with smaller investments between EUR 10 million to EUR 20 million. This is well underway, doing here extremely well. We are, at the moment, on 55,000 tonnes at the moment, roughly, unreleased capacity. So you see a little bit ahead of the timing here. And if we go through the 4 big building stones of getting this capacity, there were some smaller investments into Calvert. Calvert being a relatively modern side, didn't need so much of investment. It runs very efficiently. It is still very, very new. But we made a couple of improvements around some of our bottlenecks and around some of our equipment, which could use small changes. In Mexinox, the investments were very much in these older mills, our cold rolling mills, which lost over the time, which we run them, some of their speed. So every year, perhaps a little bit slower. And we managed over the last 1.5 years to get that speed really very nicely up again. Team in Mexico has done a fantastic job around this one and really has enabled us with capacity release back to the level where we expect the mill to run. So extremely good performance there. Manufacturing excellence. Here, very much focused around yield and also here, specifically also in Calvert, but also in Mexico, a very, very good journey to get the yield up to a very, very good level, and we're extremely pleased with this performance, which helps on so many levels. It helps on capacity, of course. If you have less yield loss, it helps on your cost, because your variable cost, you get much more efficient. If the material you produce, you don't have to redo it, but you can use it and it helps on sustainability, because you don't have to rework. So all of these factors you see in the manufacturing excellent box, and we're really happy there with the progress of both of our mills. The sales product mix improvement, that perhaps is the one, which at least this year is a little bit lagging behind. You can only really improve your mix in fairly strong markets. And this year, as I already said, volume wise wasn't the strongest market. And so this one, we need to catch up a little bit than in the course of next year. So Phase 2 of our strategy is well underway, so what comes next? We're definitely ready in the Americas to shift our focus towards growth. We feel if we look at the market environment in the U.S., market environment in Mexico at our own mill performance, our relationship with customers, we feel that we have reached a majority and we have the environment in which growth is a good prospect for Outokumpu as a group. And we're reviewing at the moment two options. And Heikki has already spoken about these two options in the webcast in August of this year. We are in the middle of the feasibility studies for options, both on the hot rolling side and on cold rolling expansion towards our commercial ambitions in North America. So we're looking at hot rolling to see the options. That is one option is, do we build our hot rolling mill? What other options are there for us to have a good footprint, which enable us to grow long term in the future? As you know, at the moment, and I said it earlier, we have a tolling agreement with AMNS, our neighbor, and this is something we're reviewing at the moment and we're seeing how we want to go forward. Decisions have not yet been taken. You will, of course, hear it as soon as we do take a decision here. And then there's focus also on hot rolling. We're looking at that gap, which is growing, which I showed you between local production. If we look at the near shoring, we look at by America. We look at everything that is being invested into infrastructure over many years to come. And we feel that cold rolling expansion may be a very good fit to the market as we see it at the moment. And this, of course, is over and above what we have said, the 80,000 tonnes and what main competitors have said already as well about capacity expansion. We would like to grow with the market and in order to achieve that, some investments may be needed. So why do we look at hot rolling at all? There were some questions after the webcast to say, why would you even look at that one? So I would like to spend just a few minutes on the advantages it would have to support our long-term growth, but also very much the operational efficiency we see in such an investment. If I start from the top, of course, the conversion cost will be lower with your own mill. No one tolls for you for nothing. So there will be cost savings. However, that is not the driver for our review at the moment. This is not a cost-saving project. It is a project to look at the overall efficiency and at long-term growth. What is the best footprint for us in order to capture the growth that the North American market will bring us over the next couple of years. We will have more flexibility, of course, if we run our own hot rolling mill. It will help us in new product development and customers definitely are very, very interested in that. This way, you know, okay, now we can put in a trial now we change this parameter or we change that parameter. What can we do better? And if it's in your own hand, that, of course, makes a difference to us how we run the mill. Same for production planning. You may have now something you want to run urgently, but that you cannot always decide. And we work around that. But definitely, the flexibility will be higher if we run our own mill. And that has an impact also on the net working capital. It's my estimation, something like 30,000 tonnes perhaps less, which we need to hold in inventory. That is quite an amount in savings around inventory if you were able to melt and then roll right away instead of holding a buffer stock for someone else to run our material. Future readiness, of course, the growth -- the present contract is restricted to 900,000 at the moment. We're looking at different options there. And our hot rolling mill would provide a footprint where expansion would be possible at some time in the future when the time is right. So I covered all the points, but one and that, of course, is the CapEx. And that, of course, is the big consideration we have to take into account, no doubt about that, hot-rolling mill is not a small investment. But the operational efficiencies, which we would see would be very, very good for our team and for our working in North America. So if I look at the investment as a whole. We're having now in the middle of the feasibility study reached a state where we have a very good readiness to make that decision. We have strong support from our banks, financing options have been looked at and have seen us favorable. We have very positive customer responses towards having that flexibility around some of the developments, which we would like to do in our mill in Calvert. On the practical side, you have seen the middle picture, there is ample space, not only on the site, but all the area on the right, which is still wooded and forest that is all ours. So we have really ample space to build that mill. The air permit process has been started, and we are at a very advanced state there. We have had good discussions with the equipment suppliers and the engineering work, the preengineering work has also advanced at a very, very, very good level. And thank you for your attention, and I think we're ready for some questions.

[Operator Instructions] The next question comes from Anssi Raussi from SEB.

I have a few questions one by one as usual. So first about the duration of the investments like how much time would it take from the investment decision for the full ramp up? And how long do you think the ramp-up is going to be once the plant is constructed? And also linked to this, maybe is that how long you think you should have the current cold rolling contract in place simultaneously with new plant just in case there would be some delays or problems or anything with the ramp-up? Or would you just cut the current contract as soon as you estimate that you have 3 years [indiscernible] plant is in full production?

We are working on this now for more than a year. So as you know, and Heikki has spoken about that, there is a possibility for early termination on both sides, which gives us a 3-year window once you trigger that. So I guess the answer would be perhaps a little bit different. If it gets triggered, we would have another 3 years to build that. And all of our preparation work shows that we can manage it within the time frame given. So overall, the duration is a bit longer than then for years because of all the work we did already. And we do feel it's very much possible for us to build and to ramp it up and ramping up perhaps half year, 3 quarters, maximum a year, which will give us 2 years to build it and 1 year to ramp it up. If then, of course, you're very right, what do you do then? Because you have to trigger it, you don't want to pay double for sure not. And so there is, of course, backup options for us in order something would go wrong, but at the moment with the team, which we have I have no doubt that we will manage in the time, which we have anticipated on this.

So basically, you're not including any margin of safety, so to say in case there's some problems?

No, our 3 years -- of course, there will be -- I think if you have such a project, there will be problems most likely every day, right? Some bigger, some smaller, but we will manage. You always have something, which can work in parallel. So overall, we think the time lines are robust, and we will manage in the 3 years and there is buffers in there for a couple of things to perhaps not go as smooth than we anticipate. And I think, again, this very solution-oriented spirit in the U.S., the experience we have on the site because it is a new site. So many of the people, which have helped building us, are still around, the suppliers we plan to use, which know the side very well, we will manage this. I'm full of confidence.

Okay. Clear. And the second one about the current cold rolling contract. Can you give us any ballpark like how much per tonne you're paying right now for the hot rolling services?

I think that is actually an information, Pia, if I'm right, which we're not at the moment sharing.

Yes.

But maybe something like from $100 to $200 per tonne? Or am I close?

Anssi, I think you are good at doing market research. So I encourage you to keep on the good work, but I think we should respect the commercial confidentiality that we have in the contract. So we wouldn't really comment on the exact amount.

Okay. Clear. And the last one from me is about improving mix and new products. So of course, this is one of your reasoning for this potential investment. But if we think that everything else remained unchanged like how much EBITDA per tonne the impact would be, roughly speaking, if I'm just trying to quantify and figure out how significant this mix improvement will be?

That is a good question. Of course, that is part of the feasibility, which we're undertaking in the business cases. So a bit early for us to perhaps comment on this. Overall, I think the U.S. market is very much suited towards the product mix, which we have. I think there's no doubt about that. But of course, you have customers in specific fields, which would like to say, can we have this a bit different on this. And that is not so easy if you're not in full control of your footprint. I think one example, which I can name, which we definitely work upon is our Duplex development. That is a product Outokumpu knows very well. And that at the moment is definitely something in the hot rolling mill. We're running sometimes into some issues here. It's not an easy product to do. Outokumpu knows how to do it in Europe very well. So this is perhaps the main product development, which I can comment upon at this point in time.

The next question comes from Tristan Gresser from BNP Paribas Exane.

I have a couple of questions. I'll start with two questions and go back to the queue if necessary. My first question is on the rationale and the timing of the investment. I mean can you tell us if you received or do you expect to receive a termination notice from Mittal regarding the hot rolling agreement? Has Mittal given you any signal that it plans to use the hot strip mill for in the future? And you mentioned that it's building your own ultra mills is one option. And the second option is expanding CRC capacity. Can you do hot stip mill plus CRC capacity? And if you go with the second option with CRC capacity, how much capacity are you contemplating? And what's the CapEx of that? That's my first question.

Perhaps if I start with the second question on CRM, let's say, it would be round about perhaps 180,000 to 200,000 per CRM, which you put in that would be perhaps a good first step for us to do, but we're in the middle of really all these investigations, so nothing has been decided yet. And the investment cost, I don't have that yet. It's definitely not as big as a hot rolling mill. There's no doubt about that one. On the first question, we have a running contract with the neighbors. No one has terminated. The relationship is a good one. But of course, it is part of good risk management of a company with critical suppliers to make sure we are well prepared for such events as we have in this contract, and we spoke about the early termination clause. But at the moment, we're running well, and we have a good relationship versus our neighbors on site.

Okay. Okay. That's clear. So no signal from Mittal there. And my second question is in terms of the timing, when do you expect really to reach a firm decision there? And if we look at the EUR 200 million or EUR 230 million CapEx guidance for next year, is that safe? Or is there a strong probability now that you -- whether it's option 1 or 2 you already start spending next year? Because -- I'm asking because it seems you already submitted another permit application. You're already doing pre-engineering. So any color there?

Tristan, Pia here. And I think it's a good question given that we are increasing our readiness. So it's clear that we want to be in a position where we can take the decision fairly swiftly. And I think that kind of the comfort that we want to have also just in terms of business continuity and being prepared for different scenarios. But at the same time, I think the only CapEx guidance we have given for next year is around EUR 200 million. And that, of course, as well includes some of the preparatory work. I mean we have already now spent some -- definitely more than some millions in terms of achieving the readiness that we have right now, and that's something we will also continue with. But that sort of stabilized preparation that we have already included here. But then should we take a bigger step, then, of course, we will need to revisit and come with a new figure. But we have not communicated a time schedule for the decision. I think this is something where, [indiscernible] just looking at the cycle right now, I was also talking about the cycle before and saying, we need to look over the cycle. But certainly, there are considerations for the right timing of the decision that we would take into account here. And therefore, I cannot communicate the time schedule yet.

All right. That's fair. And maybe a last one before I jump back to the queue. So you mentioned EUR 1 billion CapEx investment for the hot strip mill, but we're seeing stainless plants around the world being built with upstream and downstream capabilities or around that number. So it looks to be a little bit expensive. So what makes this project, this hot strip mill maybe a bit more expensive? What's different there?

Yes. I don't know, Tamara, you even want to elaborate more, but I think -- I mean, this is our estimate before taking the decision and it's also based on just the specific infrastructure and other investments that we will need to make locally. So dependent on soil conditions, for example.

The next question comes from Tom Zhang from Barclays.

Two for me. The first one, just to push you a little bit maybe on the time line. I mean it feels like 3 years feels like a long time, but you've obviously seen Mittal in the area delayed some of their projects because of labor shortages, I guess, in addition to the ramp-up, you need to get things recertified. Presumably, you need to get a lot of the stuff done before 2026. Otherwise, you're quite time constrained. I mean, is any of this worry to you? And then you mentioned there are some backup options. Maybe if you can just give some color on what that means? I mean have you certified other hot rollers or have you had conversations with your current partners? Any sort of color would be interesting. That's the first question.

I'm actually quite confident on the time line. We have looked at the major steps to build this. And I think we can manage in this time, because, again, 3 years is not the time line, which I look at. I look at more than 4 years since we started. That gives me a lot of confidence. And again, experienced team also, when it comes to understanding the site, the soil conditions, et cetera, I cannot comment perhaps why project overrun time-wise in other areas. I'm not sure what the main contributing reasons for that was. I had a look at hot rolling mills being built in the U.S. and the time line seems to be actually quite reasonable in our expectations. And I think the different solutions, which we have is, of course, even if a contract is expired, you may ask, can you roll that for us. We have supply coming out of Europe, which could perhaps supply into Mexico. There may be hot rolling mills available where we can roll as well, if something really goes wrong. It's the same work we do every day for normal business interruption, right? Something can happen always with the mill. And we always need to be prepared if some piece of equipment is not available. Is it our own or someone else's, we need to be prepared to have backup plans. So this actually is nothing extraordinary. These plans are always there for our normal business interruption and risk management.

Understood. That makes a lot of sense. And then the second question was just on your slide, you mentioned the contract -- your current contract covers 900,000 tonnes, which is the same as your melt shop disposed, but having your own hot rolling mill could give you flexibility to increase that? Are you leaving the door open to building a hot rolling mill above that 900,000 tonnes? And does it also open the door in the future to expanding the melt shop and/or adding other melt shops?

We would, for sure, if we come to that decision, the setup of the hot rolling mill would be such that it would already be kind of done in a way that any expansion would be done very smoothly and very efficiently. If you look, for example, at the length of the line, at your foundations, at the mill building, et cetera. So we would definitely future proof like anyone would do for such an investment at any point in time. So yes, it would be definitely design-wise be in a way that growth is possible, should we decide at one point in the future to do that.

The next question comes from the Ioannis Masvoulas from Morgan Stanley.

A few questions from my side. The first one, I guess you're still in the feasibility study. You don't want to provide a lot of disclosure about the potential EBITDA uplift coming from this investment. But could you perhaps talk about your returns hurdle in general? And whether you think this investment will meet this hurdle? And if the hot roll mill in isolation doesn't with a cold rolling investment, which is lower on the capital intensity curve could actually get you to an attractive return hurdle?

And without commenting sort of specific numbers here at all. I think that the first step if that was to be the hot rolling mill, then the benefits there. I think Tamara has given sort of a good context of what those could be. But it's obvious that if we really then want to come to higher return numbers, we will also need to add more volume through more downstream capacity. So I think this is -- that is why we also say, hey, there are immediate benefits or there are benefits from the hot rolling investment alone, but to really sort of make the package, then we will need to consider the cold rolling as well. And I guess that is why as we discussed already in August, we are looking the feasibilities both for the hot rolling and the cold rolling. So together then, that is the way to sort of build the future growth and then also make the financial returns in full to the level that we would expect. But there are benefits already from putting the hot rolling in place. I just want to say that.

Okay. No, that's clear. Second question, if we look at consensus expectations on your free cash flow generation over the coming years, it would seem that an investment in the size of $1 billion would consume all of your free cash flow for maybe the 3 years of construction and ramp-up. In that scenario, how are you thinking about the shareholder return policy? Are you looking to maintain the progressive dividend? And in that scenario, are you looking to lever up the balance sheet modestly, if you need to? I know you talked about keeping the gearing below 1x, but would a generous dividend policy be part of maybe a modest gearing up of the balance sheet?

Thank you very much for that question. And first of all, I mean, it's the leverage that we want to keep below 1 and then still to say I'm thinking here that our normalized EBITDA that we have communicated is in this range of EUR 500 million to EUR 600 million. And then, of course, also then growing over time as we proceed with our strategy work, but that sort of gives the context of sort of a typical way of also looking at levering of the balance sheet at least and not here. I'm looking at several other options here for the next years. And I do think that the stable and then also gradually growing dividend is 1 of the cornerstones that we want to achieve. So that needs to be there. Then that will have some implications on how we run other CapEx projects. So should we decide about a very significant controlling project. Then of course, it means that we need to face and think about other projects, whether it's then the cold rolling, whether it's something relating, for example, to European competitiveness, so that we face these in a way that we don't create a massive squeeze on the cash flow, but rather have, let's say, a very sort of a longer time line scenario. And then I still want to highlight that as we are working our way through here on making our current operations better and better, being more and more specific on our supply chain planning, I wanted to mention specifically that we are also putting in place system for supporting better supply chain work for using the data better that we have, et cetera, we have very clear projects also in place to reduce inventory further from what I would already call pretty healthy levels, but looking at that. So I think working capital is still for us an area to look into. You know our net working capital on group level is about EUR 1 billion, but there is still an inventory piece of that -- within that, that is north of EUR 1.5 billion as we speak. So I mean there are -- these are things that we need to consider extremely seriously. And then on top of that, I think we have some good experience also with relationship banks also to create good schemes for just how to have good payment schedules really on an operative level, in significant investment projects. So we will use these different tools to make sure that we can control the cash flows and also then maintain the financial sort of ratios and the targets that we have set, including the dividend.

The next question comes from Krishan Agarwal from Citigroup.

Couple of the questions have already been asked. If I can ask on, is there any kind of specific plans in place for getting the funding of this project at a competitive rate? And on top of that, I mean, given the push in the U.S. on interest [indiscernible], are there any kind of tax stopes you have considered for this project?

Yes. Thanks a lot. And Christian, I think I heard the first part of the question really well. So you asked how advanced we are with the funding. But I'm sorry, I didn't quite get the second part. Could you please repeat that?

The second part is more on the kind of a tax benefit available under the U.S. industry policy given that the scale of the investment you are going to make?

I'll take the funding part and Tamara, I'll put the subsidy part on your table then. So I think on the funding part, I mean, just looking at the current market, we have an improved credit rating. But I would still typically for a large project like this, where the cash outflow will be over a long period of time, and we also want to fund a part of this from our really cash flow, including some working capital improvements, but at the same time, have the certainty of the funding, I mean then my go-to solution would be very much to go for project-specific funding, maybe even some supported funding the ECA sort of back funding. And then I would as well go to our core relationship bank to sort of figure out the best way to finance here. And I think at least in our initial discussions, we do have a very strong relationship with our core banks. And I think that they understand very well our need to grow. So I think we sort of have a good starting point there. I mean, obviously, I think just having the funding in place knowing that for certain before we start is also one of those cornerstones. So we are prepping for that, and I'm confident we will find a good solution. But obviously, the solution is not ready yet.

And we are, of course, looking at federal level and at state level to see what kind of support is available. It depends always a little bit do you add head count, how much headcount do you add, et cetera, et cetera. So this is part of the feasibility review, which we're undergoing. I think there will be some support available, but it's a little bit too early for me to say more specifics around this one.

understand. And my second question is more on the normalized EBITDA of EUR 200 million, which you have guided for the U.S. business. That sounds pretty optimistic. And so can you guide us through, I mean what sort of volume assumption you take? Is it like more 650,000 tonnes of normalized volume or 650,000 plus, 80,000 tonnes, something around normalized volume in the long run for that EUR 200 million normalized EBITDA?

When I spoke about this at the Capital Markets Day 1.5 years ago, we said this is our normalized EBITDA expectation on ourselves. At the end of 2025 when the 80,000 tonnes of additional capacity has been released. That perhaps to the first question. How we normalize is really the average out pricing levels over the last couple of years, raw material prices over the last couple of years. On top of that, we look at our Phase 1 savings, our cost efficiency measures what comes, of course, in Phase 2, as we just said. So it's a mix of that. I think Pia, you gave a very good insight into how we normalize in the Capital Markets Day. And so very much in line with that, we're trying to see, okay, we're in a good environment on and '22. What does it mean if some of that would revert back? And the question is, would some of that we got back to an average. Difficult to say, but that is how we normalize.

The next question comes from Bastian Synagowitz from Deutsche Bank.

I just have two quick follow-ups, please. So my first question is just on the agreement with Mittal or maybe any alternative scenarios. So I'm wondering, is there still a scenario where you may possibly roll the agreement with Mittal into a firm commitment for which is lasting for another couple of years, maybe just more than 3? Is there still a scenario or is there also maybe a scenario where you could be using some of the alternative assets in the domestic market, be it ATI, [indiscernible] or any other assets?

I think there is really all scenarios are always on the table, right? We would not leave out any scenario before we have done all of our feasibility analysis, very, very clear. I think to be on one side, you see that with our main competitor, and you see that also with our setup to have it on one side is hugely beneficial. And because stainless steel doesn't travel well back and forth over long distances. But one takes that into account. And then it depends, of course, on all the other parameters, what makes the most sense. And that is really what is ongoing, but I don't think we have taken any scenario off the table.

Okay. And then just briefly, again, coming back to the financing situation. So your balance sheet is obviously very, very strong here. But I guess we're also talking peak CapEx, which may possibly go north of EUR 400 million, maybe even EUR 500 million depending on what you do elsewhere. So I'm wondering if the 1x financial leverage, a red line level for you? Or would you also consider potentially even some equity or maybe hybrid type of financing instruments if you had to?

So in the current financing consideration, sort of given our starting point, at least right now, we have mainly looked at project kind of financing. So this has been debt kind of financing. I do think your question is very relevant because it's important that when we start the project, we are confident that we have the funding in place. And I think one detail still worth remembering is that we do have the convertible bond that matures in 2025, even though we have bought shares to cover for a pretty significant part of that. But nonetheless, I still want to put that on the table even though we don't have any net debt, we still have some gross debt remaining here. So I think -- when we're talking about a red line, I think we should always be extremely serious about our financial targets. And that's the way I would like to communicate it. We are looking now predominantly at this type of financing, and we are looking at also working capital and other, let's say, operative improvements to our cash flow. But I do think it's super important that when -- if we make the decision when we start up, we have, let's say, the firmness that we have the funding in place. And therefore, again, a bit similar as we have said to other things. I mean, we still need to keep doors open when we are doing the feasibility. So these are the things that we will have to return to if and when we have the final decision on the investment, then we can communicate clearly on these topics as well.

The next question comes from Harri Taittonen from Nordea.

A lot of questions been asked already, but on the market growth and Tamara, you were saying that the gap seem to increase from 400,000 tonnes to 720,000 tonnes in the next decade. Just to remember, I think you talked about in some earlier slides, I think the gap was seemed to increase more than that. So is it -- is it that there is other supply growth kind of limiting that increase in gap? And what's -- I mean, if you could kind of share what -- how much you assume demand growth and supply growth to come to the 720,000? That would be my question, please.

Basically, what we have done is we have taken the announcement by the competition into account. So between these 2 numbers, which you're comparing, we just netted off the announcement that we're already in the market. And before that, it was gross basically. And now we netted these off. That's the change which we did. And of course, one also has to see '23, you've seen that a bit of a lower year. So it takes a little bit perhaps time to catch up upon this one. These are the only 2 factors really, which play in the overall growth. You see that as a very stable factor with the environment in which we are on the regulatory side and how the market is developing.

The next question comes from Tristan Gresser from BNP Paribas Exane.

I have two. The first one is on the supply in the U.S. stainless market. As you're looking to make potentially a large investment, can you discuss a little bit the competitive analysis you've done? So why do you believe the market will remain in deficit with the [indiscernible] open why imports cannot regain share as last year? And how confident are you we shouldn't see maybe new entrants or maybe former participants to the market actually return? That's my first question.

I think very fair question, very fair questions. And of course, if you see a market growth and you see that gap and the imports at the moment play already a role, and that role will be bigger, you have to ask yourself where is the space for what we want to do. We want to grow then we want to participate in this market. There's no doubt about that one. And you want to go in with the good setup, which we already have, the good relationships, which we already have. I mean, it took us -- if you look at our history when it comes to our profitability, it does take some time to be at that spot at where we are now. And that is a much more costly journey for someone, who's not yet in the market than it is for us, who is now well established in this market and understands that market much, much better. I cannot say what competition may be doing or not be doing that is your opinion as valuable, perhaps as mine. I think in the U.S., what we see is that very often, the imports are a necessity, because there is not enough local production. If you look at the regulatory environment, it is very supportive for local melt and pour. These are the important factors, which we do see. We have the 301 tariffs. We see also a lot of drive, I think, also together with the European Union about decarbonization. And of course, we produce very clean steel in the Americas. Most of the stuff that is imported is having a much more dirty footprint, and that will play a role one way or the other as well. So I do think if you look at a level playing field, we are very cost competitive and we have a space, which we would like to keep and we would like to grow.

All right. That's clear. And the second question on the demand environment. Can you help us maybe understand where do you see those future growth opportunities you mentioned, what's growing the most? I mean you flagged infrastructure, renewable manufacturing investment. How are those investments are really stainless steel intensive? What's the key takeaway there? Yes, any color there that would be helpful.

I think normally, if I look very long term, stainless steel grows hand-in-hand very often with GDP. A second factor which we look at is stainless steel consumption per head in the population. And there, actually, our market is much lower than, for example, the European market. So here you see perhaps standard drive as well. We see definitely the infrastructure investment. And while stainless steel is not always on the forefront of these investments, it does definitely come though at a later point in time. If you put up a new airport or railway stations, we're not perhaps there in the building is built, but for the escalators to lift, the bathrooms, the kitchens, there always is stainless steel demand at what point in time which we will see coming. We see a lot of industry, as I said, some back onshoring some near-shoring. I think geopolitical tension, China-U.S.A. play a big role in this as well that people say, okay, for some of the material, we definitely want a secure supply chain, and we are able to deliver that. We have the electrification, of course, ongoing, a renewing of the energy as it is produced in the U.S., perhaps a return of nuclear who knows. But all of these applications need stainless steel in order to be built. So I think there is a huge variety of what we see is happening in different segments. And in the short term, we always know what's happening in the segment. In the long term, I think very often, we are aligned with the GDP growth and the U.S., of course, very supportive and is normally a very happening and active market there.

The next question comes from Martin [indiscernible] from HSBC Germany.

Just 2 or 3 questions. First of all, after Mittal Holding is not really an old mill. But when you build up a new mill, you can look at your sustainability functions as well, and you can look at Scope 1 and 2. Can you give a very broad outline of what you could potentially achieve? How much better it will get on one hand? The second question is thanks for the picture as well on the overall plot and the property, which you kind of co-own with ArcelorMittal and where the factories and the workshops are kind of interwoven? Do you see when you build up your own thing and you cancel the contracts any frictions with your neighbor? Do you own the entire property jointly? Or is ArcelorMittal the owner and you are a tenant or the other way around? And the last question, why don't you buy the hot old mill from ArcelorMittal?

Good question. I mean, it is a very big hot rolling mill. I'm not even sure if it's ready to be sold, but it's a 5 million tonne mill, both carbon and stainless, definitely a very, very big mill that is outsized for us. The site on which we own our own ground, they own theirs. But of course, if you share a site and it was built as a common site, there's a lot of interaction. Our relationships on site are very good. We work really well with each other. I don't see that, that would change in any scenario going forward. I mean, whoever takes a step into one or the other direction. This is a business we will be able as professionals to work well with each other. So I do think that, that would, for me, really not be any question around that. For sustainability, for sure, every time you do something new, normally, it gets more efficient, et cetera. We haven't done the final calculations on this one. I think whichever route we go in our feasibility, we would be able to communicate more on this at the time to communicate a decision for one or the other.

The next question comes from Moses Ola from JPMorgan.

So I just wanted to ask, could you please confirm what is actually still outstanding from the current feasibility studies? And I think you mentioned some -- for the hot rolling mill, it would take a time line of about 2 years to build, 1 year to ramp up. Could you give a similar time line as well for a cold rolling mill? And then my final question would be, so within your current product mix, do you also have plans to include advanced products into your products mix if they don't already kind of exist?

Advanced products, special products, always a question of the definition, of course, duplex for us would be perhaps already be part of an advanced product, which we do is not plain vanilla. Some of the customer applications, which we do and we'd like to develop, which are smaller changes, perhaps, but still difficult for a mill of our size would also be more on the advanced side, but not what we, for example, do in Avesta, right, our advanced material, some of these grades are not on our horizon at the moment. We are a big mill, we need big runs. We don't do small, small. The current feasibility, what is outstanding? I hand that to you Pia and on the cold rolling, we definitely, when it comes to pre-engineering, a little bit further advanced on a hot rolling, but also on the cold rolling, I would think a very similar window of time, but it's really early for me to say that. I think I would need to confirm that after I've done a little bit more work around that.

And just to really sort of try to wrap up the question on the feasibility study. I mean obviously, there are still topics we have commented also today that we still want to come back to. I mean, there are topics on the areas of funding. There are topics on the area of environmental topics. There are topics relating to, let's say, really finalization of certain planning to really confirm investment amounts, et cetera. So I think that these are kind of trying to really put sort of the final stamp on a number of topics where we are already fairly advanced. But obviously, we want to make sure that we do that really properly. So a little bit of work still to do there.

The next question comes from Ioannis Masvoulas from Morgan Stanley.

Just a few follow-ups from my side. The first, in terms of the time lines for the project itself in terms of the study what we're doing, what's the earliest you could [ FID ] the project, if you needed to? And maybe when are we going to hear on the final numbers on the feasibility study? Is it in Q4? Or will it take a bit longer?

Right. So I think on the time line, what I can say here is that our readiness is good when it comes to the hot rolling feasibility. But we would then still assess that what is really sort of the right time for us to complete this. And I think when it's the right time for us to complete this. This is also then the point when we could communicate more details that really comes to what I would call, a business case around this. So probably those 2 go hand-in-hand. So with that said, still the time line at this point remains, in this sense, open that we have not communicated a deadline for that.

Okay. Okay. That's clear. Then second question, if you were to build a hot roll mill, can you fully catch up with your major competitors in terms of EBITDA per tonne? Or do you see any other structure disadvantages fully closing the gap?

I don't know all the numbers of the competitors. We really try to forge our own journey. We would like to be the best we can be with our footprint, with our customer base with our capabilities. I think some of our competitors have perhaps also long products and play. So it's really difficult for me to know exactly what's happening in the direct comparison. But for sure, being in the Americas, we always like to be #1 in what we do. But I have to see how much of a journey that would be, but it would definitely be a very good first step when it comes to our efficiency product development, as I said earlier, our planning, all of that, which goes with it, it would definitely enable us to come closer.

No, that's perfect. And just the last one for me on -- you mentioned 30,000 tonne of potential saving in terms of inventory build and running the business more efficiently. Is at around EUR 100 million gain on working capital? Or did I get the numbers wrong?

I think here, I need to say that as the value varies somewhat, I would rather give a range, EUR 50 million to EUR 100 million is probably sort of the right range. But you are right that in -- it is a very significant number. So I think this is an important point to consider also when we discuss the funding of the project.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Thank you for all the questions we have received through the conference call lines. And now it's time to go through the questions we have received in the webcast platform's chat function. So first of all do you expect any benefit in production cost through your own hot rolling mill versus the current setup?

Yes. very clear, yes. No one tolls for you for free. So yes, there is definitely a cost saving aspect. It's not the driving factor. I think we stated that, but there's definitely a cost-saving factor in that as well.

Thank you. Then how much you would need to invest additionally to melting and cold capacity in Calvert to get higher volumes out of the mill?

We put a lot of work into our feasibility around the hot rolling mill at the moment. So that was a lot of work. I have not done the same work around any melt shop. It's way too early for that one. It would be anyhow a step-by-step approach, seeing how the market develops, how we develop, what the competition does. So way too early, I think, to ask me that. I really have no answer on that at the moment.

But Tamara, maybe it's fair to say that the same way as we're now in Phase I found opportunities to increase cold rolling by 80 kilotons. I mean, we would probably look really seriously at, for example, our current melt shop and see what more could we do. So that will be, as you said, a phased approach. And that's the natural first step.

That would be very much the first step. We definitely have some scope.

Then what would be the targeted maximum production capacity for the new hot rolling plant if the investment decision is made?

What did we say? We said in the webcast, it would be EUR 1 million, EUR 1.1 million would be the first step on the hot rolling mill. And again, it's very early to speak about any future phases. I can only say we will set this up or engineer it that it's future proof.

There has been a lot of questions about the funding. So maybe one more. How do you see the financing opportunities for the investment? And are there any government grants that could be used or applied?

So definitely, I mean, the government's grants for this kind of significant investments that is still clearly into green steel. I mean, definitely, as Tamara said earlier, we would be looking into that, but that is something that we are still working on. And I really think that the key elements of the funding from other sides are what we are looking into now is project-specific financing, so that could be ECA-backed or that could be a sort of direct bank loans, for example, from our current relationship banks. We still keep this question. I mean, we still need to work on different scenarios, but I think this sort of debt finance is currently one of the core themes here and then obviously also driving good operational cash flows, working on working capital reductions that will also be an important part of the funding.

Thank you, Pia. Then I have two more questions left. Do you see any risk with AMNS currently expanding their capabilities in Calvert and finishing the project in the second half of 2024 and delayed with 1 year from earlier?

Do I see a risk with respect to further delays? I wouldn't be able to answer that for AMNS. It would be a question which would have to be directly there. I think the investment, as I understand it, of course, in a first melt shop there is replacing material that comes from outside. That's my understanding, reading the news and their publications. That is my understanding that I don't really see at the moment any other risk there, but it would be better perhaps to ask directly.

And then as a last question, if this investment in the Americas takes place, what happens to the other investments that Outokumpu is planning, for example, bio-coke?

So I think, first of all, I mean, in all kind of industry, there will always be a type of maintenance investment that typically is up to EUR 100 million per year. Maybe we would even need to look at is that something we would need to work on to even polish a bit down. But that's, let's say, the ballpark for the maintenance type of investment. And then for any other development type of investment. And I think bio-coke is one that we are looking very seriously at right now. Here is this where we need to take these decisions in such an order that we can then manage also the cash flow. So maybe there are -- also when we are looking into feasibility or for example, bio-coke, we need to take into account what could be a stepwise approach, how could we work with this. So I think this really puts the pressure on us to find the best way, sort of the best path where we can both manage the cash flow, but then also these needs for investment.

Thank you, Pia. We don't have any more questions left. So now I would like to thank you, everyone, for following our webcast today, and I want to wish you everyone a very nice evening. Thank you.

Thank you.

Thank you. Bye-bye.