Yeah, good morning, Paris. My name is Thorsten Zimmermann, I'm the Head of Investor Relations at Aperam, and I welcome you to our 2024 Capital Markets Day. Please take note of the disclaimer regarding forward-looking statements, and then we pause a second on the plan for the day. Now, we have a great mix of Brazil, forest, and environment, and you might ask: where is the 2025 strategy? Now, Tim, our CEO, will say a word about that, and Frederico will present the Brazil strategy, which is then the last segment covered, and that completes the cycle. Now you see we have three episodes of our activities in Brazil, produced a film. It's our low carbon upgrade of an energy strip. And Bernard will later then talk about our decarbonization roadmap, Scope 1, 2, and 3, where we actually lead the pack.
So we'll close with the economics of the year, because for us, it means a lot of business opportunity. Your questions we'll answer at the end of this presentation. Now, without much ado, I hand over to our CEO, Tim Di Maulo.
Hello, everybody. Welcome. Welcome, you see, you hear something which gives you a little bit of taste of what what is our product, in particular, Oikos. We will we will discuss later on what Oikos is and what does it means for this company. So let's start. I would like to start with three words. The first is cycle, the second is cycle, and third one is cycle. And if for my 36 years of experience in stainless steel, I should repeat the cycle for every time I've lived it, it will be much longer, as you can understand.
So if we are here, is because there is a need to better understand this industry, what is behind the cycle, what is the sustainability, the sustainable profitability of a, of a company which is in this sector? But also, in when we look at sustainability, we cannot say sustainability only profitable, in term of profitability. We also have a challenge, not only as an industry, but as the entire world, of profitability, of sustainability as such. And this is the aim of this presentation, to go through all these aspects of the sustainability. Now, let's start from what is Aperam, what, where we are, what are our challenge, et cetera, something that is very known to you. I will go to the first slide, which summarize a little bit what you already know, because you know the company.
You know that we have confirmed that this company has done a lot to improve the profitability by EUR 300 million. Now, we are, you know perfectly, yeah. You have seen, in 2022, EUR 1.1 billion, then you have seen EUR 300 million. And, what is the right number? Maybe in the average, I don't know, but the right number is certainly, something which is not, is not the, one or the other. You see the cycle, okay? This, the chart in, the middle, with some numbers, show you what the cycle has been, and the numbers, you know them very well. And you know that 2023 has been a very difficult year for many aspects. We will discuss this later.
And then you know this company on the aspect of the Leadership Journey. What is the Leadership Journey? Is our engagement to go and to do better and better, not waiting from the external condition, from the external market, the right moment to make profit, but continuing asking ourselves how we can do with the self-help measure, how we can do better. And you know, we have done this review of all the different phases of the Leadership Journey, and we have always realized what we have promised. Now, the question is, when you are in a cycle like this one, how can you show me that this is in the number? Okay? This is a fair question, because you see numbers that are going up and down so fast that this can be a challenge. So we have taken...
We give you a simple exercise that you can do alone, and maybe you better you should do alone with the numbers which are available in the market. Numbers that are typically this price, which represents the link with the EBITDA volumes. You see that if we look at we compare two low cycles, like 2020 and 2023, two low cycles. You see that the price in 2023 were even lower, slightly, but even lower than 2020. You see the volumes were much lower than 2020, which keep in mind 2020 was penalized also because of COVID, okay? 2023 is an exceptionally low level of volume, so you have a contribution margin.
Then you add the contribution margin, the inventory effect, you know that we always disclose to you the magnitude of the inventory effect. Here we are talking exclusively of Europe, and you see that the bridge between the two years should have been around EUR 200 million. In reality, it has been in a range of EUR 140 million-EUR 145 million, which means that the gain, the real gain, the real improvement from 2020 to 2023 has been EUR 50 million. This is what the Leadership Journey means. Means that we improve the company always to, to do better for similar level of, of market. Now, on top, can we say that Europe has realized 100% of the Leadership Journey? He has done the big part. This is only Europe, it's not the full Aperam.
Remember, it's not, it's not the full Aperam. Yes, with the inflation that we has also to be mitigated with the booster that we have launched inside the next phase of 2025. So in synthesis, Leadership Journey is and has always been a reality that you can yourself check in the numbers. Then cycle. So somebody can love cycle because it's also a lot of opportunity in the financial world, cycle, if you are here, probably is because this industry fits with your way of doing that. But it's also something that we have to take care, especially when cycle are becoming faster and faster, and with amplitude, which is bigger and bigger.
So the way we are doing is the following: The company is, and you will see much more in, in one second, in fact, two pillars. One pillar is the activity, the typical activity of stainless steel, that, that you know. We are, let's say, we have been defined as European stainless steel producer. We are much more, I will show you. So this is the part of European and Brazilian stainless steel producer, a lot of, cycles, and a growth which is, in Europe, relatively modest, okay? There will not be a strong growth. But then we have other activity, of which we have sometimes explained... No, we have explained to you, which are becoming the growth area of Aperam, and this activity are all what is recycling and renewables.
It's a division that you find in our reports, the alloys and the distribution, which is service and solution. These three activities have a much lower cycle and are growing faster. When you see in reality what they count for Aperam, you see that in the average of 16, 18, Europe was indeed dominant in term of part of the contribution to EBITDA, okay? This is why we have defined a European stainless steel producer. While this is not anymore the case, has not to be the case in 2023, and will not be the case in a normal level in 2025. On the contrary, the activity that we are developing are growing faster. Activity like, like, recycling, the forest, and all what we will explain you today, including Brazil. You see also another important thing.
This is real. These are people, these are people which are producing, producing EBITDA, they are producing in a sustainable way. Because sometimes we have the, the temptation to have a lot of speeches about, okay, how green we are, how much we are doing here and there, et cetera, et cetera. But fundamentally, company, in my opinion, is what people are doing. And what you see here is that more than half of our people will not being producing only stainless steel. They will do something else. We have nearly 2,000 people in the forest. You will see them, okay? We have people in recycling. You see what Aperam is and what is the DNA of this company and the transformation that we are, we are doing.
This is why we present always this slide, which give you what is the structure of this company and what is the link also, because, of course, you can say, "Okay, you diversify," but in reality, you don't diversify. You have a strong link, a strong synergy between all the divisions that are part of Aperam. It's not, let's say, interesting to discuss more, because we have already presented you what is service and solution, so all the service with the modern tools that we are putting there. We have presented the alloys, we have presented the investment done in stainless electrical steel. Partially will be discussed also today with Frederico in the presentation of Timóteo.
And then recycling and renewables, we will have a very in-depth look at what is this, this part in, in, in the part of the forest, in part of, of the, environment. So I will let my colleague and the, and the movies to show you. Now, fundamentally, steel and stainless steel and alloys, do they have a future? And the definitive answer is yes. You cannot do anything which is linked to environment, to energy transition, without solutions in alloys, stainless steel and steel. You cannot do the mobility revolution without these products. There is no way, and there is no way to not to do it. Okay?
So our industry is an industry that is there to support all mega trends, in energy, in mobility, in health, in anything which is linked to a better future that we are building now and we are dreaming of. So this should give you the trust and the confidence in this industry. I repeat, looking beyond the cycles is important, and looking also beyond the fact that sustainable profitability is absolutely important and fundamental for our industry, but sustainability is key. One day, nobody will have the right to operate without being sure that the sustainability is at the core and is a reality. When I say a reality, I would like that we start this with the watching the movies.
Here we will see something which is interesting, because the next movie will be Brazil, unfortunately, and would have been a nice experience for all of you to be there and making this meeting in Brazil. Okay, apart from the CO2, it's a logistical complexity, et cetera. What we want to do with this movie is to show you an incredible plant. I name this incredible plant because from the first time I was in Brazil many years ago, I saw the difference. This difference with the... You will see trees in the middle of the plant; this is not the only difference.
But you will see what people, how much people are important, how they take care of themselves, how it is important to work in a company and in the plant, which is really outstanding at a global level. So we can go for the movie.
What is it about the universe that makes us feel so tiny and yet infinite? What is it about this little blue dot in the cosmos? What is it about this little planet filled with beauty beyond imagination, creativity, kindness, and love?
This is me, William Brown, 44 years old, economist. A few months ago, I found a company that I'm interested in investing in, and this company has been intriguing me. First of all, this company is from Brazil. You know, Brazil, right? Well, if that's all you know about Brazil, you couldn't be more wrong. Brazil is currently in the top 10 economies in the world, and by the end of the second quarter of 2023, 7th in growth, all powered by one of the largest agricultural industries on the planet. It has the third largest manufacturer of commercial jets in the world, Embraer.
Over the last few years, it's seen many of its startups become unicorns, consolidating its boom within the tech industry. It has an independent central bank and one of the best energy matrices in the world. Can you believe it? I do. But I just have to see it for myself. I have questions, lots of them.
Hello, my name is Christina Oliveira, born and raised in Brazil. I will accompany my friend, William, in his search for answers about Aperam and about Brazil. Let's go?
... So William, tell me, what do you expect to learn in this journey?
I think I hope to find out about the real Brazil.
See, that's a great answer! We're going to the perfect place for this, the interior of Minas Gerais. Yeah, that's far, far away from São Paulo or Rio, and totally different from the Amazon. You'll see. Actually, I think you're gonna improve your Portuguese.
Great. I can't wait. Awesome.
So that's the bar I told you about. Can we be here?
Perfect.
This is totally typical from Minas Gerais. This is torresmo.
Mm, that's really good.
Oh, I forgot to tell you, I invited a friend of mine, Thiago. Oh, he's already here. Hi, Thiago.
Hi, Cristina, bem.
[Foreign language]
[Foreign language]
William.
William, nice to meet you.
Nice to meet you.
This is Thiago, the friend that I told you about. So he works at Aperam, see? You already-
Yeah, you work at Aperam. That's fantastic. I really wanna know more about the company.
[Foreign language]
Uh.
[Foreign language]
It's not common these days that someone would stay so long at the same company, but I suppose it's, it's to do with the specific jobs. I, I don't really know.
[Foreign language]
[Foreign language]
Yeah. So I'd really like to find out more about Aperam. Is there anyone you can recommend that we speak with there?
[Foreign language]
Let's speak with Fred. Cristina?
Yes.
About the Aperam and Timóteo plant, formerly as Acesita, how are these two stories mixed, and what's the impact one had on the other?
Well, let's see what Fred has to say about it.
Okay.
Well, it's actually one whole story of both together, because the company was founded in 1944, so even before the emancipation of the city of Timóteo. So, as I was saying, the company was founded in 1944, so it's its 80th anniversary this year. It was originally founded by the private—as a private company, became a state-owned company, and in the 1990s, it had its shares bought by Usinor, integrating then Usinor, that became Arcelor, and that's the way we entered the ArcelorMittal. Because from Usinor, we had the merge to Arcelor and then ArcelorMittal. In 2011, we made a spin-off of all the stainless operations of ArcelorMittal and created what we proudly are today, Aperam.
Who is Aperam?
Aperam is one of the biggest stainless producers in the world, so it has a leadership position in the main markets we operate. We are leaders in market in Brazil. We are one of the leaders in the world, so it's an important company in the world of stainless steel.
What products does Aperam produce?
We produce stainless steel, both in Brazil and in Europe, and we also produce electrical steels, grain-oriented and non-grain-oriented. Special carbon grades, also in Brazil, and alloys in other markets.
What is the share of, of stainless, electrical and carbon steel in your mix?
If we look at our mix in Brazil, historically, 50% of our volumes are in the stainless steel, 25% in electrical steels, and another 25% of carbon for specific applications.
I'd like to know, why is Aperam a market-leading steel company?
Aperam, since its creation, has defined the paths that some, sometimes are followed by others. The spin-off motivated other moves that were similar to the spin-off. Also, we see others moving towards the same direction we decided to move, of renewable and recyclable. Our move, our initiatives on this, renewable and recyclable can be easily understood when we look at the acquisition of ELG and of the growth strategy of Aperam BioEnergia.
Is Brazil adding specific R&D results and product development to Aperam?
Absolutely. One of our main research and development centers is in Timóteo. We have master degrees, we have PhDs, engineers, and they have a very clear link of their research with the strategy of the company, and a strategy that is of innovation and of alignment with the products of the future. A good example that comes into my mind is the R&D efforts for the development of GNO for electric vehicles. Our first project is back from the first decade of the twenty-first century. At that time, the EVs were closest to a science fiction issue than to real operations.
How much steel do you export, and why don't you export more?
We are a very flexible operation. Our footprint in Brazil can produce stainless, electric and carbon, and the percentage of each of those can change a lot. Also, in terms of market, we can export more or less, depending on the demand. So our export volumes can vary. It's never zero, as we do believe it's important to have a presence and to support our traditional customers, but can be more, more or less. The magic number is around 20%. You asked, why don't we export more? We have competitive advantages in Brazil and somehow in Americas. Logistics, technical support, our presence in the market. So our focus has normally been our domestic market, and we normally run full, so that any increase in exports would mean investing to an oversupplied market to export.
After learning about the core of what Aperam is, thank you, Fred. Cristina and I got up early as we had a tight and full schedule ahead of us. We set off to talk to Faust Vieila. He's a finishing S&S manager at the Aperam Plant.
[Foreign language]
[Foreign language]
[Foreign language]
[Foreign language]
Thank you so much! It gives me a lot better idea about the processing. But how does the process introduce new steels into the production line?
[Foreign language]
Could you recommend someone that we spoke to at the research center?
[Foreign language]
Let's speak to Guilherme! It fascinates me to know that all of this is done with great care of the health and safety of the workers. It is considered one of the safest plants in the world. The frequency rate in Aperam South America is 0.2. That is 20 times lower than the world average.
[Foreign language]
[Foreign language]
Tudo bom, Guilherme? William, Guilherme.
Prazer, William.
[Foreign language]
[Foreign language]
[Foreign language]
So, Guilherme, tell us about what you guys do here at the Research Center?
[Foreign language]
This is Roni, research technician here at the Aperam Research Center. We spoke with Guilherme earlier, and he gave us a great idea about what happens here at the center in general. But I'd like to know a few more specific details: how the research, the tests that you do here at the center, are applied into the process of production? Can you tell me about that?
[Foreign language]
Roni, can you give me a simple example of some of the research or work that you've done here, and how it's been applied to a client in particular?
[Foreign language]
Uau!
[Foreign language]
All this research and work that you do helps place Aperam as one of the leading players within the market?
[Foreign language]
William, and there is more. Aperam in Brazil is committed to diversity and inclusion and has a structured program in place. The number of women in Aperam South America has recently increased from 8% to almost 19%. In addition, there are affinity groups like races, generations, gender, people with disability, and LGBT plus. So what do you think so far?
I'm really impressed in terms of technology, process of production, and vision. Aperam seems to be exactly what it says it is.
mYou know what? We only scratched the surface of it. I want to show you a special place where we can learn a bit more about Aperam's history and this region, actually, the Aperam Foundation.
Sounds amazing!
Yeah.
[Foreign language]
[Foreign language]
While we headed to the Aperam Foundation, Cristina told me more about other aspects of Brazil, Minas Gerais, and their people. I was amazed to learn about all of this. Seeing a company that does what Aperam does here, makes me feel a little more hopeful for our future here on this planet.
Thank you. Let me just connect this. Yeah, it'll be easier. Hello, everyone. Good morning. I'm Frederico Ayres Lima, so I'm the CEO of Aperam South America. And I have two targets here today. The first one is to, together with the video you've seen, plus the next two videos you will see, give you a bit of the flavor of what Aperam South America is. This is my first target. The second one is that as you could not go to Brazil, as Tim said, because of the CO2, because of the logistics, I want with this presentation to leave with the willingness to go one day.
Because actually, I would say that there is only one thing we can do that is as good as our steel, and it's the caipirinha we can drink in the guest house there. Hope you will be there one day. When I was thinking on how to present you Aperam South America, I decided to, to focus on three pillars. People, so it's a very engaged and diverse, team we have there in Brazil. Market, so it's a market of growth, it's a market of opportunities that we have. And the last one, the, the footprint of, this unit. The unit that compiles, as you saw in the video, Bioenergia and, the Timóteo plant, both are located in the state of Minas Gerais in Brazil.
So I'll deep dive in all those three pillars so that you can then understand the business from this perspective. Starting with people. So Tim spoke a few words about it, and I think that when you look at that smiley friend that Thiago is speaking about, speaking that his father worked there, and he works there for 20 years, you can get a bit of the feeling of how proud, how engaged we are as a team there in Brazil. One thing that Thiago has not mentioned, and it's important to state, is that he started in the company 20 years ago as an operator, and today is a manager in the hot strip mill.
So, I think this also complements, the way we treat people, the way our people we are important for us in, in the company. Another two aspects I would like to raise today for you, we can see in those charts. If you look at the chart on the left-hand side here, we have, as we saw in the video, our frequency rate, of the unit, Aperam, plus Aperam BioEnergia, plus Timóteo plant. For those that are not familiar with those figures, what you have in the bars, in the gray bars, are the number of lost time injuries we had at the company. And in the red line there, you have what we call the frequency rate.
For the frequency rate, we divide the number of events by the number of hours worked, during that period. And I have two messages in this, slide. The first one is that when you look at the 3 in 2023, that we were very sad because we were coming from 0 in 2022. But when you look at these 3, it means that all those almost 5,000 people working in a steel mill, 8 hours per day, but a mill that works 24 hours per day, 7 days per week. We had, in the last two years, only 3 people that could not work the day after the safety event they had. So this is... I mean, when you look at that, all the hours worked, it's a, it's a figure that, is outstanding.
Actually, when, as I also said in the video, the average of the stainless industry in the world is 3.46 for this frequency rate. So while we are at, in 2023, 0.2, the average of the industry is 3.45, so 46, to be precise. When I was building this chart, my idea was to put a line on where the sector is so that we could compare, but this line would be above the ceiling here if I could put it if I would put it there. So this is the first point I would like to have in mind, and the second is still based on people and on engagement, is this, the second figure here.
In Brazil, we have a business school that is a São Paulo university, that has a context in which every year they evaluate through questionnaires, through audits at the site and interviews, they evaluate the companies in Brazil, and they classify them as what they call poetically, incredible companies to work for. In Brazil, we have always been recognized as a good company to work, and in the last four years, Aperam BioEnergia was elected the best company to work in the agricultural business in Brazil. And the Timóteo plant was elected the second best work in the steel—sorry, not steel, metal and mining industry in Brazil. No need to tell you that when you speak about agriculture in Brazil, we have many big companies known by all of you. The same could apply for mining and metal industry.
So, it's a very, I mean, good result to be recognized in that way. So this, when we speak about people. The second asset I would like to discuss, the second of those three pillars, is the market. And for the market, to start, I will explain what our products are. On the left-hand side here, you have the stainless steel, so that's easy for you to recognize as a product of Aperam, for sure. So used in architecture and construction, as you saw in the stadium, we saw in the video, but also on the day-to-day, like the handrail you use on the stairs here, the lift of your house, the cutlery you use today, all these are made of stainless and well known as an Aperam product.
But in Brazil, we have a second line of product that are the electrical steels. And inside the electrical steels, we have two main products: the GO, Grain-Oriented steels, that are used for transformers and for all stationary machines. So transformers, charged for electrical vehicles, and many other stationary electric machines use GO. And the GNO. The GNO are Grain Non-Oriented, so rotary machines, so rotating machines, and there we have the generators of electricity, hydraulic, hydropower plants, and also the motors. So we could say that all the energy, electric energy, not all, but most of the electric energy we use is generated by using GNO, because you all have rotary machines that produce electricity. And then to transform that energy and make it arrive to our homes, to make it arrive here, you have the GO.
And then when you use it again, we have the GNO. So the electric vehicles, they have GNO in the motors. The motor you have in your air conditioning, your fridge, all this has GNO steels inside. And the special carbon grades that are in, let's say, in revenue, not as important, but also is sort of a filler, a product we have in Brazil that helps us keep the competitiveness and the scale. I will deep dive in each of those products, but first, I would like to show, because I spoke in the video about the volumes, but then how you see that in revenue.
So in revenue, as you can see in the chart on the left-hand side, stainless is responsible for 70% of our revenue, and then we have the other products around 30%. So as I said in the video, 50% in volumes and in revenues, 70%. And on the chart on the right-hand side, we see where stainless is applied. And the reason I put this chart, these two charts in this presentation, is to show you the importance of having this diversified product range, because we have different products, as you see in the left-hand side, and even in the main one, that is a stainless, you see that it's spread all over the economy, and particularly in Brazil.
So this multi-product, business, in, in which you have many segments consuming, is a sort of a natural hedging for this operation. It's a hedging because, when a product is not performing well, we have alternatives and we have flexibility, as I will discuss, in the coming slides. So going product line by product line, I would like to start with stainless steel. That, as you saw, is the main, source of our revenue. On the chart on the left-hand side, we have in the bars the apparent consumption of, of the market. And what I would like you to notice here is that, one, it's a market that has always show a reasonable growth, and that is expected to grow further. It's expected to grow because of the chart in the middle.
In this chart in the middle, what I show is the apparent consumption per capita of stainless in Brazil. So how many kilos per inhabitant we consume every year in Brazil. And the message I would like you to have in mind here is that, even comparing to developing countries like Mexico, we have a much lower apparent consumption per capita. So this shows the potential that Brazil has to grow the, the consumption of stainless. So this supports what I said when I spoke about the apparent consumption. So the growth of the apparent consumption that we saw in the past will continue for the future. And then, and then I also have this dotted line in this chart on the left-hand side. This is the market share.
Sorry, no, not the dotted line, the gray, the orange part in the middle of the chart here, where we show the market share. So it's a market that grows, in which we have a market share that has always been between 70%-80%, and for which we have plans to grow. So we have a roadmap in which we are growing the market share. We could grow it in the last years, and we are planning to continue this leadership in the market. So, summarizing what I presented about stainless, I would put in those four main points here.
The first is the market that has a growth because of the GDP, and also because of the products we have—projects we have to boost this consumption by finding new applications and, and by developing new grades, as we saw in the speech from our colleague from the research center there. The second is the market leadership we have. So as I showed in the market share, so between 70%-80% market share, it's a very solid leadership we have in, in this market. It's a level competitive playing field. So we, in Brazil, have always been able to have trade defense measures that would avoid any unfair competition in the market.
So at this very moment, we have anti-dumping against China, we have anti-sub, countervailing duties against Indonesia, and we have always had this eye on a fair trading market in Brazil. And the last point of the four I'm mentioning is the position we have in the cost curve, that I will come back to this in the coming slides. So but what I would like to say is that it's a—we have a sound, very good position in the cost curve that enables us to have this market leadership in Brazil. Electrical steels are also important for Aperam, and the three blocks here show why. The first one is the energy transition that Tim already explained. So it's unavoidable.
So to move into the electric vehicles, to move into less use of fossil fuels, the use of electrical steels is a must. So that's one point that supports the importance of electrical steels for Aperam. The second is particularly for Brazil. In Brazil, there are a lot of investments and a lot of plans for the years to come, to increase the availability of electricity. So to make electricity available for industry and for homes in all the country. And these will boost a lot the consumption, particularly of grain-oriented electrical steels. And the last point I would like to remember in this slide is the mobility electrification. So it's a reality. So Brazil will take a bit more time to move into the electric vehicles for two main reasons.
The first is that in Brazil, today, 90% of the cars produced can run at ethanol, so it's already a sustainable solution. And the second reason is the purchasing power. So those two reasons make the move in Brazil a bit lower than in Europe or United States. But nevertheless, by the middle of the next decade, more than 50% of the cars produced in Brazil will be electrical hybrid. So this will also boost and is a strategic point we have in our roadmap for the future of the electrical steels in Brazil. So I spoke about the people, about the market, and then a bit about our footprint. So a few points on the footprint. The first one is the integration.
It's a fully integrated footprint in which we start from the charcoal, and we go down to the finishing lines, as we could see in the video. So this integration makes some important points that give us some important points that I would like to remember. The first is the use of all the waste and all the scrap internally. So the blast furnace gas is used downstream. The scrap that is generated in the cutting processes comes back to the melt shop. So this integration is important point for us. The second is the flexibility. This new is fully flexible. So as we saw in the video, we can produce electrical steels, we can produce stainless steels.
We can use the blast furnace route, but we can also use the scrap route. So this flexibility, with the flexibility we showed in the product range, is really important for the resilience of this company. Again, as I already said, and I will detail a bit more, the position in the cost curve, that is somehow connected to this integration. Because we can dilute our fixed costs. We have a very, let's say, efficient supply chain internally. So this is helping us on this competitiveness. Sorry, I'm moving back, this way. So, and another feature of this footprint that I would like to mention is the sustainability.
I will talk about sustainability here from the, from the point of view of CO2, but I could speak about the foundation that we will see afterwards or governance, but let's focus on the CO2. This chart here, the yellow part shows our emissions of CO2 per ton of crude steel, Scope 1 and Scope 2. For those not very familiar, Bernard will help us in the coming presentation, but, I will speak about the numbers, and then Bernard will explain the, the definitions. But again, when you look at the yellow, so is the emissions. Here I have two points to say. The first is that we are very well positioned in the, in the CO2 per ton of steel if we compare with our other, other competitors. And this is the first point. And the second is that when we look ahead-...
Even in a very conservative approach, in which we don't improve, and we don't invest, and we don't change any process, we would still stay at this low level of emissions. Then we have the green path down there. The green path in the chart are the removals we have in our forest in Bioenergia. So what we can see in this chart is that we have a low level of emissions, and even this low level is fully neutralized by our forest. The bars here shows the balance, and you can see that it was slightly negative in 2023, then it's negative in 2024, 0, and then negative again for the future. So it's interesting to see that this is a company that's CO2 neutral, if we speak about Scopes 1 and 2, considering removals. And why is that?
I would say three main reasons. The first one is the use of charcoal. So to make a long story short, the trees are the best equipment we could imagine to remove CO2 from the atmosphere. So what a tree does in the photosynthesis is that it takes CO2 from the air, releases O2, oxygen, and incorporate the carbon in the wood, in the trunk of the trees. So with this, then when we produce our steel, what we make, what we do is that we take this carbon, and we burn it again to CO2, but then the trees will take it again and use it again. So it's a fully renewable process in terms of the charcoal use.
Completely different from using coal, in which I take a carbon that is on the Earth, and I burn it to CO2. So in this case, this is the first of the three reasons we are so low in CO2. The second is the electricity in Brazil. It was already also said in the video, but I'll give the numbers. In Brazil, in 2022, that is the last public figure we have, 92% of the electric energy in Brazil was renewable: hydropower plants, solar or aeolic, so 92%. And in Aperam South America, 50% of the energy we use comes from the grid, so 50%, 92%. The other 50% we take from a dedicated hydropower plant, so 100% renewable.
So the balance for Aperam South America is that more than 98% of the electric energy we use is renewable, so close to 100%. And then, the last reason for this good result is the green part there, is the 100,000 hectares we have of planted forest, that are, at this very moment, removing CO2 from the air, and a part of it being accumulated there in the forest. So just a statement, all this is made based on the methodology of ISO 14064. So this is the standard that we use for this, certification of, scopes one and two, and it was certified by external bodies, okay?
So, with this, I conclude the three pillars I would like you to have in mind to explain the business there in Brazil: people, market, footprint. And then I will show where we are with all those assets and what we plan for the years to come. One important point, as I spoke a bit about flexibility, the position in the cost curve, and how the flexibility resilience we can bring from this flexibility. And the chart on the left-hand side shows this.
So what we can see here is that this company, even in the difficult years of car wash scandal in Brazil, with the recession we had in 2016, actually, the recession was 2014, 2015, and even the COVID, this company has always delivered a three-digit, close to three-digit, EBITDA. Even in the difficult year of 2023, it was a positive result. So, what we see with this, EBITDA of the company, is that it's a resilient company that resists very well in the low cycles and take a lot of benefits from the high cycles. And this is due to how I tried to explain in those three main pillars there. And as I said, the position in the cost curve.
This schematic cost curve you have in your right-hand slide here, chart here, shows the cost of my competitors, plus the import duties and logistics to bring material to Brazil, comparing to Aperam. So we can see that even the very competitive, the very competitive units that are supplying to Brazil cannot be as competitive as we are in our own market. So no one can beat us in our market in terms of costs. And how do you look at our strategy for the future? I would put it in four pillars. The first one, first one is competitiveness increase. So okay, we are well positioned in the cost curve, but we, we cannot sleep with that.
We know we are in a business with a lot of overcapacity, with a lot of ups and downs, as Tim showed. And we know that one of the main assets to survive is the competitiveness. So here we have a lot of actions. We have initiatives to increase the use of scrap. In Brazil, as I said, we can produce using electric arc furnaces. We have two electric arc furnaces. We have limitations of availability of scrap, but we are ready to increase the use and take opportunities from the market. We have a lot of actions on productivity, Industry 4.0, all the initiatives that we can use to bring more productivity and more competitiveness to the business. This company has a culture of continuous improvement.
Everything we do one year, we try to do better than we made the year before, and this forever. So this is what brings part of the gains and part of the competitiveness you could see in the cost curve. A second big block on our strategy is mix improvement. When I say that the market in Brazil is growing and we are growing our market share, this is a mix improvement. Because instead of selling carbon steels, I sell stainless steel. Instead of exporting stainless in an oversupplied market, I sell in the domestic market where I have advantages, I have trade defense measures. Also, electrical steels, we are improving the mix day by day. The grades we produce today, most of them were not in our portfolio ten years ago.
Not most, all of them were not in our portfolio 10 years ago, and I'm sure that the products I will have next year are better than the ones I have this year. So this is a mix improvement through which we improve our margins. NGO is a similar issue. The development of applications like electric vehicles are bringing grades that have a better profitability than the ones we have as commodity grades in GNO. Still talking about mix improvement, at this very moment, actually, at the end of today, Brazilian time, we'll be starting up the new hot rolling mill in Timóteo plant. So an investment that started 2 years ago, and we are concluding really right now, today is the day.
And with this investment, we are able to produce grades at a wider width that we were not able to produce before. Again, mix improvements that are bringing better results for us. We have a capacity increase roadmap. So as I said, we have a focus in Brazil, we have a leadership in Brazil, and it's a market that is growing. So we do have a roadmap in which we can increase our capacity. And I don't need to tell you that it's much easier for us, that we, that already have a footprint in Brazil, that have a hot phase, that has some spare capacity, and we produce carbon. It's much, much easier for us to invest and follow the market growth than for anyone else in this business.
My last pillar of this strategy is the sustainability. But sustainability, I will not speak about reducing CO2 or about less use of water. Here, the point I would like you to have in mind is the business that comes with this sustainability ESG issues. We want to promote low- promote low CO2 grades, to have a premium on that. We want to take profit of markets connected to the low CO2. For example, the picture in the middle, that I think Sud will speak a bit, is the bio oil. This was a byproduct that didn't have any use in the recent past, and that today we sell. We sell as a fuel with zero CO2. So a lot of new opportunities we believe will come out of the business of low CO2.
So, this is the fourth pillar I would like you to have in mind when I speak about my strategy for, for the years to come. So to wrap up, well, what have I said in those 20 minutes I'm here? First point are the differentiators this company have. The first one is the engaged and performing team we have there. We have a unique market position, so we are leaders in a market that is growing, in a market in which we, we have, a competitive advantages. It's a flexible multi-product, business. So we can, as I said, produce a stainless steel, I can produce electrical steels, and I can change the, the amount of each of those. It's a competitive and, unit.
Our position in the cost curve is good, and this is due to the costs in Brazil, so the Brazilian cost we have in Brazilian reais, but also due to the fact that most of my suppliers are in Brazil. So all my ferronickel comes from Brazil, my ferrochrome comes from Brazil, my scrap comes from Brazil, my iron ore comes from Brazil. So this gives us a good competitive base. And also a future-proof environmental setup. When we see companies trying to use hydrogen to the blast in the blast furnaces, trying to change from the blast furnace to DRI. So all those moves, Brazilian footprint is already prepared for the needs, because we are already producing via 100% of through charcoal. That, as I explained, is a renewable fuel.
And this, and then in the middle here, we, we can see the resilience and the future of this company. So a company that has always shown a good level of EBITDA, and that we expect to increase. I like the chart Tim showed, in which we see the cycles, but we see the cycles, and we are, in each low cycle, less low than in the previous one, and each high cycle, higher than in the previous one. This is the idea I want these charts in the middle to give you. And then when we look ahead, so we have the, the competitiveness, initiatives that we are, we are adopting, that should maintain or even improve our cost position. I repeat what I said, so debottlenecking and upgrade investment.
So, the small investments, if we compare with a newcomer, that can make us ready for the growth of the market and for the opportunities of the market. Volume and mix improvement, what I said of a market that is growing, a mix that is improving, and that we are ready to take profit out of it. And the CO2 economy that I mentioned. And then I come to my very last slide. Acesita, we will celebrate the 31st of October of this year, its eightieth anniversary. And the best image I can have of this company now is that it is an eighty-year-old child. It's a child because it has a bright future ahead.
I see much more opportunities than threats, but it has 80 years, so it has a reputation, it has a history, it has a solidity of a company of 80 years. So with that, I close my speech here. Thank you all for the attention, and I invite you for the coffee break that will be downstairs, where you entered. Thank you.
OK! Can we start? Good. So, we are starting the second, the second step. I grant you, at least, in my taste, this second and third part will be even more astonishing, and I give you a sense of what Brazil is. But on top, what Aperam is, what we want to do, and how this company is really engaged in the future. We always hear about ESG. ESG is a kind, sometimes a kind of, small star in a slide presentation with the certification somewhere, et cetera, et cetera. But I really defy you to find other companies in which the S has the sense of what you are going to see. S, I repeat, for you, is social.
You've seen a part of it, being the best company, the incredible company in which working is one thing, being by far the safest company in the steel industry is another thing. Now you will see something which is more based on social, and look at the numbers and look at the activity. You will be astonished. Thank you.
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Beyond this facility, what does the foundation do?
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The foundation is all about giving back to the community, right?
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We follow the HDI of the areas we operate, our forest, our mill, and we compare then with similar cities around, where we are not present. There is a difference between the cities where we operate and the others. We believe that a big part of this, this improvement in the HDI, HDI of the areas we operate, come with the development that our operations are bringing to the area.
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Let's talk to Angélica.
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Great!
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All this work, so that in the future, Aperam turns into a carbon neutral industry, right? Is this an internal initiative or, or are there other players involved?
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Okay, thank you so much, Angélica. Thank you, bye bye!
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The plan is to reduce our emissions and for such reduction, the use of biomass is indeed an alternative. Our target is to reduce 30% of our emissions until 2030, versus a baseline of 2015. What we cannot reduce, we will offset by removals. That is already the case. We make every year an inventory of our emissions, using external entities to audit and certify, and our target is to keep reducing emissions and neutralizing all of them.
Ah! It's really beautiful here. But where are we? And, and why have you brought me here?
This place is called Oikos, and I asked Venilson to join us. He will explain a bit more about the education, the environmental education, and what they do with kids and the community as well. I think you're gonna love it. [Foreign language]
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All of the classes happen here, is that right?
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And what do you have here in terms of structure?
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With this remarkable journey through Aperam and Timóteo's history, our visit to this little town in the middle of Brazil ended. But the most important part of our journey was yet to begin. Aperam BioEnergia, in the valley of Jequitinhonha, in the northern part of Minas Gerais state.
So good morning still to you all. I am Bernard Hallemans. I'm heading the renewables and recycling division in Aperam, and I'm also in charge of CTO and sustainability. Before we are going to look at BioEnergia, which is really a marvelous story, I would like to get into our CO2 roadmap together with you. I could start like Tim. Tim said three words: cycle, cycle, cycle. In this presentation, it will be about CO2, CO2, and CO2. I think CO2 is the word that you have already heard the most in the current day. So let's first, maybe, and it might be a recap for some of you, get into some definitions, because CO2 is a word, but behind there are some very important concepts.
When we talk about CO2, we should be reminded that CO2 is defined into three different scopes. You have already heard Frederico talk about scope one and scope two in Brazil. We have three scopes to look at, and we need a roadmap on the three scopes. Scope one is what you emit as a company in your direct activity. So everything we do inside our plants, if there is CO2 emitted, it is counted in scope one. Scope two is what you buy as CO2 inside the electricity that you use in your production. So we consume a lot of electricity, which we buy on the market. This electricity has been produced in a power plant. This power plant emits CO2. We have to account for this CO2 in our scope two.
And then scope three is everything else, which is needed to get your product on the market. And you will see, and you already know, I think, that scope three for us is really a very important subject. I illustrate by this chart, the importance of scope three in our business. Don't look at the numbers because they are not really relevant. I will talk about numbers later, but look at the scales. You see, for stainless steel industry, the importance of scope one, scope two, and scope three, and this is for typical EU-based producer. And you directly see that in our case, the most important is scope three. We are, in fact, an industry where scope one and scope two are already very low.
If you compare stainless steels or also the electrical steels in Brazil with, for instance, carbon steel, we will be already 4-5 times lower, due to the way or thanks to the way that we are producing. If you compare it to other metals like aluminium, aluminum, we will even be 10 times lower or more. So Scope 1 and Scope 2 in our industry is already something we can start from as being very low. Additionally, when we then say that Scope 3 is really the essential differentiator, Scope 3 is very, very different among the players in our sector. When you buy a fork, a knife, a spoon in the store, you don't see the difference, but this spoon can be produced with a carbon footprint Scope 1, 2, and 3.
Below two can also be produced with more than 10, and it's the same product, and you pay a similar price today.... So it will later go into the value creation, with such a differentiation can make in the future. We are a producer which is on the top of this graph. We are, and you will see numbers later, we are emitting 5 times less CO2 than some of the competitors which are coming from Asia. They are based on nickel pig iron, and nickel pig iron is a source of a very strong CO2 scope three. So once we have the concepts, let's look at Aperam, and let's look at the roadmap we have already ongoing and that we have for the future. And I will start with scope one and scope two.
We are already today a leading player in Scope 1 and Scope 2. You see in the middle of this graph, what I already told you, in comparison with average steel production, we are already four times, five times less. You have seen in the Brazil presentation that the Scope 1 and Scope 2 in Brazil is fully compensated by the absorption in our bioenergy premises, so there we have a total, which is close to zero or even negative. And so we start already with a very low carbon footprint in Scope 1 and Scope 2. At the left side, you see where it comes from. We'll not go into the details, but the different parts are rather obvious.
The second message, apart from the fact that we already have a very low footprint, is that our plan to go even lower is a plan that needs only relatively, very little investment. We have a plan towards 2030, and I will show the numbers later, which needs us to invest over the next, let's say, seven years, we are 2024, less than an average of EUR 20 million per year. And these are investments in known technology, which are stable and which are not going to fundamentally change the production cost that we have. So we are very different from, let's say, carbon steel, which has a very big challenge of reconverting this industry to a much lower CO2 footprint in Scope 1 and Scope 2, which we don't have. We have a plan.
We will strongly reduce further, but it is CapEx light, and it will not fundamentally change our cost position. This plan is also well balanced between different levers that we have, different actions that we take. You see this pie chart in the middle, and you see that we have three pillars, which are in investment, almost equal. Which are these pillars? First one is to work on energy efficiency. I think that's a sensible thing to do. We all do that at home. We do that in our plants, and we use the most modern ways to come down in our energy consumption. And we have quite very nice results at this moment in doing so. So we consume less and less energy to produce our products.
The second one is that we are substituting all fossil sources into green sources, into potentially green sources. So this means electrifying your processes. We still use gas in several furnaces in our mills. This gas is gradually being taken to electric energy. So we transform this energy process into an electrified process. You have already heard about coal and charcoal, and you will see the video later also on bioenergy. The second... The third big pillar is that we are generating our green energy ourselves for as much as we can. Some of you were in the Gueugnon plant a few years ago. You have seen the solar power plant that we have built there, which we are doubling at this moment.
We have already a lot of wind energy in our, in our premises, and so everywhere where we can, we are installing the same kind of technology to produce the green energy ourselves. And where we have heat available from our processes, we will also look into converting this heat into energy again. So you can, from heat, produce electricity again, and then you have again, a CO2 neutral source of energy that you can use. And then the fourth pillar, which is not a CapEx one, is that we are also active in getting green energy from the electricity market, on which we are also active, through the schemes that you know of. The total of, the total impact of all these actions come into this curve.
This is our plan going forward until 2030, which we have also submitted to SBTI, and on which we are, or against which we are ahead for the moment. So our, our results from 2023 are not fully final yet, but they will probably, they will surely be better than the curve that we had embarked. And so we are very confident that for the next years, we will reach our target, which is close to 370, 380 kg CO₂ in Scope 1 and Scope 2. Now, Scope 1 and Scope 2, I already told you, is important, but it is not the essential part or the differentiating part. I think a lot of companies are doing the same as what we do.
Scope 3 is really the point on which we focus, and we should focus in our sector. You've seen that Scope 3 is the most important emitter of CO₂ to get to our products, and there, I think, really, that Aperam is differentiating from peers and from other companies. Of course, we have already integrated in recycling, and we have bought ELG. This integration has been done, still continuing in terms of generating synergies. And so, of course, we will base our product production for the biggest part possible on scrap. Many companies can do that. We have chosen to do it in an integrated way, which gives us advantages. But we go beyond this. You can go to a certain percentage of scrap, let's say 95%, 96%, 97%. 100% technologically will be very difficult.
So you still need some raw materials to add to the scrap to come to your final product, and there, I think we are really a differentiator. We have plans, we have already actions, we have assets which enable us, for this last part, to go the extra mile with a very low, and in the future, close to zero CO₂ footprint. Then we talk about our waste valorization units in ReCyCo. Then we talk about Botanickel, which I will explain to you. Then we talk about partnerships to get to alloys, ferroalloys, with very low CO₂ footprint. All that on top of what Frederico already indicated on the Brazil perimeter and our forests there. So I will go a bit more into detail on each of these very important points. And here you see what the effect is of what we do there.
So of course, we will use recycling scrap as the base material for our production for as far as we can. The other bearing here, it's nickel-bearing units. There we can make the difference, as I said. You can use ferronickel or nickel pig iron, NPI, where you see on this graph, which carbon footprint, CO₂ footprint, scope three, they represent. Our way is to choose to go to the red bars that you see with ReCyCo, with Botanickel. With these initiatives, you see what difference we can make in scope three versus other techniques. I already told you, in recycling, we are integrated, as you know. It enables us to recycle in local supply chain through the three different ci-circles that you see on this graph.
First small circle is what directly comes back into your production, as scrap that is generating during the production stages of our product. The green cycle, the green circle is coming from the industry where we deliver materials. When a dishwasher is made, there is scrap generated, and this scrap is circling back into the production process. And then the purple circle is what we call the end-of-life scrap. It's what you generate as scrap when you change your dishwasher, for instance. It goes through the recycling chain, and it comes back as scrap in our plants, and we produce new, steel out of it. For these three circles, having an integrated entity, ex ELG, which is active on the world market and which has access to all these sources, is, of course, a prime asset.
We have been, thanks to this integration, pushing forward the use of scrap and the value we can get out of this scrap to the maximum extent. We're still doing that. You see at the right side a small graph for one of our typical grades, and you see the progress that has been made in one of the parameters, which is scrap ratio, especially since 2022 when we did the integration. But we can do that not only for this typical grade, we can do it for all the grades that we produce, since we have a very good visibility on this scrap generation market, where sources are and how we have to activate them. As I told you, we go beyond scrap, because the last mile will also be important in the future.
There I want to talk with you about Botanickel and about ReCyCo. This slide is about Botanickel. Botanickel is the joint venture by which we will retrieve in the future, and we are already doing the first, the first move, out of plants. And it might be very exotic as an idea, but it works, and we are proving that it works. How does it work? You have to start at the top of this, slide. There are in the world, soils which naturally contain nickel, and the nickel content, you see it on the slide, is somewhere between 0.3%-1%, let's say. There are plants which are local species, which have the ability to extract preferentially this nickel out of the soil when they grow.
And so they are naturally accumulating this nickel inside the plant if we plant them on this soil. And so you get a plant with inside, you see the number, typically 2%-4% of nickel. This is a nickel source that you can get in a CO₂-free way. You don't have to do any big metallurgy or any big investment. You will not emit CO₂ when the plant is growing, on the contrary. And so we will harvest these plants, and we will turn them into biomass. When you turn them into biomass, you can produce energy. So we can produce electricity with this biomass, which we can also give and use to the local community or to the local entity where we are harvesting.
The biomass that comes out, and so the ashes that come out, are a very rich nickel-bearing source of material. You see the percentages, so we come into percentages which are comparable to what usually is used as ferronickel, for instance, to add the last nickel to our products. And so these ashes will then be used in our recycling or in our ReCyCo unit, our valorization unit, which I will explain in the next slide, as a green source of nickel, replacing the raw materials that we used to use in the past. And the beauty of the thing is that what remains out of this process can even be used as a fertilizer, again, to use on these soils, which we are growing the nickel from.
Of course, this is a process that ends at a certain point, because then the nickel will get out of the soil. And the last beauty is that this soil is then has the ability to be used by the agriculture, which is locally active. So it is, in my view, a fantastic circular story that has many components, and that is when you talk about ESG, that ticks all the boxes that we should look at when we talk about ESG. Now coming back to this ReCyCo unit, which I understand is sometimes maybe complex to grasp. I've tried in this slide, and there's a lot on the slide, to explain what we do there. ReCyCo is a former steel mill.
It was the former steel plant of Isbergues in the north of France, and we use this ReCyCo entity to turn waste into nickel, chrome, and molybdenum units. Why and how are we doing that? You see below in this scheme are melt shops. The melt shops of Châtelet and Genk in Belgium, where we have a furnace and a refining unit. And what usually is done, as I told you, you use scrap, and then you go the last mile with some expensive and CO₂-rich raw materials, which are in the red box at the right side. So we use ferronickel, typically, to feed into this process. With ReCyCo, we can do it in another way.
With ReCyCo, we start from the left side, and there are in the market wastes, byproducts of processes which contain these valuable metals and which are for other or for colleagues of these products, used already by companies which you know well, which valorize these waste streams. With ReCyCo, we have a process which is based on heating, so pyrometallurgical process, which can take these wastes. We put them together with other waste coming from other sectors. We use, for instance, molasses. We compress these, and then they go into a complex metallurgical process, which gives us the metals out of these wastes. And so there, in this green box called ReCyCo, we will generate again nickel, chromium, molybdenum units with a very low footprint out of the waste that we have taken in.
Also, these botanical ashes will be part of the feeding of this ReCyCo plant. And you see in the graph that we are, at this moment, ramping up, and we have a target of more than doubling in the next years. We are ramping up the generation of these nickel, chromium and molybdenum units in the ReCyCo plant. And so we will replace the red arrow by this green arrow at the left side. This is my last slide because it's—I would say it summarizes what we are doing and what we have committed now to, and what we are committing to. We are in the last days of finalization of getting approval from the SBTI targets that we have put, and you see the targets in the slide.
So we are engaging on a CO2 intensity reduction by 34, 34% by 2030, in Scope 1, 2, and 3. You see the absolute value on which we are committing, and this is the next step into then the carbon neutrality roadmap that we have towards 2050. I told you, we are ahead of the plan that we had put in 2023, and our plan is to keep on being ahead in the next years with the actions that I have tried to explain to you. So that summarizes my, my explanation on CO2, Scope 1, 2, and 3, and the way we see as Aperam to make the difference, in the next years, in a world which will need this CO2 to reduce fast and heavily, I would say.
Next point is the lunch break, and so I invite everyone to go to the lunch, and then we will be back at 2 o'clock to look at the third part of our Brazil story. Thank you.
Okay, thank you for coming back. I hope that the lunch was interesting. At least, I had some discussion in a few groups, and it was very nice, and you have nice feedback for the moment. Now, I would say that you have seen Timoteo, you have seen the foundation and our engagement in the social. Now, you will see something which is different. Different because you have heard so many times us talking about the energy, our forest, how big they are, et cetera. It is a pity not to have been there, because how big it is, it is an experience that you can have only being there, okay? When you take a jeep and you cross during hours and hours, and this is always forest, always forest.
It is something interesting. But what you have to look at also is that these are not simple farmers. These people are the most innovative people we have in Aperam. During the last 15 years, we have a challenging contest, which has all groups from the company, workers, typically workers, presenting their innovation. I tell you, the division that has won the maximum number of prizes was BioEnergia. These people are extremely innovative. They are doing things which are really nice. You will see them. I don't disclose so much, but you will see also that there will be a small gift for you of products coming from BioEnergia, that you can use to be part of the campaign carbon capture, okay? You will see this and let's start with the movie, please.
We are on our way to Itamarandiba to visit Aperam BioEnergia. But where is Itamarandiba, Chris?
William, Fred told us. Do you remember?
It's good to always have the chance to speak about it, as there are myths that need to be clarified. All our forests are in the state of Minas Gerais. They are far and completely disconnected from Mata Atlântica, Pantanal, Amazon forest, rainforest. The biome we operate in is the Cerrado. The Cerrado is the kind of Brazilian savanna.
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Our first stop here in Itamarandiba is the seedling nursery for the eucalyptus forest. Lilian is explaining how the work is done.
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Is there any dangers of using eucalyptus as a species?
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What about water consumption and usage? Is there any difference if you were to use a native forest?
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Uhum!
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William, this is Júlio, our experimental coordinator.
Júlio, what do you do here in the lab?
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A nossa meta é chegar em 2026, com o controle de 100,000 hectares de floresta, com inimigos naturais, o que vai proporcionar que a gente elimine 100% do uso de produtos químicos em nossas florestas.
Once you've grown a forest, what happens?
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This is Magno. He's responsible for harvesting the crops.
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Where does the wood go after this?
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William, this is Naiara. She's the Process Control Supervisor. She will introduce a bit about the monitoring center here, in Aperam BioEnergia.
Hi, can you tell me what happens here?
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Mariana is talking to us about the carbon neutral balance.
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How could a company that produces steel, burns coal, manage to reduce emissions of CO2 to this level?
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What are the current emission levels in the furnaces?
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Mariana, can you tell me, what is biochar?
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So this point of a good electric energy, the use of charcoal and the efficiency of the operations put us in a very good position in terms of CO₂ per ton of steel. We are far below the average of the market for Scope 1, Scope 2, and even more, if we put Scope 3 inside. This low emission is neutralized in our forest, so we have a low emission per ton, and all the emissions we have, we neutralize with the removals we have in our forest.
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I will keep for the clichés that the steel industry will face threats and opportunities. The threats are many: the CO₂ reduction targets, the attraction of talents, an excess of capacity in Asia, particularly in China, with subsidized production. But on the other side of the scale, we do see opportunities. We have the mega trend of electrification. We have the need of the investments in infrastructure in the whole world. Steel is a product that is everywhere. Everything we look has steel. It's a product that is fully recyclable. We have the electric vehicles that will use a lot of steel. What I see as a future for Aperam, is that in our case, Aperam, and in the case of Brazil, particularly, the opportunities are much more than the weight of the threats. The stainless Aperam consumption in Brazil will keep on growing.
It will grow more than the GDP. It was the case in the past, and will be the case in the coming decades. Brazil has natural resources. We have iron ore, we have chromium, we have nickel. We also have a product mix that is very aligned with the future. The stainless, that is normally used for longer cycle of life of products, so, contributing to, to less use of natural resources. We have the electric steels that are fully aligned with the electrification. So when I look again in the opportunities, I do see, for Aperam in Brazil, a very bright future ahead.
I got so much more than I was hoping for. This company, the people, this country, has so much to shout about. I was more than happy at this point. We finished our journey later on in the most Brazilian way possible, with amazing food, drinks, laughter, heat, and good conversation. I don't know about you, but it's not everywhere in the world that you can look at the stars like this. In the beginning, I was hoping for hope, and I think I found it here, in what many of us gringos might call the middle of nowhere. But any place with this kind of soul, passion, creativity, and the strength to fight for what is right, it's never the middle of nowhere. It's always the heart of somewhere. Farewell! I'll see you soon.
Hi, everyone. I don't know how I'm gonna top that. It's impossible. My job here is actually quite simple, right?
... Which is that, you guys read a lot of things, listen to a lot of people talk about these fantastic buzzwords, about sustainability, environment, billions of euros, dollars, energy, hydrogen, and all those things, right? In the context of this, Tim spoke about a uniquely Aperam story, and my job is to come back and explain to all of you what this uniqueness means in terms of value. So, one of the things I'm going to do today, or try to do, is demystify this word sustainability in terms of value, okay? Because, there's three things I want you guys to keep in mind as we go through these slides. First, is the exciting opportunities my colleagues have spoken about and the value from these streams.
The second one is how these are not dreams of the future, but are happening today in practical and clear means. And third, we are Aperam, and efficiency is in our DNA, and how we are doing it in the most Aperam way possible, which is looking at how we invest shareholder capital in all these existing projects. Right? So please keep these three things in your mind as we go through all these exciting opportunities and look at the value. So to start with, this is something which is a typical CFO chart. I would like to walk you through what we are doing in terms of E. In terms of environment, it is very easy to think that, okay, there are past traditional businesses and there are these exciting new opportunities.
But it's important to remember, sustainability, if it is going to happen, metals are going to be at the core of it, and recycling is going to be at the core of it. And if you remember, metals and recycling are at the core of Aperam. So on three stages, we are going to do this. The first stage is our existing businesses. We are using the E-revolution to transform and decommoditize our existing businesses. The second phase, which is all these fantastic new value streams you've heard about today, we can clearly see the gains in our books, and these are production-ready. Some of these, like recycling, are in production. And the last part, which is what most companies like to talk to you about, which is selling the dream, is the upside of carbon.
Which is truly the way we view it at Aperam, something which we are working towards, and if it happens for an investor, a fantastic upside, and we are confident that this will happen. I will walk you through with some really worst-case scenarios, and even in these scenarios, how much money we are going to make. Just for the record, on a value basis, we expect from the first two phases, a minimum of EUR 100 million of returns in EBITDA, out of which EUR 40 million has been planned in already in our next Leadership Journey 5. I've given you a legend on how CapEx heavy or light these businesses are. First step, decommoditizing traditional businesses.
So I always—when I talk to my commercial guys, one thing they like to say, and I give them full credit, is: "Stainless is moving out of your kitchen into industry." So we are really living the second phase of stainless. So the first part of our stainless business, if you look at it, we are going into mobility and energy, and our investments we have made, and last Leadership Journey, we've announced the investments in our AOD, in Genk, or the cold rolling mill in Gueugnon, will help us and are already starting to deliver solutions, for example, for the EV. In alloys, we have basically reduced three cold rolling mills to one in Gueugnon and expanded our capacity in Gueugnon.
This CapEx has been announced in the past, and because of this growth in capacity, today, we can fulfill the growth in LNG demand, which is coming. Brazil, Frederico has talked about electrical steel growth. There, we are moving up in mix. We have announced a HGO, which is a high-quality grain-oriented steel announcement. As Brazil grows, Frederico has explained 32% growth in transmission and distribution of electricity over the next 10 years. So there we have seen value, and we will see value. And last but not the least, in recycling, you remember our investment in recycling when we purchased ELG, and we clearly said that the aerospace size of the business is something for us new, and it is a space where we will actually see value come along. And this is a business, if you don't know, we are the world's largest recycler of aerospace alloys…
If you are west of the Danube River and have flown in a plane in the last 10 years, your engine has been recycled by an Aperam company. So clearly, the current businesses are changing due to the investments we are making, and will deliver already in Leadership Journey 5, and that's how E is helping us in the current businesses. Next, we move to the new value streams. We've discussed enough about recycling in the past slides. There's two points I'd like to add to this. First one is that we have increased our synergy target from raw material valorization from EUR 24 million to EUR 40 million. We're confident of doing that because we see the value in the recycling business.
The second thing is that we are confident also because of our own expansion in the recycling business, that by the end of the decade, which is not a long time, right? Tim committed and promised that we are continuing to perform along the 2025 targets. So if you take a next milestone to 2030, we believe that our recycling business target should be higher than EUR 100 million. The next part is about ReCyCo. Bernard has explained the process to you. Take everything which is, in this case, a waste from two businesses and actually deliver value out of that. Now, important to keep in mind, it's an old stainless mill with very little CapEx requirements. I promised you in the beginning, the way we as Aperam do it, is with capital efficiency, we keep shareholder capital in mind.
So this is not a brand new facility with billions of euros of expense. This is a retrofit of the existing steel plant from the '50s, and we continue to improve the processes there to use pyrometallurgy to actually convert waste in the north of France into valuable material. So the point in ReCyCo is also that this material is not just in terms of CO₂ footprint, but also cost-effective compared to primary nickel, which it replaces. ReCyCo, we said, will add a double-digit million EUR EBITDA until 2030. The next one is BioEnergia. You've seen this fascinating presentation. Let me give you a couple of numbers behind it. Number one, forest area expansion, we're expanding 24% target until 2030. Annual planting area is 18% increase. Wood density growth is 24% till 2020, another 30% we expect till 2050.
Now, these can look like typical graphs for you, and they don't mean anything. So let me decode it for you. First thing, you take money and buy forests or forest companies, mergers and acquisitions. Second, you do continuous improvement and keep increasing your planting area in the existing area. Third, you invest in innovation, and you actually increase the amount of carbon captured by a single tree over a period of time. So it clearly shows this is not just you put in a seedling, pour some water, and trees grow. There is a lot of human effort, resources, ingenuity, innovation, which goes. And it also clearly says the choices we make on capital efficiency. What does that mean? I can increase 18% by buying 18% surface area by acquiring a company, but then I have to pay a premium to the shareholder.
I can choose to actually optimize and increase the plant area. I can increase the forest area by buying 25% increased land, but I choose to actually work on innovation and amount of carbon captured by a tree, increase it by 25%. So basically, these are not either/or options. However, I want to make it clear to you that these are options which we consider carefully, where we actually plan this growth, and nothing is left out. And before I move from the BioEnergia slide, because this was a topic of conversation during lunch, the planting machine you saw there, just to give you an example, was actually the prototype was used somewhere in Scandinavia in wood pulp machines. We've bought it, adapted it to the Brazilian climate, to the rains, made it a multi-operation, which means it can be used for fertilizers and seeding.
And for the analysts among you who are cracking numbers, we used to have more than 100 people, actually, used for more than 2 months to plant forests every year. Today, we use 10% of that overnight operation during 14-20 days in the rainy season, so there's no wastage of water. There's reduction of cost because the people are not working there for 2 months. And actually, we use these people basically in other areas where we are growing, so that it is a, a cliché, but it's a win-win situation. And then I come to the last part, which is the upside of carbon. First, if someone comes and tells you: We have a brand which is low carbon, zero carbon, everything.
In our industry, most of our peers, if not all of our peers, have only one way to reduce their carbon footprint, which is to actually go and buy scrap from somebody else, and as a result, increase their scrap ratio. Because of our differentiated value chain here, Aperam has unique ways of reducing its carbon footprint. Today, already, we have pilots, and that's the reason we put it on the upside part. Pilots, where customers pay a premium to actually get reduced carbon products. The volume growth on this, plus the price premium, we expect, and this is why we call it the upside of carbon, a low double-digit EBITDA contribution. The next part, Bernard spoke about this, is Carbon Border Adjustment Mechanism, which is a uniquely European concept to price, rightfully, the carbon emitted by the different processes.
Just the math on that, it's 8 tons of carbon dioxide between us and imports. Today, a spot price of CO2 is at a very low level because of activity. Let's take that $50. So it's a simple math, you can multiply, and even if you take 10% of that, it's EUR 40 per ton more than today, as a price premium. Now, there are two things to keep in mind. First, stainless is the only process in which we consider Scope 3, but so it is true emissions by the process, which means, as Bernard explained, it goes back to the sourced alloys as well.
The second thing is that, in all other industries, carbon, steel, aluminum, a carbon border adjustment mechanism, the price premium, and the added benefits which will come to the company, is used for transforming the footprint, the billions of EUR necessary to transform the footprint into a CO2-free operation. Bernard showed you the CapEx. In case of stainless, this 8 times 50, or whatever that number is going to be, is purely a premium to the investors in a stainless business. That's the difference if you are covering metals and the difference between the different metals companies. Then we come to even more new business models. We've heard about bio-oil. So basically, the process is here. You can read it directly. What used to go up as smoke and actually damage our carbon footprint, today is captured and converted into bio-oil.
We made, because this was such a landmark process, we made actually a sale of this oil and published a press release about it. I like, actually, the Portuguese word, which differentiate between carbon mineral and carbon vegetal, which basically clearly explains the added advantage of this oil. If you take it from the ground, you have it with a lot of sulfur, and this one, because you take the carbon from the air, there is no sulfur, because the trees filter it already. So you get a value and a premium for that, and it's very CapEx-like process. The advantage we have in Brazil, in our operations, is we are the world's largest charcoal producer, which means that we have the scale and the technology to actually capture this. Let us look at the value, and we're looking at another low double-digit EBITDA contribution until 2030.
The next one, Botanickel. Bernard has, in detail, explained to you the process. Let me just touch upon two points. One is the fact that as we have looked at, we still buy, and will continue to buy, even with our scrap footprint, a limited amount of primary nickel. Our goal is that Botanickel will cover a large part of this primary nickel need with low CO2 footprint until 2030. The second thing is that this output of Botanickel in terms of nickel cash costs, and please ignore the negative column, that is because some people subsidize nickel costs with cheap byproducts like platinum. End of the day, if you look at it, it is at the low second quartile, so it's very competitive. It makes business sense. Again, growing forests or plants is a low CapEx business...
In terms of M&A, and it has the added benefit of, as Bernard has explained, remediate the land and then give it back to agriculture. So any asset you invest in technically goes back. Again, low double-digit EBITDA by 2030. And then we come to the discussion where the professor in the video explained in detail about bio, biochar. And we have to be clear, biochar is something which we used to sell as fines, and it was used as a low-margin product, which was sold externally. Today, we use a pyrolytic process and convert it into biochar, and this biochar acts as a fertilizer and a clear carbon capture for hundreds of years. Right? Now, it is something which you probably noticed downstairs, right?
You have small packets, so if you want your personal contribution to carbon capture, and you want to help enrich your own personal garden, or your parent's garden, if you don't have one and live in Paris, please take a packet. It's your personal contribution to carbon capture. The point is, end of the day, in this business model, today, we have a partnership with a traded exchange where you can buy CO2 credits generated at Aperam. It's a pilot, but you can buy that. Again, a low double-digit EBITDA contribution by end of 2030. So through the cycle, recycling and renewables, we believe, will double its EBITDA until the end of 2030. You remember I spoke about 5 ideas in this upside of carbon. Let's take the worst case of low double digit, which is EUR 10 million.
That's 5 times 10, it's EUR 50 million, just to do the math. The added benefit is growing in this segment softens our earnings volatility as well. So that's the economics of the E. And I have a couple of charts which I've brought to show you how do we practice this. The first one is this, which is we do not want to use sustainability as a word to actually, we say in German, throw money out of the window. The use of capital efficiency is absolutely important. Two pilots. The alloys team came to us when, unfortunately, the Ukraine crisis happened, and we foresaw that a 7-year plan to expand into LNG has now become a 3-year plan. You could buy another player and expand there and pay a premium to the current owners, or you could invest EUR 50 million CapEx.
The net working capital build is EUR 200 million just because the nickel and all the raw material prices went up. If they normalize, it's going to come to EUR 150 million, and the additional EBITDA is EUR 50 million. So you're looking at a 4-time, 4-year simple return. The capital efficiency focus is that we are not investing in new facilities. We are using the upstream and downstream in our European stainless facilities to actually re-equip the equipment at lower cost and lower CapEx to use them to expand the capacity of alloys. The other focus, bioenergy. Capital efficiency also means not just reducing the CapEx and reducing... It also means investing in the right places, even if we believe that the scenario is critical. Last year, one of the most difficult years in metals in the past cycle, we still spent EUR 51 million for M&A for our bioenergy business.
Full run rate, EUR 15 million for 3.5 years for simple return. So importantly, capital efficiency focus, it is designed as a JV with our largest supplier in Brazil. As a result, ferrochrome we get back from them will also have a Scope 3 reduction. So efficiency of shareholder capital employed for us, I would say, is even more important than the sustainability space. And then I come to the last slide, where I'd like to use a chart which Tim told you. This is a chart which shows a nice story of the new growth businesses in specialty, and sustainability, and supply chain, which is our S&S business, for example. They drive base dividend growth. We have a progressive dividend policy. They drive base dividend growth, and they contribute to a solid balance sheet and reduce earnings volatility.
And then the cyclical business, which will have up cycles and low cycles. They boost shareholder returns, and they will fund the reinvestment in new earning streams as they happen. Our financial policy has been split a little artificially into these two parts, but that's the principle. Now, that's a story that every CFO shows you, right? Now, let me use Tim's numbers. He showed you a case in 2020, we made in Europe, EUR 100 million EBITDA, out of a total Aperam EBITDA of EUR 300 million, 293, to be exact. In 2023, Europe made EUR -43 million, out of a total, total Aperam EBITDA of EUR 304 million.
Which means this is an action already in the past, where EUR 200 million EBITDA missing from the European business, thanks to energy crisis, inflation, and a slowdown market at the low bottom of the cycle, has been compensated, or there is a contribution from these businesses we are talking about. So it's nice to tell you a story and make you wait for three years to see it in action. This time, we have brought actually that just the difference between 2020 and 2023 shows clearly in numbers how the story is in action. So that brings me to the end of this presentation. The one thing I do want you guys to all remember is that we use these new earning streams to actually complement existing businesses.
We believe existing businesses clearly have value, and like Tim said, "Cycle, cycle, cycle." It will help us to deliver value across the cycle. Thank you. So we just need a couple of minutes to set up chairs here before we start taking your questions.
Grab a chair. Okay, so I hope you have enjoyed the movies and the presentation. Now there is the most difficult part for us, to answer your question. I hope a lot of, let's say, ideas or things have been clarified. We are always on the market. I think we say all the same thing, but sometimes it's not so easy to understand, and visiting, even if virtually, should help a little bit to clarify things. But the floor is yours, so please.
Hi, good day. It's Patrick Mann from Bank of America. This is probably a very basic question to start with, but how should we think about South America and Brazil from sort of a cash flow perspective? So you gave us the EBITDA history, just maybe how much CapEx is going in, and then are you very, very much focused on growth within Brazil, or do you send money up to the center, or how does that cash return to shareholders? Thanks.
I will let our CFO answer.
So, Patrick, first of all, Brazil is a very cash and ready operation, as you can understand, because of two things. One is because it's a low CapEx operation, and second thing is because it's an integrated site. It's one site in terms of our stainless operation. So typically, we... I would look at it as, you know, less than 50% gets put back in the company in terms of cash, okay? In terms of both organic and inorganic investment, and the rest actually flows into the, cash flow statement of Aperam. That's the high-level number.
Yeah. Hi, it's Bastian Synagowitz from Deutsche Bank. My first question is just also on the strategy. I guess you've been talking about your strategy here. Seems to be like a lot of single and small, small projects, and I think you refer to most of them as being pretty capital light. Can you give us maybe some color on the CapEx needs overall, and how we, in particular, should be expecting your CapEx cycle to phase over the next couple of years? I think we've been going through this phase where we've seen CapEx at very high levels, at EUR 300 million, EUR 250 million over the last two years. Now you're coming off to, like, EUR 150 million.
Is this sort of a level where we should be expecting you for the next couple of years, or is there actually a chance where the CapEx could actually bump up again to a much higher level than that? That's my first question.
So I think that you have to take as a first answer, the fact that we have, we have a typical level of maintenance CapEx, which is in the range of EUR 110-120, depends on the activity. Plus, we need some money for the CO2 story. So it is very small at the global scale, but still, in a range of between EUR 15-25 million, depending on the year. Then you see our policy. Our policy is to be a reasonable actor and investor. First, we need to find the good story and the good investment. And, part of what Sud has explained is that we very much care about return on capital invested, okay? So this is the first point.
Second, we want to maintain a level of of company with nearly zero debt, huh? You know that our debt is only some working capital. Keeping that will means that we adapt the level of investment at the level of the cycle, okay? The less cycle we will be, the easier it will be to answer to your question. Now, we are a very cyclical industry, and so you have seen a high level of CapEx and even share buyback in the past years when the cycle was very high. You have seen in 2023 a more reasonable level of investment, and it will be reasonable from what we see today in 2024. Then cycle, our cycle, that I'm confident that we will come back.
In the meantime, we are studying so many other opportunities that will grow Aperam and make Aperam even bigger.
Thanks, Tim. There may be one more question for Fred on the Brazilian market. So, can you maybe give us a bit of an update on what's really going on there? What are the demand dynamics near term? Because I guess the Brazilian market has always been a very exciting one when you look, when we looked at the, I think, consumption per capita, but that's obviously been for a very long time. I guess there were certainly some underlying structural growth, but what are you seeing near term? And then also maybe just on the anti-dumping side, there's this ongoing anti-dumping case. Is there any color or update you got for us on this front?
Yeah, let's let me start from the market growth. If we look at Brazil in the long run, in the past, the consumption of stainless has always grew more than twice the GDP. Not more, around twice GDP. But you're right that we didn't see the growth we expected because Brazil has not grown for a few years, like 13, 14, 15, 16. So we had low growth. So even if stainless grew twice, the GDP was not a spectacular growth. Then this... But it's growing. It has always grown, and it's growing for the years to come in our analysis. There is a very good connection between the fixed capital formation and the apparent consumption of stainless, for example, and this has a positive trend for the future.
So, as you say, it's a market that has always shown some growth, but sometimes less than we expected because of the GDP that was not growing. For the future, our expectation is that this growth continues, and then it will depend on the economy. That today we had the last year growth of around 2% of the GDP, so you could say that apparent consumption of stainless was 4 or something a bit more than that. And then we will depend on the economy for the years to come, but again, the growth is there. And then you asked about the anti-dumping. In Brazil, the trade defense measures have always been in our agenda. We have always been very agile in implementing.
We have an, let's say, an advantage is that as we are the only player, we know all the figures, because the domestic supply is ourselves, so we have the precise number. The imports are public. So we have all the tools we can have to implement trade defense measures. So in Brazil, the first trade defense measure was applied in 2012. It is still existing, and that was an anti-dumping against many countries on stainless and on GNO as well. So for both products, we have the anti-dumping is implemented in 2012, 2013, still in place.
Last year, we approved CVD against Indonesia, and at this very moment, we are at the final stage of circumvention for the slabs and hot-rolled coils coming from Indonesia and co-rolled in other markets to Brazil. So this is what we see as trade defense. We also have import duties, as you all know, so they are today at the level of 12.6% for the stainless and electrical steels. In the recent past, there was a pressure to reduce this, but what we see today is the other way around. So no one talks about reduction, as now we have United States with the Section 232, and we have in Europe also trade defense measures, so no one speaks about reduction in import duties.
So, answering your questions, we have measures that are there in place, some of them to be renewed, because as I said, they are from the beginning of the last decade. Some new ones to be increased with the circumvention and the import duties, that shouldn't change. So that's what we see. Or if they would change, for me, they would change to the upside, so they wouldn't be reduced.
Do you have any expectation from the timing for the circumvention case?
Short term. Still, for sure, still this year.
Hi, I'm Ioannis Masvoulas from Morgan Stanley. Thank you very much for the very interesting presentation. First question from me, I mean, Sud, you announced some very interesting targets on some of the new initiatives coming from the Botanickel and some of the other projects. But going back to the previous EBITDA uplift target of EUR 300 million on a like-for-like basis, can you perhaps provide an update in which areas you're ahead or maybe a bit behind your targets? And what shall we expect by next year in terms of today's market environment? How much of that progress shall we expect to see through the P&L? Thank you.
... So, Yannis, Tim spoke about in his first slide, and I confirm that, first of all, we are on target to, on a like-for-like basis, to reach EUR 300 million. And Tim also actually showed the delta coming from the volumes and the prices, right? So that's the market. That's a number. Any given day, you can look at CRU numbers and utilization assumptions, and you can model what that effect is going to be. But in terms of Leadership Journey is defined as self-help, what we can go out and do ourselves without any help from the market. And based on that self-help measures, all divisions we set targets. We said we'll do disintermediation. We said we'll go into higher mixes in our alloys business and our stainless businesses. We said our recycling will contribute more, right, because of the acquisition.
Those were the main targets to reach the EUR 300 million. Everybody's performing on or better than targets, right? The headwinds have been, of course, energy costs, demand, and last year it was the valuation effect of the windfall, right? But those are the things. So, yeah, in terms of the EUR 300 million, I see no deviation from any businesses. Recycling has overperformed, because remember, we said our contribution has been over the cycle, EUR 55 million, right? So that's something you have to keep in mind when you discuss over the cycle, because the EUR 300 million is over the cycle target.
That's very clear. Thank you so much. The second question is going back to CBAM. There is clearly the opportunity, assuming Scope 3 is included properly, there is the upside opportunity for the European mills, but, how confident are you around some of the risks that could result from CBAM, for example, Europe becoming an even higher cost region? And how could that impact competitiveness, both in terms of exporting stainless, but also producing downstream products and exporting those into the world? Thank you.
So I think I will take this. Europe has a challenging front, which is the Green Deal that has no sense without an industrial deal, okay? I think United States are more advanced than Europe in understanding that there is no Green Deal without an industrial deal. Now, it is not something which is reserved to the application of stainless steel, but is for everything. You've seen the big debate on the electrical car. It is good to, let's say, state that from a certain time, all the car sold in Europe should be electrical. But you need also to be sure that there is no dumping and subsidies that are coming from other countries with these with these cars. And the European Commission is aware of this and has already started to work on that.
This applies to every kind of product, of which the cars, the electrical cars, will be one of our main segments. So we are interested in this because it will be important for the development of our stainless steel electrical car. So I think it's a general problem of Europe. I'm confident that Europe, even if it's low, will take care of it and will not allow our industry to go away. Because in any case, if the industry, the European industry, will be transferred to, I don't know, Asia, nothing will change with the planet. On the contrary, you have seen, you have seen that if this happens, the planet will be worse, okay? And so there is no Green Deal without an industrial deal. Maybe Europe is low, but I'm confident that this will come.
Hi, this is Tristan Gresser from BNP Paribas, and I'm there. One question on Brazil. I think you mentioned you want to grow capacity there. What is the timeline? What are the plans? You also say you want to grow your market share there. So at what point will you consider new melt capacity in the region?
Yeah, sure. Now, actually, as I said, our priority is the Brazilian market, so, we will not invest for export. And today, we still have, capacity, so we still export a reasonable part of our production, as I said in the video, 20%, around 20%. So we still have a buffer, and the total capacity to, to supply the, properly the Brazilian market, and e- and even Americas, I could say. But then, when we say grow, the point is that, one day it will be necessary, because as, I showed in answering the, the question before, I think it was from, from there. So we do believe it will grow, and one day it will be necessary. Our point is that the roadmap is clear.
We know what to do, and we don't need a new melt shop, because as you know, we produce carbon steel that are more affordable than a product, a strategic product at the end. So my answer would be that we are ready to invest whenever necessary, and that the CapEx is much lighter than any other competitor could do to supply the Brazilian market. So this is the point. But so far, with the capacity we have, we are comfortable of properly supplying the market with our 70%-80% market share to the coming years.
All right. That's very clear. My second question, and sorry if it's a bit provocative, but we talked about Brazil, the new streams of EBITDA, but we haven't talked really about Europe. That's a question we asked some of your peers. For an underperforming asset, at what point do you look at a business and say, "Maybe Europe is no longer core?
... I would like to have your view there. Thank you.
So the answer is very clear. Europe is and remain core of Aperam. Even if today, it's a smaller part of our people, for example, only 25%, we are growing other activity. But Europe has a very competitive assets in Europe, our Aperam Europe. It is in a market which will be more and more protected by the CBAM. And despite the cycles, over a long term, over a long period, over the cycles, the return on capital employed, the ROCE of Europe is very good. Okay?
So yes, there are years in which we are very happy of Europe, years in which we are not happy of Europe, but all in all, we are happy with Europe, and especially because we have built in Europe a very competitive assets, including the fact that Europe is supported by service and solution. So we have a very large penetration in the market, and this is a stability of flow and knowledge of the market. And we have Aperam Recycling, which is the unique—we are the unique one integrated and can that can leverage on synergy in the market. So having the best competitive position in one market, it's something that will last, and there is nobody who can challenge this position in the future, because these assets are not available for others. So it's a question of endorsing the cycle, unfortunately.
We have started the discussion cycle, and cycle will remain.
Hi, it's Tom Zhang from Barclays. Thanks. Sorry, I'm over here. Thanks for the presentation.
The light just in, in front, so it's a little bit difficult sometimes to-
Okay, no worries. Two questions from me. The first one, just on Brazil, again, touching on the sort of stainless consumption per capita. You know, it's a divergence we've seen for a while, but on your presentation, you know, Brazil is not too far away from some developed markets like UK, Australia. You know, what gives you confidence that Brazil is meant to be at the top of that chart with a much higher level of stainless per capita consumption? Maybe, yeah, we'll do one more way one.
I think, being at the top is very, very long term. We are coming from less than 2 kilos per person, while we have Japan, Italy at 18, so this will take decades. But what we believe is that it should grow faster in a developing country as Brazil. We cannot compare the Brazilian economy with UK or some others you may mention, economies that are based in services, while Brazil is the industry, the economy is based on segments that do consume steel and stainless in particular. So the agriculture business in Brazil is a big consumer of stainless and growing consumer of stainless.
So I think when you look at a developed country in which services are growing faster than anything else, it's I don't see the stainless growing as fast as it would grow in Brazil. And we do have... Because it's important also to say that we have an organic growth of the apparent consumption per capita. That will happen because in Brazil, if you look at today, the number of fridges per inhabitant, the number of houses per person, this is much less than in a developed country, so and this catch-up will happen. So this will be a natural increase in apparent consumption. But we also have another part that is boosted from us, by by ourselves.
So we develop applications, like the ones you saw with Endur, the use of stainless in concrete mixers, the use of stainless in applications that before were carbon, were plastic; this is growing very fast. So I would say we have a part in Brazil that whenever you look at the economy or the segments that will grow, we see that it will grow, the stainless, and we have our efforts in which we measure and we put targets of growth that would be above this level.
Got it. Thank you. And then just another one on sort of the cycle or in your presentation, Tim. You sort of showed the recycling and renewable cycle overlaid against the stainless cycle, and you were saying the peaks and troughs are the same. Not the same magnitude, I mean, they come, you know, they're, they're procyclical. But obviously, with how earnings have developed with recycling renewables, as you were saying, Sud, they've offset, to a large extent, stainless Europe in the last year. So how do you sort of see that developing in the future? Is this just a one-off, you know, really good year for recycling renewables, it goes back towards a more mid-cycle number? Or do you think they're actually more sort of acyclical or, you know, countercyclical, the earnings between recycling and stainless?
So it will not be fundamentally countercyclical, because you understand that we are in the same area when you are recycling scrap, so you are collecting, and if the volumes are lower, you have an effect on volumes, which is lower. So 2023 has been a low, let's say, year even for recycling, which leads to the consideration that if it's been profitable at this extent, means that the resilience is much higher to cycle than in the rest. And for the other components of Aperam Recycling and Renewables, forest will always be, let's say, stable. We have a cost base which is realistic. We have a productivity which is unbeatable. Nobody can have the same productivity. We have done extensive benchmark.
We have, let's say, the best second competitor using eucalyptus, which we have sold them as a seedling. So, there is no doubt that the performance of the energy will continue to grow. And on top, they are producing new products which were not existing before. So these are typically non-cycle industries. Then you have alloys. Alloys have a cycle, but first of all, it's counter-cycle, or at least it is depending on things which are completely different from the commodity business as stainless steel, okay, can be different. And second, the history of alloys explains that alloys is a unit based on innovation, okay? Our cycle are mostly linked to the fact that every 10 years, 30% of the products we have are not existing anymore.
So we have a continued renew of products, and we continue to have products growing, reaching a maturity, so decreasing then, and so there can be a cycle, then going down and again, okay? Now we are developing so much. You have seen our new plant in India. So for the moment, we are not putting any virtual, let's say, visit, but in the future, we will do, because it is an amazing application.
Thanks.
Hi, sorry, Maxime Kogge from Oddo. Two questions on my side on Brazil, because it's topic of the day. So the first one is, actually on the S&S business. I think you're quite underrepresented in that area in Brazil, and that's in contrast to Europe, where it's a strong competitive advantage. So how come is it, how come it... I mean, this business is not that developed in Brazil, or is there any plans to change that? So that would be my first question.
So, sometimes it's historical, and you have a certain level of, let's say, link with your historical customers, and so you keep your historical customers. Service and solution was an activity which was developed in the year 2000, but was really poor. Really poor in the sense that the facilities of the service center, when I arrived there, was the worst in the world. And today, we have the best, probably the best and the nicest service center in the world in Campinas. You see, externally, is all stainless steel, and so, and internally is the perfect layout and competitiveness of the machinery. So we have developed, but not to the extent of Europe. Also, because the problems is different.
In Europe, the problem is that the market has been highly penetrated by imports, and being with S&S was a way to not compete in our segments with the imports, okay, which are typically entering by the independents as distributors. In Brazil, the independent distributors are buying very largely in very large majority by us. So there is not the same sense of urgency and sense of the economics.
Okay, second one is on... I think you highlighted that around 20-25% of Brazilian production was going overseas, was exported. Can you talk us more about the export market? Is it the U.S.? Is it the rest of Latin America? And don't you see this segment as a bit at risk, given that you have so much, like, overcapacity in Asia, and that could obviously wipe you out in the long term of this market?
Yeah, well, we do have a mixed strategy for exports, for obvious reasons, what you exactly said. So I wouldn't supply 3 or 4.2 millimeter to Indonesia. It doesn't make any sense. So what we export today is more on Americas. The majority is exported to Americas. And then answering your question, isn't it a risk because of the Asians? Of course, I don't have in Latin America the advantage I have, or in United States, the advantages I showed in my cost curve here. No, I don't have the same, but it's not zero neither. So I have logistic advantages, I have traditional customers for which I supply for decades already that prefer to buy from us. In, let's say, in Latin America and United States, we have the Section 232.
So what we are exporting there is normally what is within our quota. That, again, we see no chance that is reduced, and, if you ask me what would happen, eventually an upside, an increase in our quotas, because we have never been a threat to the American industry in terms of security. That was the reason for the Section 232. So, and then I said, Americas is majority, so no risk in United States. They are blocked with the Section 232, I'm not. And in the South America, we have the logistic advantage, I said. So a big part of it, I ship by truck, so it cannot be compared lead time, risks, and, forex risks with my Asian competitors.
Then I do export a bit for, for other markets, but then it would very niche. So in which I don't see my, the Asian competitors, playing there. So it's less commodity grades or something to complement Europe whenever necessary.
Hi, Moses Ola from J.P. Morgan. Thank you very much for taking our questions today. First question I just had was just on the very near-term outlook versus your Q4 guidance, if I may. So what we've seen over the past couple weeks is a lot of nickel supply come out of the market, and we've seen nickel prices obviously move higher recently. In terms of just expectations to raw material prices, obviously, scrap pricing has moved higher as well. What are your expectations here for raw material prices on the nickel side, with all the supply that's gone out? Do you think that the supply that's come off is temporary, or do you view it could be more permanent?
Cyclical, always there, even in the supply and demand of scrap. So it's a temporary, temporary, let's say, up and down and, and balance between supply and demand. We, we compensate with ferronickel if there is a lesser scrap, and we have more scrap, and we reduce ferronickel. This is the, the typical. Then, for guidance on price, we are not here to guide on price, so I will not give you this. It's, you know that, in our, let's say, on our release, we have already guided on the fact that, we have exited, exited, Q4 with a market which was difficult, and the market, what we were expecting is a market is still difficult in Q1 in Europe.
Thank you. And then on the recycling business, when could we expect that full run rate of over EUR 100 million EBITDA, through the cycle?
I gave it as 2030. Yeah.
Good afternoon, Stijn Demeester, ING. Two questions. The first one is on your M&A preferences. Can you talk a bit about which areas do you see the more potential? I'm assuming alloys and recycling, and what type of transaction, bolt-ons like ELG, or would you consider some larger scale M&A? The second one is on Botanickel, maybe a footnote, but have you secured land agreement with owners to back those EBITDA growth targets, or how do the economics work? Do you buy the land? Do you lease the land? Can you just talk a bit about that? Thank you.
Okay, for M&A, I will say that our preference is always on three aspects. The first aspect is there should be synergy or a very and solid good reason to do an M&A. We have done only one M&A last year, was on the forest. We have done two years ago, was ELG, and we will always proceed with the logic that is linked to our business model and what you have seen, and our business as a producer of stainless steel, electrical steel, and a very much integrated producer in the circular economy and the sustainability. The second is that should have also economic sense.
We are very much attached on return on capital employed, as I said, and so we will always look at that with a very wise attachment, and on the fact that when we compare external growth to internal growth, our internal growth is a typical area that should be higher than 15%, and the large majority is much higher than 15%. So if we want to grow externally, we need to have this as logic. And the third one is also that we want to keep, let's say, a solid balance sheet. That is one of the things that we have always shown to you, because part of the duty of the company is to be solid, to have a clear dividend policy and to be shareholder friendly. It's part of our duty.
For Botanickel, I ask Bernard to explain.
Well, I would say that for Botanickel, there is not a predefined model that we are, that we are running through. Botanickel is a, is a business that we will perform in many different places in the world, and so we look at the local situation, and we will adopt the best model or the best approach vis-à-vis the local situation that we encounter.
Hi, Andy Jones from UBS. Just one quick one on the Brazilian forest. If you compare it to the cost of met coal, like in terms of your cost of charcoal, the cash cost, which is clearly pretty consistent, how does it compare? And, is the consumption ratio in the blast furnace similar? And, you know, how do those economics compare?
Yeah, sure. Well, yes, we can make a TCO, total cost of ownership, calculation of the cost. The coke has an advantage of the density, so the productivity of the blast furnace can be slightly better because of this density. But then, it has some disadvantage, and the main one is cost, and the difference in cost is huge. So it's really ... Well, let me make an easy calculation. It's more than double. So the charcoal is much, much more competitive. Then you may be asking yourself: "So why don't everyone produces with charcoal?" For a few reasons. The first one is that Aperam South America has the biggest, best furnace operating with charcoal in the world. And I can tell you that it's not easy to be operated.
I mean, I think some of these white hairs of Tim here came from the blast furnace when they changed it to coke, from coke to charcoal. Because it was really difficult to make it work because it's too big for charcoal. As I said, it's the biggest one by far, and the second biggest one in the world is as big as our small one. So then that's the reason. So it's much cheaper. So it's much more competitive.
So, Andre,
And also, sorry, and just in general, we don't rebound it. Also, you need 156,000 hectares of forest, huh? Don't forget, yeah. You know, what is this? It is if you take some kind if you take a land of the width of 1 kilometer-
Mm-hmm.
You go from Belgium to Sicily, as land. Just have in mind.
Mm-hmm. Yeah. Okay, now that's clear. Thank you.
Yes. Good afternoon, Frank Claassen of Petercam. I've got a question on the use of scrap in Brazil. How much of your sourcing of raw materials is already scrap, and how quickly can that evolve in the future? How important can a scrap market become in Brazil in the future?
I start, you conclude?
No, I do it. Simple. All the developing market have not enough scrap to go to the cir... To go in the way of circular economy as, for example, Europe and United States. In Europe, we can run all the plant in Europe with around 90% of scrap because the life cycle of a stainless steel is 20 years. In 20 years, in a market which is growing with 1% or 2%, so in a certain stability of the consumption, at the end, you collect what, what is, let's say, the end of life plus the consumption of the industry, and so you have an equilibrium. In grow- in developing market, and typically, there are many statistics about China, et cetera, you.
You have normally a ratio, depending on the level of growth and depending on where the industry has started, between 25 to maximum 50%. In Brazil, we are closer to the 40, 50%.
Okay, thank you.
Hi, over here. Yeah, Neil Sherlock from Citi here. I just have a quick question on the Botanickel. You mentioned that you guys are expecting a double, low double-digit, EBITDA improvement from Botanickel. Do you guys have any guidance on what's the amount of land or the amount of, given, like, the X amount of yield you can get of nickel per hectare of planted? And to achieve that EBITDA target that you're saying, what's the expected amount of hectares or expected amount of raw material you need to, to be able to achieve that? And will you be adding that in, or is there already a capacity for that, in what you own right now?
No. So, like I explained, that's, that came in my third part, which is the upside of carbon, right? So we were talking about that. That low double-digit EBITDA came from what we expect as nickel value from what Bernard has shown as the ramp-up, calculated compared to today, what we buy as primary raw material. Right? So, as he has explained before, it's in a pilot phase. It's a working pilot. I mean, And, the discussions, and that's why I put in my chart, the CapEx depend on the growth ramp-up.
So that's if you were to generate the same amount of nickel in that you're using at the current moment, price comparison, if you were to use botanical instead of primary.
Mm-hmm.
Okay. And then in order to achieve the current nickel, do you know how much?
Yeah. So basically, in Europe, for example, let's say we have an average of 90% scrap and other parts. Then, Bernard has shown five different source or four different sources, right? Recycling, primary scrap, ReCyCo, and Botanickel. So and then we make an allocation currently where the nickel will come from, and one of that is Botanickel, and from that.
Okay, that's clear. Thank you. Yeah.
Yes, hi, it's Tristan from BNP Paribas, and again, just a quick follow-up on the sustainability and the CO2 cuts presentation you made. By 2030 in Europe, are you able to really... I know you're gonna be able to cut your Scope 2 emissions with renewables, et cetera, but the Scope 1, is it gonna linger, or do you have an option there to cut it? Because you get the CBAM kind of benefit, but if by 2034, there are no free allocation and you still need to buy to cover your Scope 1, that's kind of a bit of an offset. Is there a way to cut the Scope 1, or yeah, there is gonna be a remainder of it, and you'll have to pay for the credits for it?
No, there's clearly a way also to go down on Scope 1. We don't have separate targets also towards SBTI between Scope 1 and Scope 2. But I told you at the basis of what we do, we go to a maximum usage of scrap. The carbon content of scrap is not existing, huh? So the scrap is already stainless steel. And so the carbon that comes from your Scope 1 is mainly coming through the raw materials that you use. When we use Botanickel, when we use scrap, when we use what comes out of ReCyCo, this will also have a beneficial effect on Scope 1.
... Sorry, it's very dark in here. Did we overlook anybody? Any questions left? Thank you. Just, Ioannis Masvoulas again from Morgan Stanley. Just one more question. You showed a very interesting chart with a cost curve. I think that was just for Aperam in Brazil on a landed basis. Where would Europe sit on that cost curve?
Similar, in the sense that, landed basis without circumvention will be, will be exactly the same. So in Europe, we have a very competitive asset, as I, as I said, and I repeat, including the fact that we have a strong support from Aperam Recycling with the synergy and, and service and solution. Then, against all the countries like Indonesia, China, et cetera, we have a strong protection, anti-dumping, anti-subsidies. So the large majority of the producer country, which have, the, the use to dump, this is covered. The only thing that still is, is in discussion with the, with the, commission, is the circumvention. So there are countries which are circumventing. What is circumvention?
If you buy, for example, hot bands, which have anti-dumping, anti-subsidy coming from Indonesia, and then you do a light transformation in, I don't know, in Thailand or in Turkey, and with this, you go to Europe. This is typically circumvention, because you are not paying the duty, which are generated by the protection of raw material, by the subsidy, et cetera, on raw material, trying to, let's say, sell something which is different from the origin, okay? This has been already treated by the commission with the anti-circumvention against Turkey for hot rolled, and now we have other three files for the cold rolled.
Very clear. Thank you.
Yeah, Maxime from Oddo, last one on my side. So the word Tesla has not yet been pronounced, and yet I'm quite tempted to ask a question, given how, I mean, it could be a real game changer for you and the rest of the industry. So as far as I know, the first Cybertrucks have been delivered in November. Unless I'm wrong, they were made of stainless steel, and unless I'm wrong, they were made of your stainless steel. So is there anything more you can say at this stage on this contract, and how we should think about it for your future earnings and power here?
So unfortunately, we are linked to an NDA, and so we cannot disclose any more information about this. You have a lot of information if you look at the site of Department of Commerce, because they have published everything, so you know the sites, you know everything. What I can say is that stainless steel is a fantastic product. Since many years, it could have been used for the body-in- white of the, of the cars. Why we don't use in the, in the cars? Because this industry is dominated by two big players, which are carbon steel and aluminum. They are much bigger than us. The way of managing, for example, stamping carbon or aluminum is much easier than stainless steel, okay?
This has been the fact that the automotive industry, which is very conservative, has always looked at the solution as if they were the only solution for carbon steel and steel and aluminum. But now, with the electric car, there is hope that people are changing a little bit mind, mindset, and this is happening in particular, for example, in the battery case, okay? In battery case, stainless steel has a solution, which are by far efficient, lighter, with higher volumes and cheaper. And this is something that the electric vehicle producer are really looking at, and it will be a game changer for stainless steel. But also in body-in- white, there could be, let's see, the experiment of Cybertruck, and when it will be larger in the market, maybe, maybe the somebody else...
But you know, there are a lot of applications that you cannot imagine. Even you have seen the Space X is now in stainless steel, okay? It's fantastic. Who has ever imagined that in the past, that instead of using carbon fiber or titanium, you can do a rocket going in the future to Mars with stainless steel? And indeed, stainless steel is the product which has the highest potential for this kind of sector.
Okay, appreciate it.
Just one final... Sorry, me again. Just on the targets, just to clarify, the EUR 90 million, or let's say the doubling of EBITDA for recycling renewables, is that just upside from carbon, or is that everything? Because I guess you've specified that some of scrap recycling, recycled bioenergy or growth, that's within, you know, new value streams, and then there's upside of carbon. That EUR 90 million target, that's for everything together? And then if you could give just a bit of color on the timing of when that flows through, because you said, you know, EUR 40 million improvement will come within Leadership Journey 5, so I guess that's 2025, and then the rest comes later, just sort of phase in.
So it's
... So the EUR 40 million, you see there's one, one of the four use cases which drive that EUR 40 million has come from aerospace recycling, right? So, so that's your answer, and that's the delta. So we've said over the cycle, average of EUR 55 million for recycling to start with, right? Then for 2025, I've given EUR 40 million, out of which recycling, aerospace recycling is one of the parts. And the growth, so in terms of numbers, 100 - 45 is 45, right, till end of 2030. And part of that will come in Leadership 2025. So that's the math, so I think it's -- we have enough colors to work that out.
Okay, thanks.
Okay, I think we have no more questions. Okay, so if there are no more question, we have a reception now, down. I would like to, let's say, to conclude this Capital Markets Day, say a few words. First of all, thanking you very much, because it has been a long day, but I hope interesting in the format. It will never replace a visit in Brazil, huh, that's for sure. I really suggest if any day you are transit that way, et cetera, ask us to visit the plant or the forest, and it will certainly be possible to organize that. Now, as we have said many times, a company which is in transformation has to show the reality of this transformation. Sometimes it's difficult to assess it.
Sometimes it's difficult to understand also what is the sense of this ESG commitment, okay? When you see environment, social, governance. Governance is easier. But when you do social, I think that Brazil is showing something different. Social means the people who are there, how they live, the population, and you have seen big numbers. When you see environment, you have seen all the initiative we are taking, which are solid ones, and then will be part of the economics of Aperam. The company is prepared for the future. My team is very solid and very competent and really enthusiastic what is the transformation of the company and our journey to the sustainability. I hope you feel the same. I hope that you, whenever you are investor, I hope you will feel the same.
I thank you for the participation. You will have time for further question later during our reception. Of course, Thorsten, Sud, and myself, we are all always in roadshow and meetings with you, and we'll be happy in the future to update about the situation of the markets, et cetera. At least, I hope that from today, you have clearly in mind what is our engagement in term of Brazil and sustainability. Thank you very much.