Good morning, everyone. Welcome to the earnings call for the second quarter of 2022. We have Ricardo Carvalho, our CEO in the company, and Luciano Alves, the CFO and investor relations director in the company. The presentation of this event is on our investor relations website, where we'll also provide the recording of the event after we end. Before we proceed, I'd like to clarify that some of the information in here is just expectations or trends, and they're based on hypotheses and current perspectives from the company's management. There could be material variations between the results, performance, and future events, and they're that way, thus not forecasts. The results related to different factors like general economic scenario in Brazil and other countries, levels of interest rates and currency exchange, protectionist measures in the U.S., Brazil, and other countries.
Changes in laws and regulations and competitive rules globally, nationally, and regionally. After the presentation, we're gonna start the Q&A session, where more information will be provided. Now, I would like to pass on the floor to Ricardo Carvalho. He'll cover the main highlights of the second quarter of 2022. Please, Ricardo, you may proceed.
Hi, Amabile. I wanna thank you and start off thanking you for the participation as you participate in this earnings call, the results. The second quarter of 2022 was set by another historical record in adjusted EBITDA and also advances in all of the ESG pillars. The completion of our follow-on and the advances in our innovation projects and technology projects.
Despite the volatility in aluminum and iron, the average price of $2,875 per ton was 20% higher compared to the second quarter of 2021. This is the main lever for our strong results at CBA. We are able to reach a net revenue of BRL 2.3 billion, a growth of 22% compared to the last year. Even with a drop of 7,000 tons in the volume sold in the same period, the increase in the costs were about 9%, being lower than the increase in the revenue, which contributed to the adjusted EBITDA. That was an all-time high of BRL 641 million in the quarter and an EBITDA margin of 27%.
I wanted to highlight that in the quarter, the company reached the second-biggest net income in history, BRL 511 million, growth of 29% compared to the same period in 2021. Besides the financial highlights, we also completed the follow-on in April for CBA, improving liquidity with a free float of 32.1% and then a daily volume traded of BRL 63.2 million in the quarter. In the ESG front, CBA adhered to the Ambition Net Zero, which is from the UN's Global Compact. We also received an important achievement, the highlight of the best in ESG for the mining, steelwork, and metalwork categories.
Reinforcing our commitment with this journey and the initiatives through innovation and technology, we performed a partnership with Senai in Paraná for the development of a national aluminum sheet for the application in lithium-ion batteries to strengthen our strategy at CBA for the development geared towards electric vehicles. Finally, we're able to complete on June 15 the transaction for the purchase and sale of the Nickel company with a trading company, Jehua Global Limited, in line with our strategy to keep focus on the aluminum business. Now I'm going to pass on the floor to our CFO and IR Director, Luciano Alves, in the company so that he can introduce a bit more of the details on the aluminum market and our financial performance at CBA. Luciano, I'll pass on the floor to you.
Thanks, Ricardo. I'm Luciano, the IR director at CBA. I'm gonna start talking about how the aluminum market behaved in this quarter. In the last few months, we saw China had increased their primary aluminum production through alloys and new capacity, and that was already expected by the overall market. Even with this growth in the offer and the supply, the overall global market was deficient, and they're lower than the level that was considered ideal. In the second quarter, we had the physical global market was tight because stocks were at a historically low level, and we had the fifth quarter consecutively in a deficit in the world. The primary aluminum demand was pretty resilient, and the country increased its exports for transformed aluminum.
Exports were an important consumption channel in the second quarter of this year. In the other countries, we had a reduction of demand, mainly led by Europe and the conflicts in the region, but still the levels of consumption kept at the same pre-pandemic levels as we can see in the graph on the left side. On the next slide, we have more details about the aluminum production in the quarter on the left side graph. We were able to see that China was the main party responsible for the increase in the supply, growth of 3.9 compared to the last year. There's an expectation that there should be a slowdown and a downturn in the growth of this supply, not only because of the conclusion of the projects, but also high costs.
On the other hand, in other countries, the growth of the production has been consistently at lower levels because the pressure for cost limits the expansion of the supply and the trends for cuts in production. In the last quarter, two of the main productions had cuts related to increases in costs with a reduction of 254,000 tons per year, the cost of energy specifically was impacting the profitability of some smelters in Australia and in Europe. The risks of new closings of smelters is quite relevant because energy rates are historically high. According to the consulting CRU, 27% of the aluminum production in Europe and 67% in the U.S. were exposed to the spot energy prices in the next 8-10 months. These don't have a mid- and long-term energy contract for 2022.
We're expecting an increase in the global production, but even so, there's an expectation for a small deficit of 93,000 tons in the year. On the next slide, I'm gonna talk about prices and premiums. The aluminum price kept a downturn trend in the last quarter, mainly influenced by concerns with global warming and other macroeconomic factors had an important significance. Interest rate hikes, conflicts in Europe, lockdowns in China, all these factors influenced this downturn in prices. With this drop, we also increased the amount of smelters operating at a red level because the price cost has been a challenge for all the industry. Premiums continued to be at a high, even despite the recent drop, and this was a reflection of the metal prices also in Russia and also concern with future demand.
What has sustained premiums at high levels are lower stocks globally and logistical costs that are high and risks for new closings and smelters. On the next slide, I'm gonna talk about the cost in the industry. The margins of the smelters in China and out of China had a downturn compared to the first quarter, even with the reduction of some raw material. With the alumina prices reduced in China and abroad, the price in China also dropped, but even so, the drops in aluminum prices were more intense, pressuring the margins of the smelters. A good part of the liquid aluminum had a price that was above LME, and we can notice this on the left side. Producers on the bottom of the curve are mainly Chinese that have been suffered with high energy costs in the last month.
Integrated producers like CBA are less exposed to these external factors impacting costs, and that's why they have a better positioning in the global curve. Now moving on to the next quarter, in the next chapter, sorry, I'm gonna focus on our financial performance in the second quarter, moving on to slide nine. It's important to mention that recycling was one of the main highlights in this quarter. We incorporated the volumes of Alux do Brasil, which contributed to 6,500 tons in the quarter. Even though the volumes of recycled materials increased 14% compared to last year, overall, the aluminum volumes had a drop of 6%, adding up to 112,000 tons.
In primary metals, we had a reduction of added value products, especially the billets, since the demand in civil construction is lower in comparison to the same period last year. There's some stocks in the billets in the market due to the high costs in imports last year. When we compare to the first quarter of 2022, we had an increase in the volumes for primary. We sold more of the ingots in the market in this quarter with best premiums, and we gained markets for the imported products. The sales of transformed products had a drop compared to the second quarter of 2021, especially for sheets and foils.
When we consider the first quarter of 2021, there's also a drop for consumer goods, but also the sales of the foils were stable. When you consider sheets and foils, we were able to advance in the packaging for flexible packaging as well. Moving on to the next slide, we're gonna talk about the performance of the financial indicators. The net revenue was a growth of 22% compared to the second quarter of 2021, influenced mainly by the increase of 22% in the revenue of the aluminum business and also a peak in 20% of the aluminum in the LME, offsetting the reduction of the volume that I already mentioned, Matt, in the previous slide.
Another factor that also contributed to the growth of the revenue was the increase in the premiums practiced by CBA in all the product lines, primaries and transformed items, a reflection of a tight physical market with high logistical costs that are also mentioned previously. In the aluminum business as well, it's important to mention that the negative effect of the strategic hedge of BRL 18 million in the quarter was 90% lower than the negative effect in the same quarter last year. This hedge strategically stopped being executed by the company in June 2021, and there were some derivative contracts that were active till May 2022. From the next quarter onwards, we'll have more of an impact in this hedge.
About the net revenue in the recycling segment, we had an increase of 96% in the second quarter compared to the same period last year, considering the full integration of Alux do Brasil, which contributed BRL 107 million in the quarter. We also had a reduction in the revenue from other segments in the second quarter of 2021 compared to the second quarter of 2021 due to the trading of ingots. This is gonna be partially offset by the greater volume of alumina due to the anticipation of the take from of ingots.
About the products sold in the second quarter, we had. Also that's influenced by the inflation and the cost of the industry, the energy crisis, and logistical cost increases, as well as an increment in the products sold by Alux, which is connected to the LME rate, especially for scraps. This was mainly offset by the cost of the operation, the trading, and also for the ingots. The increase in the average cost for production of liquid aluminum was 33% in the quarter. Due to the timing for the stock or inventory turnover at an anode paste and 59% energy, 22%.
Adjusted EBITDA, we once again reached an all-time high with an important BRL 277 million, which is significant, and levered by an improvement in the aluminum business, an increase in the prices practiced and the aluminum prices in the LME and the premiums practiced for the primary and transformed products. The consolidated EBITDA margin also reached an all-time high with an increase of 8%, reaching 27% in the semester. We also had the second net income in history, result of the favorable scenario due to the prices practiced. Well, in slide 11, I'm gonna talk about some of the CBA investments.
In this quarter, 55% of our CapEx is already related to expansion and modernization, considering the expectation for expansion in the market, we're following the rhythms considered in the IPO. One important highlight is turning on the pot rooms. In this project, we already have the 58 pots operating in the pot rooms, and they're gonna be completed by the end of the third quarter of 2022. By the end of the third quarter, this project is already gonna be delivered. In April, we also approved the turning on of the pot rooms one for the startup expected for 2025. Modernization of the pot rooms has already been hired with a scalable risk construction work.
On the next slide, I'm gonna talk about the free cash flow in the company. Moving on to slide 12, the cash generation pre-dividends was BRL 166 million, including expected investments. Working capital was influenced by the interruption of the ingot trading activities with longer payment terms. Another important relevant factor was the increase in the balance of the inventories due to the increase in the prices of the inputs and also the reduction of the sales of transformed items. Important to highlight that in this quarter, the impact in the strategic hedge was BRL 18 million. This has stopped being done in June 2021, and the active contracts are gonna be ended in May 2022.
In slide 12, I'm gonna talk about the debt profile at CBA. Our debt is mainly traded in dollars, 88%, and also the contract for the stock with the funding from BNDES, which is dollarized as well. We reached BRL 1.5 billion in 2022 without considering the credit line or credit facility with maturity date in 2026, which is gonna strengthen our position as well in liquidity due to the profile of the sales, so it's about four years. The net debt was at BRL 4.4 million, and the adjusted EBITDA in the last 12 months was kept stable and 0.68 times. We ended the quarter with a capital structure that's very comfortable. Great.
Now I'm gonna invite Ricardo to talk about some of the ESG highlights. Thank you very much, and we'll see each other again.
Thank you, Luciano. For ESG, we, as we've mentioned, were able to have ESG completely incorporated in the management and culture of CBA with the targets of four executives. We've been moving strongly in this direction to be able to reach our objective and our targets for 2030. We had some important environmental and social evolutions as well as in governance in this quarter. Especially about the environmental part, we had our target for the carbon reductions approved by the Science Based Targets.
CBA is the first producer of primary metal with a commitment to reduce greenhouse gas emission, and this is validated by this movement, which is led by the CDP and by the Global Compact, U.N., and WWF as well, and it's in line with the Paris Agreement. We are also adhering to the net zero movement, which is an initiative from the Global Compact. We intend to engage the companies to reduce these greenhouse gas emissions. It's really in line with the SDGs. We also advanced with our Reflora project in June 2022 with planting 460 trees, and we're gonna be expanding this to 15,000 this year still.
The Reflora project is really intending to recover ecosystems, native vegetation, and this is an environmental and a social project that we generate local activities for small farmers and we also have carbon capturing initiatives and carbon credits in this project. Moving on to the next slide, we had some important evolutions and CBA reached 16.4% versus 15.3% in the first quarter of 2022. This is very relevant. In leadership, we also took on 20% women in leadership position versus 19% in the first quarter. We performed a census on diversity to understand the perception of the employees in regards to diversity, equity, and inclusion.
We launched the Ser Família, which is new program for parentality in CBA with benefits for different types of families without distinction for gender orientation and social levels. We were very happy with the census showing evolution at CBA when it comes to diversity and feeling more comfortable in the company, feeling involved. We are starting to move ahead to really have not only diversity, but also inclusion. When it comes to governance, we received the award as the best ESG in 2022 in the mining, steel work, and metal work categories, granted by the Exame magazine. We also progressed with our sustainable supplies program, where we've been working on structuring the robust program. This intends to influence the supply chain that works with us for aluminum.
In this quarter, we've been able to complete 100% of the suppliers, strategic suppliers that have already been certified. This is an important step so that over time we can monitor and keep up with working with our suppliers in the evolution of the sustainability and ESG. We also kept our A classification and the MSCI rating, which is also very important to show us how we're doing. Moving on to the next slide. Here, we're basically showing you a bit of a summary of what me and Luciano mentioned till now, on the main messages. The first one is the foundations for the aluminum market that are still firm with a perspective for a deficit and low level of inventory.
The level of inventory in the world is a really low level compared to what is considered, a minimum level, which would be the 50 days. Aluminum is also in basically all of the applications, one of the main metals in the world for low carbon. It's in the application of solar panels, electric vehicles, transmission lines, and so on. Cost inflation is relevant for the industry. We've all felt this. CBA is a little more robust in cost inflation, as it's integrated from bauxite all the way to a laminated and extruded product. We have our own bauxite and alumina, and also our own energy generation, which gives us a little bit more robustness, for moments with high inflation.
The results in the quarter also showed solid performance from a financial perspective, as we presented here. The modernization and expansion projects also gained traction. We were able to anticipate line three, which was expected for next year. We were able to anticipate this for this year. Now we're working on other projects which are all in line and committed to the IPO. Luciano talked about this as well. Some of the advances we just mentioned in ESG, also stressing our commitment to be a low carbon aluminum producer contributing to solutions in this area in the world. Now I'm going to move on to Amabile so that we can begin our Q&A session.
Thank you, Ricardo. We're going to start our Q&A session. To participate, participants can send their questions by chat or raise their hand on Zoom, and we'll open up your mic, so you can ask Ricardo and Luciano directly. The first question comes from Caio Greiner from BTG. Please, Caio, you may proceed.
Hi there, guys. Good morning. I have two questions here on my side. Just about the premiums, I think that this was a very positive surprise for us. For primaries and transformed items, the premium was stronger than what we expected. I confess that I'm having a bit of a difficulty to understand how much is really an improvement in the premiums or how much is just a price lag effect. It's difficult to determine how much of the is each one.
I hope you guys could help me a bit more to understand this. Looking up towards the third quarter, we've already seen that it dropped a bit. There are levels that are really high, but what should we expect in these premiums up ahead? If you could maybe break this down into primaries and transformed items, that would be great. The second question about demand is that we saw a performance of volumes that was way lower than what was expected in the first quarter. You talked about this as well, and some of the reasons for the reduction in the demand from civil construction and consumption being a little worse. I wanted to explore your expectations a bit more for the second quarter.
Because if we annualize the level of sales from the first quarter for primaries and transformed items, just like at these two segments, you'd have a level of 350,000 tons per year. Is this pretty much what you're looking at, looking at 2022? Could you share how this is with the orders for the next months and what you already have as visibility? What are the sectors when you look up ahead that are really calling your attention upwards and downwards? Then a final point which is how the ramp up of the pot rooms three and this environment with a weaker demand, what could you do with these volumes? Could it be exports? Are you gonna reduce the utilization in another pot room that's now operating currently?
I wanted to understand a bit more of the volume dynamic. If you could help me with this, that would be great. Thank you.
Thank you for the questions. Just to organize some of the answers here about the premiums. We follow the market premium. The main difference maybe in your calculation is really considering the lag. There's not a perfect formula for the lag. There's a trend, and it's what I always try to explain, which just to remind you, most of our sales are related to the previous month, the average price, and premiums of the last month. There's also part of the previous quarter. On average, like 45 days is a good number. It's not 45 days, it's perfect, right?
'Cause sometimes you have income concentrated more towards sales that are more in the end of the month that kind of pull this number a bit. The difference, and we've been calculating this, was the difference between the calculation you guys work on and the actual price of the premiums we have here is really based on the lag, and that's what can explain this difference. Of course, the product mix. There's also an issue of how much we're selling in each product and how much each product has the market premium. This influences the average premium that we can calculate. That's basically it. We follow this trend. You've seen that, and we're at a moment where it's quite interesting for premiums this year. We also had some sales.
Even considering the reduction in sales I've been demonstrating, there are some spot sales and then these naturally with a market in a peak in premiums. In the last quarter, we had two important factors. Exports continued. We had exports in the first quarter and the second quarter also to offset part of this loss in the internal market. We also sold ingots in the internal market and the spot market, which is basically substituting the imports. The volumes that are not recurring in contracts, but in practical terms, we end up performing with good results considering the spot premium in the market. When we close the premium topic, that's pretty much it.
It's probably the lag, but we can maybe search for ways to bring in more information to you and give you more visibility on this number. When it comes to the demand, the visibility for us is still limited. I'd say that the first and second quarters have behaviors that are very similar when it comes to the Brazilian demand. The first quarter has the month of January, which is naturally worse. The rest was pretty much similar. In our expectations, we should follow the same pace. You did mention a calculation that in our vision mentions a few factors. Naturally, you have seasonality here, and this is not a relevant volume, but it's important. In the second semester, normally you have a bigger demand for certain segments, especially those that are preparing for summer.
Packaging, consumer goods, and others that are starting to buy more in the second semester for our new customers. Also, they're gonna produce the products that are gonna be sold in summer. There's a bit of seasonality. We also had a first semester that was below expectations. As we're looking at it here, Caio, liquid aluminum, we're always producing our full capacity. This is not changing. The second question about the third pot room, that doesn't change also. The pot room three follows the ramp up, and it's gonna reach its capacity at some moment in the second semester, and then we're gonna keep up with a pace of 380,000 tons without major changes. What changes for us is the consumption of liquid aluminum is stable.
What changes is in the second phase, which is how much we add of scraps in this entire mix. Of course, this will depend on the demand. Just to give you some examples of what happened in the first semester with this reduction in sales, especially for the billets and for the sheets. These are the two products that most include scraps in its composition. It's not a business decision. They naturally have more scraps in their composition. When you have this reduction of the volumes of these products, then you have a reduction also of the addition of the scraps in the mix and the reduction of the volume in production. Not in the pot rooms, but in the actual smelters. That's a bit of the explanation of the volumes in the second semester.
When you look at the rest of the year, when we look at how we've been performing in regards to sales, it's natural to search for alternatives that can add the additional stocks we have. In the stock in the last quarter, the main impact was not volumes. There was a bit of a volume of the stock, but the biggest impact was the prices. The cost of the inventory or stock is increasing, which affected our inventory. Naturally, towards the future, if we're not able to sell in the internal market, we're gonna try to export this. The exports of ingots and our commodity that naturally will have the worst margins. Even so, you have the external market as an alternative. This is how we're looking at it, Caio.
Eventually, we could have a lower volume compared to last year, but it's because of this factor, because we are producing product mix that takes less scraps, and that's why you have a total volume of production that's lower.
Wonderful, Luciano. Thank you very much.
Thank you, Caio, for that question. The next question comes from André Vidal from XP. Please, Andre, you may proceed. Andre, we can't hear you. I don't know if you're saying something. Maybe you're on mute. Hello, Andre, can you hear us? Maybe we can move on to the next one, then we'll come back to Andre. The next question we have here is from Daniel Sasson. Daniel, you can open your mic, please.
Hi there. Can you hear me?
Yes, we can hear you.
Great. Thank you for the questions, and congrats on the results.
The first question I have is a little more macro, and if you could maybe share with us a bit of the estimates of possible closings of smelter capacities in Europe if the energy prices continue to go up in that region. We've seen some risks in a energy crisis, especially with the approximation of winter and possible impacts that this could bring maybe to the supply-demand for aluminum around the world, and I wanna thank you for that, if you could clarify. Also about some of the projects with the recovery or restarting of the pot rooms one that you're expecting for 2025. Is there a chance that we could anticipate this? Is this more of a capacity operational issue to just have them started from three years from now?
Is there also another concern from TBA about possible impacts on the supply and demand in Brazil, not adding that many products in Brazil to the point they can maybe get in the way of prices or premiums? Finally, about expansions, could you give us an update on the bauxite project, the Rondon project? I'd thank you for that. Thank you, guys.
Thank you, Daniel. I'll start answering the second and third questions, and then Luciano will talk about the first ones regarding Europe. In the second question, the forecast to resume activities in pot room one in 2025 is not in any way related to market perspectives or any other limitation or concern in this way.
It's just the time we need because in this case to restart the pot room one. It's not just renovating them and starting the operation. We also need to deploy some projects for the reduction of the bottlenecks in our supply chain to be able to increase our capacity of our alumina refinery because nowadays we produce alumina that has a lot better quality, which lowered a bit of the productivity in our refinery. However, with alumina which has a lot better quality and allows us to update the quality and technology of our pot rooms and production with more efficiency. With this, of course, we have to reduce the bottlenecks through a technology project so we can produce more in our refineries.
We can guarantee the supply of alumina in pot room one and as well as other projects also that we need to work on besides the modernization of the pot room. That's why this project is taking a bit longer, especially if you compare it to the recovery in pot room one. We were able to anticipate this year. We had no problems. We didn't need investments in peripheral items or supply areas for the pot rooms, as I mentioned. This is one of the points in pot room one. We also can't say that we can anticipate this. Of course, for any project we're working on, if we have a capacity to anticipate this, we'll try to.
If, well, we can state that we can anticipate this because we have all these other projects to reduce the other bottlenecks in our supply chain that we're working on. About the Rondon project, the situation did not change. It's a project we're still working on, and we should be expected to finish this in the next year. And we've searched for partners, and partners in companies, and so for us to be able to work on this, we need to have partners that we don't have risks in the market.
We need to have partners that invest with us, but especially that have an interest in the take of bauxite so that this can be a project that supplies bauxite for people that actually need it, and it can be a lot more robust. It didn't change. What I'm mentioning now is what we've been talking about in regards to the Rondon project. Now I'll pass the floor to Luciano to talk about the issue with the production in Europe.
All right. Thank you, Ricardo. Thank you, Daniel. From the closings, the only information we have here is that in Europe there would be a potential reduction of about 400,000 tons. When we think about the European production without Russia, 3.8 million tons. But of course, this is still a potential.
In the U.S., we don't have this kind of visibility. In practical terms, the main message here is that the volumes will not be specific. It's not something that makes such a big difference in industry. It's maybe a lot more related to some kind of a sentiment from the market in a reduction in the demand. We know that China has the capacity also to add more capacity in the market if necessary. It's a lot more of an impact in the regions and of course, the sales in this region and a market sentiment. Of course, to impact the balance sheet would still not be relevant volumes in our vision.
Thank you, Ricardo. Thank you, Luciano.
Thank you, Daniel. The next question is from Isabella Vasconcelos from Bradesco BBI.
One of the first questions is if you could talk about the expectation for profitability in the next quarters, considering the cost issues, and what's the expectation for aluminum volumes in the next quarters. The last question is, how much was exports in this quarter, and if you're working on higher levels in the third quarter?
Thank you, Isabella, and I think I can answer these three ones. About the margin, of course, this depends on the prices a lot, and we can't foresee this. Maybe, what we can mention is about the taxes that we were able to control. We demonstrated that there was also an important increase in the cash cost of the liquid aluminum.
Up until now, we've been acquiring some inputs like caustic soda, natural gas, which have higher prices. Of course, this leads to higher prices. We do have an operation that's very competitive. As you mentioned, we're less impacted than the average in the market because we are integrated. These are the four inputs that are the main ones we acquired, and we're following the same trend that impacted the market as a whole. When it comes to aluminum, this is a great question because normally we don't have this kind of visibility. We have a stake in Alunorte that was about 3%. It's a volume of aluminum per year, about 200,000 tons.
That's sometimes a little more, sometimes a little less. It depends on the production. For the year, we have this volume guaranteed. Not necessarily does this have stable volumes in the quarter. That's why it's a great question, because in practical terms, we really depend on the optimization of the production. We know we're gonna receive the volume in a year, and there's some predictable impacts. Sometimes to optimize their production, we have to accelerate or delay some of the rest. That's what happened in this quarter. We had an intake of what would be expected for July. In practical terms, in the first semester, we've already sold 130,000 tons, and the rest was close to about 200,000 tons for the rest of the year.
Results were a little bit lower. The third question, I don't remember here. Amabile, could you redo that?
Yes, of course. The third question is about exports in the three quarters, as well as the levels and how we're looking at this for the third quarter.
We have two factors. These are not that relevant. They're, in fact, marginal to close some of these gaps. In the second quarter, due to, we did have demand that was bigger in the ingots in the internal market. The profitability of ingots in the internal market is better than exports of these products, even for added value products. We had this small trade-off.
Up ahead, as I mentioned, since we have an expectation that the market will keep up as it is, it's gonna depend on the internal demand of the ingots in the spot markets, which are normally the ingots that are already imported in the market. Considering the fact that Brazil has a deficit in ingots, but it's natural that we'll keep up the same levels. It could be that we'll have more exports in the second semester if we certainly end up having an excessive stock and volume of stocks due to the fact that we maybe have some kind of an impact in sales. What we would like is that the volume in the year is in line with what we were foreseeing for production.
Of course, we keep up a stock volume for most of the products and also the materials in the processes. In our vision, if there's excessive stock, then we can export more, and then it's an alternative for exports. The limit, according to the ingots, which is a commodity that will always have some kind of a destination market somewhere else in the world.
Thank you, Luciano, for that answer.
Thank you, Isabella, for the questions. Now we have a few more questions on chat. André Vidal from XP, the first question is about the cost of the contracts for the purchase of energy. He mentioned that he had a slight drop compared to the last semester, and he's asking about what could explain this kind of drop, and what could be expected in mind for the third and fourth quarters.
Thank you for that question, André. To add to the question from Isabella that I didn't mention about the cost of energy. Well, that's just about seasonality really in the mix and maybe some other contract that we had that was cheaper or more expensive that impacted it, but the contracts themselves did not have major changes. There was an adjustment in the contracts that takes place once a year, and some of them happen now in June. It's something that we normally consider with the same behavior. Then the cost of energy in CBA, we have that behavior that we already mentioned a few times, which is in considering the seasonality of the rain in Brazil and the energy generation in Brazil and CBA, and this is pretty much the same case.
We generate more energy in the first quarter, a little less in the second quarter, but it's so important and even less energy generated in the second semester because of the drought period here in Brazil, so we have the seasonality. This is reflected in our cost of energy because normally the cost of energy is lower in the first quarter where you have bigger generations of our own production plants. In the second semester you have a bigger cost naturally because we have lower generation of our own production plants and more consumption from these contracts that we have that are considered to be long-term. From this year the behavior is pretty much the same, so we're expecting that we should have lower costs because of these factors.
Our production plants already generated a significant parcel of energy, and in the second semester they won't generate this because of our contractual supplier needs. Besides this, what we have this year is that we're restarting the pot room three, and there's an additional consumption of energy which comes from these contracts that we also have here. In practical terms, you have a bigger consumption of energy, and that's also more impacted in the contract. We have higher prices than our own energy costs. That's pretty much the dynamic. There's nothing very significant I should mention in the contracts at this point. There's a correction standard which is once a year from an initial contract. Some have premiums and some also have a currency variation embedded.
Luciano, we have another one from André, and he would like to understand a bit of the behavior of the administrative expenses, which is in line with a lot of variability quarter by quarter. He mentioned in the first semester of 2022 there was an increase of 30% versus the first semester of 2021. He wants to understand how much of this is structural and what could be like the current situation or occasional or others that are non-recurring. Could you maybe give us an estimate of what would be an administrative expense annually that's considered to be recurring?
Thank you for this question, André. We don't have this estimate to share with you, but we'll try to find a way to provide more visibility on this. It's a little bit of everything you mentioned.
I think first of all, there was an increase in the structure in CBA ever since the IPO, and this is natural. For example, in the accounting team, the controls, internal controls and investor relations, everything connected to the fact that we are a publicly held company. There's also another issue of services and maybe this variability that you'd see in our general expenses is more in the services line than in the labor line because these are services that are hired for the year, but they really depend on the execution of the services. In the second quarter we had the impact of some contracts for services that were added. But that doesn't mean that we're gonna have this continued expense up ahead.
A third point is pretty much this, as you consolidate Alux's and other operations, you also have an additional cost increase. I don't have an answer for you, but we're gonna find a way to provide more visibility on this, on these cost items as well.
Once again, Luciano, thanks. Thanks, Andre, for your questions.
We have another question by Mike from Caio Greiner. He wants to have a follow-up. Please, Caio, you may proceed.
Hey, thanks for taking my question here. Just a quick follow-up on the question that Isabella had. For Luciano for the second semester and even for the third quarter, what are you expecting when it comes to cost variations in the smelters?
I don't know if you mentioned the expectations that you guys have for this, specifically, but just understand a bit of the major variables. There's a lot of costs from the commodities that you have as an input that seems to have already reached a peak and some others are even going up. Just to understand, are you still expecting a cost inflation for the third or fourth quarter, or can we already understand that the second quarter was pretty much like a peak and it should be stable up ahead? Then once again, covering these major variables and energy, which is what you already mentioned, and even thinking about alumina and the anode paste, and you could maybe talk about a bit of the general expectation for the third quarter and even for the second semester as a whole. That would already help.
Well, of course, we don't have guidance on these numbers, but just to give you a bit of the concept, energy, naturally the cost of energy in the second semester is higher than the first semester because of the seasonality and we have, the power generated in, hydropower plants. You should see this in our numbers. Alumina, in the first point is something in our case that depends on the cost of bauxite, which in our case is, internal. We produce the bauxite, but there's also the freight costs, and the freight costs are on railways, and it's, of course, impacted by the cost of fuels especially. That's the main ratio we have with the freight cost, and then depends on the dynamics for this market. Besides bauxite, we also have caustic soda and also natural gas.
It really depends on the behavior of these inputs, because in practical terms, our vision is that first of all, these inputs have been increasing their prices, so we don't know how things are gonna be up ahead, but it does not seem like there's a reduction here. Just because of this fact, you would already have an impact on these costs because then you have an issue with the stock turnover. That point I mentioned also about the costs we have in the last quarters is what would most impact our CPV in the next quarters due to the slide you have between buying this and how this would impact your CPV. In our vision, some of the raw materials are still not reaching their peak. When you look at the pot rooms, it's pretty much the same.
I think the main point is the coke, because it's really related to petroleum and the dynamic in the petroleum markets. In fact, what's gonna happen with this does not really depend on what's gonna happen with the. It depends on what's gonna happen in the energy crisis around the world. What we have as information is that we were buying coke at higher prices, and actually this impacts our costs. In our vision, we're a little more careful because I'd say that we, some of the raw materials may be in our vision, it would be premature to mention this because there's still a lot of uncertainties about what could happen in Brazil and in the overall world with some of these raw materials.
Okay. Thank you, Luciano. That helped.
Thank you, Caio, once again for the question.
We have another question here on chat from Leonardo, from Bank of America. The question is about the trading strategy for ingots, considering the outlook for the demand that we've already mentioned, should they continue to notice volumes reducing in the business over ahead and/or if there may be a recovery in these sales?
Thank you, Leonardo, for the question. I'd say that more maybe in a marginal way. Brazil is a net importer for aluminum, and we have a market that's very relevant, it's been growing, but there's also an increase of supply that also comes from certain points till the end of the year. In practical terms, Brazil could continue to have a deficit, but it depends on the mix between the sales and the internal market who produces aluminum versus exports.
We know that a lot of the companies, just like ours, also export, so not necessarily will all the internal production kept in the internal market, but our focus is always in internal market as well. I don't expect exports at such high levels or the trading of ingots at levels that are so high as the past. There is a demand that I'd say is pretty stable, which is a lot of customers ask us for products with imported content. This, of course, could happen in the future, but these are volumes that are very marginal.
Even if you have a price and premium equation that justifies just working on a trading of ingots, I'd say that we have to really consider how this equation is gonna behave and how much you have as a demand and how much you have as a supply, how much is gonna be kept in Brazil, and how much is gonna go abroad. I don't think there's gonna be an answer that's 100%, safe, but we think it's pretty much this. Up ahead, if we can get back to performing imports of ingots to produce these materials with imported content, but maybe in lower volumes than in the past.
Thank you, Luciano, for that. I just wanna remind you all that if you have a question, by audio, just raise your hand on Zoom or send your questions directly by chat. Well, since we do not have more questions, I'll pass on the floor to Ricardo Carvalho to present his final remarks. Thank you for your participation. Thank you very much, Ricardo. You may proceed.
Well, thanks everyone for your participation in our earnings call. I wanna take advantage of the opportunity to invite you all to come to our CBA Day on the 5th of October. It's on the screen, save the date. Don't miss out on our CBA Day. It'll be a pleasure to have you guys with us. Thank you again for all of your participation.
The questions were very rich content, very good, and this allows us to provide even more information and more clarifications to you. Thank you all for participating.