Good morning. My name is Lydia, and I will be your conference operator today. At this time, I would like to welcome everyone to the Bethesda Preliminary Full Year twenty twenty Results. After the speakers' presentation, there will be a question and answer session. Now I would like to turn the call over to Rafael Perez, Director of Investor Relations and Strategy.
Please sir, go ahead.
Good morning and welcome to the preliminary full year twenty twenty results conference call of Befesa. I am Rafael Perez, Head of Strategy and Investor Relations of Befesa. And today, as usual, we have with us Javier Molina, CEO of Befesa and Wolff Leman, CFO of Befesa. Javier will start with an executive summary of the full year covering the main highlights of the period. Then Wolff will review the full year financials in total and by business unit as well as cash flow.
Javier will close this presentation providing an update on our growth projects as well as preliminary view on the outlook for 2021. Finally, we will open the lines for the Q and A session. Before getting started, let me remind you that this conference call is being webcasted live. You can find the link to the webcast and preliminary full year results presentation on our website, www.defesa.com. Now let me turn this call over to our CEO.
Javier, please.
Thank you, Rafael. Good morning, and thank you for attending this conference call. 2020 has been certainly a challenging year for Rethesa. Nevertheless, we have been able to manage the crisis well, making a strong strategic progress and delivering within the upper part of the guidance. The fourth quarter has been the strongest quarter in 2020, confirming the continuation of the gradual recovery that we started already in the third quarter.
In the 2020, we have achieved an EBITDA of €42,000,000 which is similar to the last quarter of the previous year. Looking at the quarter on quarter development in 2020, over the last two quarters, we have increased our EBITDA by 35% in the third one and by 45% in the fourth one. The main drivers for this increase has been a recovery in the plant utilization, reaching nearly 90% in the case of steel gas and 84% in the case of aluminum solids last as well as a recovery in zinc price during the last quarter with an average of €2,203 compared with $19.97 euros in the previous year in the previous quarter, sorry. This strong performance on the last quarter of the year has enabled us to achieve a total EBITDA of €127,000,000 in the full year 2020, which is in the upper third of the initial guidance provided and better than the consensus of our analysts of €120,000,000 Compared to the previous year, 2020 EBITDA has been mainly impacted by a decrease in average steel price of 13% as well as higher premium charge of $300 compared with $245 in 2019. Additionally, the volume in the aluminum soda slabs division has been 10% lower than the previous year, driven by a weak automotive industry in Europe, which has been partially offset by a slight decrease increase in steel volume, mainly driven by charging.
In 2020, we have ranked our plants at an average capacity utilization of around 85%. The main industries that represent our markets have seen during the fourth quarter a recovery in the level of activity. As such, the production of steel in Europe in the last quarter has increased 5% compared to 2019. However, for the full year, the production of steel in Europe has decreased 12%. As in the past, the part of the steel industry that we serve, the electric arc furnace steel produce, has performed better than the overall steel industry as demonstrated by Germany, where the blast furnace steel production has decreased 13% compared to the electric carbonate steel production, which has decreased only 3% in 2020.
The automotive industry in Europe has seen a better second half of the year than the first one, ending the year with a decrease of 24% in car sales compared to the previous year. This has affected the volume of aluminum solid slag that we have been able to process in 2020. Metal prices have suffered great volatility during 2020 and have recovered during the last quarter from the low levels achieved during the second quarter because of COVID-nineteen. As such, average seen LME has been $19.79 euros per tonne compared to €2,276 in 2019. This has been partially offset by our hedges, as Ward will explain later in more detail.
During the 2020 and early twenty twenty one, we have extended our hedging book until October 2023 at attractive prices. And today, we enjoy more than two point five years of hedging going forward, which provides high visibility and predictability. The generation of cash during last year has been very strong, and this has enabled us to finish the year with more than €150,000,000 on cash on hand and a leverage ratio is slightly above 3x. Despite the challenging environment of 2020 created by COVID-nineteen due to our strong liquidity and capital structure, we have continued our growth plans with our investments in China. We continue the construction work of our two Tindas recycling plants in Jiangsu and in line, on time and on budget.
We expect to have the first plant ready over the coming weeks and to carry out the coal and hold commissioning in March and April. The plant in Henan is expected to be finished after the summer of this year. Finally, on ESG, 2020 has been a year where we have made significant progress. It is very clear that society and investor put more and more for sustainable solutions, which is very much aligned with the CESA. What we do is a detailed part of the secular economy.
We recycle 1,500,000 tonnes of hazardous residues for our customers in the steel and aluminum industry to extract value natural resources like zinc, aluminum and salt. Furthermore, and especially over the last five years, we focused on all the aspects of ESG compliance, environmental, health and safety, employees and governance. The efforts that the entire organization is making across these areas are being reflected in our ESG ratings improvements. We are very proud of the progress we are making on ESG, which is a recognition from the market on the contribution PEPEZZA makes to a more sustainable world. Now, Wurr Leman will explain the financials in more detail.
Good morning. Please turn to Page six, the 2020 consolidated financial highlights. As Javier explained, the quarter over quarter recovery is on track and the 2020 has been strong at €42,400,000 EBITDA back to the level of fourth quarter twenty nineteen, resulting in a full year adjusted EBITDA of €127,000,000 down 32.6 or 20% compared to 2019. The main drivers of the year over year EBITDA bridge are as follows: one, a minor 0.6% volume impact. Higher volume in electric arc furnace dust due to Turkey was offset through less volume in stainless and allusol flex and SPL Second, a material €32,500,000 impact on prices.
The different price impacts are as follows: €45,000,000 lower EBITDA from LME marketing prices €24,000,000 positive from hedging, offsetting more than half of the zinc market price pressure negative 12,000,000 from treatment charges at record high unfavorable levels of $300 per tonne. Third, on cost other, we achieved a positive plus 0.5% year over year. We executed and tracked more than 50 operational excellence projects, and those efficiencies more than offset any inflationary and other pressures. In summary, the minor down in volume is being offset with a minor up in costs other. Net net, the year was impacted by €32,500,000 due to unfavorable metal prices in the wake of COVID pandemic.
Aligned with EBITDA, net profit is down €35,100,000 year over year and stands at €47,600,000 for 2020, equal to 1.4 earnings per share. We achieved a very good cash net debt and leverage result, which I will explain later on Page nine. Turning to Page seven, the Steel Dust Recycling Services results. Steel Dust Recycling Services achieved €97,700,000 EBITDA, down 27,600,000.0 year over year or 22%. The levers volume and cost other were positive, each around €2,500,000 to €3,000,000 year over year and partially offset the negative €33,000,000 from the COVID impacted price.
Looking at selected operational metrics on the lower part of the page. Volume or electric arc furnace stuff throughput slightly improved to 687,000 tonnes, 3% up year over year, with our operations in Turkey back online after the expansion the year before. Plant utilization stood resilient at 83%. The average zinc LME market price was EUR $19.79 per tonne in 2020, down 13% year over year. But our hedges were favorable and in the money at €2,239 per tonne and improved our zinc blended price to come in at €2,136 per tonne, down 6% year over year.
Correspondingly, the EBITDA impact from the lower zinc LME market price of gross €45,000,000 was offset by €24,000,000 due to the favorable hedges, resulting net in a negative 2021 impact. In addition, treatment charges were unfavorable at a record high of $300 per tonne of VOXX in 2020, impacting EBITDA year over year by negative €12,000,000 We expect this to normalize in 2021 in this year. Overall, Steel dust recycling services delivered €98,000,000 EBITDA at resilient 28% margin and solid 83% capacity utilization. Going now to Page eight, the results of our Aluminum Salt Flags Recycling Services segment. 2020 adjusted EBITDA is €28,800,000 down €4,200,000 or 12.7%.
The EBITDA decrease was mainly driven by volume, impacting by around €3,500,000 year over year. Salt flex and spent hot lining volume treated was 445,000 tonnes, down 9.7% year over year, still at a resilient 84% capacity utilization rate. And secondary aluminum volume produced was 174,000 tonnes, down only 1% year over year with capacity utilization at a solid 85%. Furthermore, EBITDA year over year was impacted slightly positive by EUR 600,000.0 through moderately higher aluminum alloy prices, which partly offset the minor 1,300,000 negative year over year impact in cost and other. Overall, aluminum Salt Flex Recycling Services delivered €29,000,000 EBITDA at resilient 25% margin for the Salt Lake and spent on lining hazardous waste recycling core business and demonstrated resilient 84%, 85 plant capacity utilization levels during this COVID impacted year.
Turning to Page nine, the cash flow, net debt and leverage results. On the EBITDA to total cash flow bridge we're showing, starting with €127,000,000 EBITDA on the left hand side and walking to the right. Working capital was approximately flat year over year and both interest and taxes as expected around €17,000,000 each, resulting in solid operating cash flow of €92,500,000 We spent maintenance CapEx of €25,000,000 plus growth CapEx of 29,000,000 for a total of €54,000,000 CapEx, of which €15,000,000 was funded through the China local loans for our two plants at Changzhou and Hainan. Euros 25,000,000 dividend was paid out in two steps, 15,000,000 in July and €10,000,000 in December, resulting in a total cash flow of positive €29,000,000 The €29,000,000 total cash flow improved cash on hand from €125,500,000 at year end 2019 to a €154,600,000 at year end 2020. Cash on hand at €155,000,000 plus our entirely unused €75,000,000 revolving credit line provides strong €230,000,000 liquidity to Befesa.
Net debt improved from €417,000,000 to $394,000,000 and with €127,000,000 EBITDA results in a temporarily higher but very, very manageable 3.1x leverage. We target and expect to return to around the leverage levels of 2019 as we go through this year 2021. We continue to be compliant with all debt covenants and have no applicable covenants. The capital structure remains unchanged and long term, set up to July 2026, and we cannot be priced above 2% interest. Summarizing, the backbone of Befesa is strong, and we manage very conservatively based on three levers: number one, the capital structure is long term up to mid-twenty twenty six and at efficient rates as we cannot be charged more than 2% interest secondly, cash.
We manage cash and liquidity conservatively. Even at the peak of corona, we had more than €100,000,000 cash and at year end, even more than €150,000,000 Three, hedging. Our strong and long term hedge book, we are hedged for more than two point five years, and I will explain on the next page in more detail. Those three levers form the strong backbone of the peso's financial and capital structure and serve us very well in crisis situations like the COVID-nineteen pandemic. This allows and allows us to continue to go full speed ahead on our growth expansion in China and stay on budget and time schedule.
Turning to Page 10 on hedging. During fourth quarter twenty twenty and early twenty twenty one, we extended zinc hedges further up to and including October 2023, thus for the next more than two point five years. Hedges for this year, for 2021, are at around 2,150 tonnes sold forward prices, 2022 at around €2,200 and 2023 at €2,300 per tonne. The hedging provides the peso with improved pricing, earnings and cash flow visibility to allow to fund our growth initiatives organically. Our hedging strategy remains unchanged.
We hedge one to three years out. We target 60% to 75% of our zinc equivalent volume. The majority, about 80%, is in euro, the rest in Korean won. No collateral. The risks are transferred entirely to our hedging partners.
Our hedging approach very much worked. In 2020, the average LME zinc price was EUR $19.79 euros per tonne. Our hedges were in the money and locked in at €2,239 per tonne, which stabilized the blended zinc price to a total of €2,136 per tonne. Note, we added various financial and operational data tables with quarterly, annual and multiyear views for your reference in the appendix. Summarizing the financial section before we turn to the growth and outlook, three points.
One, our quarter over quarter recovery is on track. Second quarter was low at €22,000,000 In Q3, we delivered €29,000,000 and Q4 EBITDA is at €42,000,000 and back at twenty nineteen levels. Second, our financial backbone is strong. We extended our hedges out to October 2023. Our capital structure is efficient and long term, resulting in stable and strong liquidity.
Three, we funded our expansion in China even during this challenging pandemic full speed, which serves us well in this year in 2021 and over the coming years. Back to Javier to review our growth projects and initial outlook.
Thanks, Walt. Please move to Page twelve and thirteen of the presentation. I would like to finish the call providing some thoughts on our growth projects, the market environment and the outlook for this year 2021. Let me start by providing some thoughts about our business opportunity in China. 2020 has been a very challenging year in many regards.
However, on the other hand, 2020 has proven that the decision to invest in China we made in 2018 was the right thing to do. Firstly, over the last five years, China more than doubled its electric arcane steel production to more than 100,000,000 tons. UDIGHT China is by far the largest electric arcane steel market in the world, representing a market of near 2,000,000 tons of steel dust. Second, China has navigated the COVID crisis pretty well. And while most of the countries in the world are suffering decrease in the GDP, China has increased its GDP by more than 2%.
Similarly, China has continued to grow its steel production by 5% year on year. Third, China is very committed to reducing its CO2 footprint. Primary steelmaking from blast furnace produce seven times more CO2 per ton of steel compared to the secondary steelmakers using steel scrap, which are our customer base. And today, only 10% of the steel produced in China is from scrap compared to 30% as an average in the world, 40% in Europe or near 70% in U. S.
A strong rules and regulation has been put in place in China in order to follow secondary electric carbonate steelmakers, our customers. And according to the latest market forecast, the steel gas market in China will continue to grow from the current size of 2,000,000 tons or near 2,000,000 tons to more than 5,000,000 tons over the next five to seven years. This means that the market in China is already the biggest market in the world, but also is a rapidly growing market. 2021 is an exciting year for Refesa and truly an important milestone in the development of the company as we will complete the construction and restart the operations of our first two electric arc furnace steel harvesting plants at the Jiangsu and Henan Province. At Jiangsu Province, we are basically done with constructions, as you can see from the pictures in the presentation.
Right after the Chinese New Year break, so this week, we will start the coal and hot commissioning in March and April. The construction is progressing as expected on budget and on time. We are investing €42,000,000 in each of the two plants, and we have closed the long term local financing. Regarding the ramp up for Jansen, we reserved the entire first half of the year for commissioning, pilot batches and commercial contract negotiation. We plan for commercial output and a positive earnings contributions in the second part of this year.
We have already secured the steel gas volume from customers to do the trials. Our second plant in the province of Henan is developing as planned on budget and on time and which are scheduled around six months after Biaxou. We expect to complete the construction by the end of the summer. Moving now to the market environment. We have seen over the last quarters a recovery of the steel production industry in Europe, and we expect the current levels of the steel production to be maintained throughout this 2021, which will represent a higher production over last year.
The automotive industry in Europe is also showing signs of recovery, and we expect this to continue over the coming quarter in 2021 and support secondary aluminum as well as solid frac volumes. This recovery in Europe should be supported by a strong demand from second aluminum alloys in Asia as well. Let me share now some initial thoughts on the outlook for this year 2021. As in the past, we will provide detailed guidance in our Q1 earnings presentation April, once we know what level of treatment charge is being agreed in the zinc industry. On volume and capacity utilization, we expect a better year and a good year and an improvement over 2020 based in two drivers.
First, for 2021, the base volume of steel dust fleet is expected to be higher, achieving more regular levels and capacity utilization. Additionally, on steel gas in China, Befesa expect to have volume contribution from the 2021, coming from the start of commercial operations in the first plant of Befesa in the Chinese province of Yazoo. Second, in aluminum solid drag, the company also expect some volume recovery, driving up capacity utilizations compared to level achieved in 2020. With regard to price of zinc and aluminum, 2020 was characterized by high volatility throughout the year with very low price levels in the second and third quarters and prices only recovering in the fourth quarter. In 2021, the market has started with more normalized price environment.
Overall, we expect higher average price than 2020, returning to pre COVID levels. Similarly, we expect some normalization in the level of treatment charge 14, which were extraordinarily high and unfavorable in 2020. This will represent a very positive earnings contribution for BECHEA in 2021. In summary, considering the above mentioned operational growth and expected price environment plus treatment charge, we expect substantial earning growth in 2021. Regarding recurrent maintenance capital expenditures, we expect similar levels to the years pre COVID around €25,000,000 On growth capital expenditures in 2021, the focus will remain on funding the growth in China.
For this year, euros 50,000,000 to 60,000,000 will be invested in China in the two plants that we are building in Yantou and Henan. On dividend, we will continue to carefully manage the dividend stability and dividend yield, cash flow, leverage and the funding of the organic growth. We maintain our dividend policy to distribute between 40% to 50% of the net profits as dividend. But for 2021, we want to propose a dividend distribution between €30,000,000 to €40,000,000 This would consider our regular dividend and additionally a catch up on the lower dividend distribute last year. We will make the final decision after the first quarter results once guidance has been provided at the April.
From the leverage point of view, BPSA expect to return to maintain levels below 3x net debt EBITDA, similar to 2019. Finally, I would like to highlight that we are doing a lot of efforts to make sure that the market understands how the Tesa is part of the circular economy and contributes with its business to environmental protection by recycling more than 1,500,000 tonnes of hazardous residues annually and producing more than 1,300,000 tonnes of new materials, reducing the consumptions of natural resources. This has been the backbone of the business since the company started more than three decades ago. So in summary, 2020 was challenging, but we delivered sound results. And we are looking forward to 2021, which we expect to be a growth year for BECHEAL financially, operationally as well as from the strategic point of view.
Thank you very much.
Thank you, Javier. We will now open the lines for your questions.
The first question comes from Ingo Sechel from Commerzbank.
My question would be on China. And specifically, would be interested to understand a bit better what we should expect to see between now and the next time we speak on the April 29. I mean, you're doing the hot commissioning, you're doing the first trials. Can you tell us what the expected quantity of steel dust would be that you process in April? And also whether it's, let's say, very specially selected high zinc dust samples that you're taking?
Or would you already expect to have a good visibility on the technical operational performance of the plant by the April? Or does it really take a more and more random selection of field samples before you can really comment on the operational performance?
Thanks, Ingo. Okay. Now we are finishing the New Year break in China. The constructions will restart next week really, because as you know, New Year is a real really the yearly holidays for the construction sector in the country. So now next step, we are working in different levels at the same time.
The most important one, construction, where we are focused to finish totally the plan and to start full commissioning that will happen March and full commissioning that probably will be in April. So at the same time, we are securing the still that we need to run the trial, which is a very important part of the ramp up. It's really the moment we are going to confirm all the progress in the plan. Just to give you an example, we are going to send a solid team of European people from Germany and Spain to China. And all of them will need to do a quarantine period of fourteen days to be able to work there.
But this is essential. This part of the process is essential. So now the main focus to do the to ramp properly in coal and cost commissioning and do the trials. And so our initiative is to dedicate the second quarter of the year to do the ramp up, to do the trial, etcetera. At the same time, we are in the middle of the negotiations with the steelmakers regarding the supply of steel dust.
As you can imagine, this is a tough negotiation, it's a case by case negotiation with each steel makers. As I have explained in all times, we are not talking with 1,000 customers, we are talking with friends in the case of Yahsun. So we say real individual negotiations. That will depend on different factors. The quality of the steel that they produce, the steel contain, the distance to the plant, the position of the landfills around the producers, etcetera, etcetera, etcetera.
So my expectation for the next earning calls April is that we will be able to confirm that the plan is running properly and that we are making progress in with the steelmakers. Probably it will be soon to confirm which are the type of contract we are signing, the collection fee or the quality of the steel dust. That will be provided with more certainty in the earnings call that we will hold in July. Okay?
Okay. Yes. Thanks for the very clear road map. And maybe one question on the numbers, and thanks for making it very transparent what the swing factors in the earnings bridge for Steel dust recycling have been. And I think the contribution of the €2,600,000 operational excellence and other, I think, was quite positive and maybe overlooked to a certain degree in all this metal price volatility.
Just looking at next year, do you think you can report a positive number again as an operational excellence swing factor in 2021 compared to 2020? Or would you rather see some of those costs coming back after a few instruments like short term work have expired?
I think we will be in a similar situation than previous year. It's clear that every year is more difficult for us to find ways to reduce costs or to get earnings increase through operational excellence. But which is clear at the same time that we need to invest some money to get these cost reductions or earnings improvement. But still, are in a position to say that in 2020, we will get similar figures in that regard than the previous year. Okay?
Yes. Just a quick one on the Salt Flags plant closure in The U. K. Can you remind us what the EBITDA contribution of the SaltFlex U. K.
Plant has been and whether you expect any major cash outflows this year, for example, for environmental remediation in context of this plant closure?
The first thing we would like to highlight is that the plan is totally closed. We have only three people there that will be three one quarter more basically, just to finish all the last actions we need to do there, but the plan is totally closed. Second, the EBITDA contribution in the past on average has been around €1,000,000 per year, so not it's not a bit clear. And we don't expect any further investment regarding remediation as a transaction.
Okay, Verdi. Thanks very much.
Thank you, Ingo.
Thank you. The next question comes from Michael Hoffman from Stifel.
Thank you, Javier, Wolf, Rafael for taking the questions. Good morning. Wolf, where is your thinking with regards to not only the negotiating for volume from China, but beginning to introduce your hedging on that future volume? When do you think you'll start including that in the hedges from a tonnage standpoint?
Michael, thank you very much. Yes, when we have stable plant output, we will start topping up the hedges also for the China volume. So as Javier mentioned, Michael, we'll have commercial output for the first plant in Changzhou in the second half of the year. And we're now looking at preparing hedging. But as you know, we never do speculative hedges.
We always do operational hedges. So when we see the stable plant output in the second half of the year, we'll then start hedging additional volume.
So from our standpoint, and I understand we need to wait until April to get a full year detail, but we have the task of having to build models. Should we use as a conservative approach, we'll get one full quarter of $110,000 So sort of the fourth quarter is a normal quarter. And the first half is about the shakedown, 3Q is about ramping slowly, and 4Q you're at full pace?
I think for the second half of the year, we would say we plan for about 70% capacity utilization. That's normally what we do when after ramp up. And that would mean, you know, for six months, 70%. So you're talking somewhere around 30,000, 35,000 tonnes or so. And again, we'll come back to you with more guidance on that after the successful cold and hot commissioning.
But this is a ballpark first number.
Okay. And given
where everything has landed at the end of this year, and I know I'm trying to front run guidance, but I'm I'm but what I'm really looking for is a a framework. It would appear the data would support that you ought to be able to at least replicate 2019, that we're fully back there on a profit basis.
I guess you you first passed out the sentence, Michael, was right. You're a little bit ahead of the game. Yeah.
Yeah. I know.
But, you know, that's what I gotta do for a living.
I think Javier already highlighted the framework. Look. It's different factors. Volume. Base volume, we're clearly continuing the recovery as Javier explained, so that is positive.
Then on top of that, you have incremental volume from China. Metal prices, we have a great start in the year, right? So obviously, that's a little bit early to tell. That's why we want to go through the first quarter. And then on top of that, learn about treatment charges, which indications are that treatment charges are normalizing, so that's also positive.
And as such, yes, we feel good, and we will validate the guidance after the first quarter and earnings call, yes, or with the first Let
me add, Michael, that we have we are seeing a strong start of the year. January has been a solid month and February will be as well. So I think we are in a good shape. Yes.
Okay. That helps. And I do appreciate that. From your perspective, what is the what are you hearing from your the auto customer? So it's I guess, again, it's downstream from your production, but what are you hearing from the auto production side?
Do you think that auto production will get back to a more normalized level and then sales can sort of pick back up again?
Yes. This is what we are hearing in the market, clearly. And what we are seeing in the first month of the year. So clearly, we expect to see that at pre COVID levels.
Okay. All right.
Okay. Thank you. Thank you, Michael.
Thank you. The next question comes from Charlie Mortimer from Citigroup. Please go ahead.
Good morning, everyone. Thanks for the presentation. Very good presentation, I must agree. And a question starting on the growth CapEx and the 50,000,000 to $60,000,000 What if that is included? What is what of the current two plants does that account for?
And what is the additional growth CapEx? If we could
just break that down a bit, please.
Please. Yes. Good morning, Charlie. So for I'll just give you the full picture on CapEx, as Javier mentioned, on the year in 2021. So let's start with the usual bucket, which is maintenance.
Maintenance in the broader sense, Charlie. This is IT, productivity, compliance as well as classic maintenance. We spent €25,000,000 last year in 2020. And this year, we're thinking 25,000,000 to 30 somewhere in that ballpark. For growth, we have penciled in 40,000,000 to €50,000,000 and this is primarily for China, for our two plants in China.
So you come to an overall 65,000,000 to 80,000,000 gross. But please note that €45,000,000 of that is funded through the China local loans that are in place and that we already started to draw on last year at the end of last year. So you're talking about 25 to $35,000,000 net CapEx after the funding through the local loans of the two plants in China, Does that answer
that's correct. Just to confirm then, the growth CapEx that you alluded to only refers to CapEx that is going into the two plants currently under construction?
Yes, that's correct.
Okay. And another question on the utilization. I mean, back to 89%, can you just remind us what the maximum capacity utilization you feel is for the sealed gas plants and the aluminum plant?
Yes. Around 90% is quite full utilization. You need to understand that we in when we talk about plant utilization, we include the annual maintenance shutdown of the plant. The maintenance shutdown would be between three, four weeks. So to get more than 94% is impossible for that reason.
So to get 90% is we can consider, which is quite full utilization rate.
Okay. That's very clear. And then just again, helping slightly with the model on the treatment charge. Do you have an expectation of a ballpark of where it might land for this year?
Okay. So we are in the middle of the negotiations. There are a lot of rumors in the market. The first movement we have seen apparently mining companies are offering 100 and smelters companies are talking about 300. So the solution will be in the middle.
But if this could say today, it will be 200,000,000 $240,000,000 I don't know, something in that range.
Okay. That's a wide range. Very good one. Thank you. And just finally, you mentioned collection fees with the contract negotiations.
Do you feel there's an expectation that you will be able to get collection fees from the plants in China?
It's too soon to say to give you an answer. We are discovering that Chinese people are good negotiations. So and we are in the middle of this process. And it's difficult because it's an individual negotiation, but at the same time, it's dealmaker looking what's happening around themselves. So probably in the next conference call, we will be able to provide a better view than today.
Okay, excellent. Thank you very much for answering those questions.
Thank you, Charlie.
Thank you. The next question comes from Phoebe Barker from JPMorgan. Please go ahead.
Hi, morning. I'll take them one by one. Could you maybe just comment on South Korea and Turkey volumes in full year 2020 and also your expectations for 2021?
Okay. Thank you for the question. Volumes last year in both geographies. In Turkey, we finished in the year with a good utilization level, around 70,000 tons in the year. And our expectation for the next year is to stay at those levels.
In Turkey, we are suffering for the last it's something that is happening in the last five years. There is an import bank to import still that is putting some travels in the market. What is 100% of utilization before to get out the import will be difficult. And so a stable market and a similar amount for this year than the previous year. And regarding South Korea, remember that in South Korea in 2020, we treat 60% of our supply from the local market.
And this has been this figure is very stable, slightly growing every day. And we didn't suffer any major problems in 2020, where we suffered some issues in the imports of the steel darts around the surrounding countries, but more for logistic and transport cost issues due to the COVID crisis than for production problems. So this year, we expect to recover or even to improve the levels we achieved in South Korea in 2019.
Okay. And could you share just the tons roughly or
utilization? Excuse
me? I was just wondering if you could just share the full year 2020 kind of final outcome in terms of the tons or the utilization.
We don't we prefer don't split the figures in the different geographies, because we manage that internally. We don't we would like to confuse our investors, because sometimes we treat some quantities in one geography or in more than defending logistic issues, etcetera. So that's why we prefer to provide total figures. In that sense, in 2020, at the end, we improved the throughput of steel dust in 3% from 665,000 tonnes in 2019 to near 690,000 tonnes in 2020, and we expect to improve these figures this year.
Thank you. Then two more quick questions. One, just on kind of China and further expansion. Obviously, now that we're coming to the end of the construction for the first two plants, when could we expect further news flow around you kind of looking to either expand these existing locations or look for new provinces? And then secondly, just thinking about, I guess, the green spend in Europe, is there any shift there from BOS to kind of EAF where your clients might be required to shift or their clients might be required to shift anything that might actually drive that penetration of EAF further within Europe?
Thank you.
Thank you, Silvi. Thank you. Okay. Regarding the additional expansion in China, first I would like to remark the market opportunity we have in front of us. Today, China is producing more than 1,500,000 tons of steel dust.
This is more than the total European production. On the other hand, the quality of the DAC will be still clearly below the European standards because they are using different and not only scrap, some pig iron as well. But clearly, we have a big market opportunity in front of us. And additionally, the expected market growth in China regarding electric car furnace, as I explained during the presentation, is that in the next five to seven years, the proportion of steel produced in China from scrap will go from less than 10% today to more than 30%. That means that we will have in front of us a market of around 5,000,000,000 tons of steel gas.
This is the name of the game in China. So clearly, we want to build more than two plants in China. It's difficult to say today how many plants we'll be able to build in the country. That will depend on many different factors. It's not only on our side.
But clearly, we want to build more than two plants. First thing we need to do is to start operations of the at least the first plant to confirm all the hypotheses we analyzed when we took the decision to invest in China some years ago. And then that will be the moment to decide or to announce the construction of the third plant. Remember that probably before to go to a new province, we have the opportunity to build new fields in the province of Yaxu and Enhan. As we have explained in the past, we we acquired have enough land to add new things to both plants in both geographies.
When will be the exact moment? Well, let me be prudent. Let us start operations, confirm the hypothesis, and then we'll be right moment to take the decision. It's okay?
Maybe can Silvia, if you want, on the second question on Europe. On the EF penetration, I think at some point in time, Sylvia, we had shared the study of the International Energy Agency, who had reviewed deeply the impact of the various countries looking to reduce the CO2 footprint. And fact is, per your question, basic oxygen furnaces, primary steelmaking takes 7x more CO2 per tonne of steel production compared to electric arc furnace steelmaking, which is our customer base. So the energy agency had forecasted that there is over the next years a structural change happening. I think their forecast was to gradually change from currently in Europe, you have 40% of the steel is produced through electric arc furnaces that would gradually increase to about 50%.
So Yes. But I think I wouldn't like to create big expectations regarding that point because what saying is totally true, clearly, and this was the energy agencies explaining. But on the other side, the growth of the electric carbon based production in Europe is totally linked with the availability of scrap. I mean, this is what it is. And so we will see an increase in the coming years, but will be a slight increase.
And that will happen as well in U. S. The area and that's why I consider we took a great decision some years ago when we decided to invest in China. The area where the production of steel will change dramatically is China, because China is producing only 8% of the steel from electric car furnace production. And that will change in five years to more than 30%.
Very interesting. Thank you very much.
Thank you. Thank you.
The next question comes from Olivier Carved from Kepler. Please go ahead.
Yes. Thank you. Good morning all. I just had a follow-up on this particular aspect of the China EEF output ratio growth. Whose forecast is it to see the EE output ratio go up to 30% or more than 30%?
Just curious.
There are many different Oliver, there are many different studies explaining that. And this is based if you probably Rafael Perez will provide can provide you some exact reports, very interesting about that topic. But this is there are a lot of information about the production of scrap in the coming year. And based on that, it's totally it's very clear, totally clear that the percentage a steel port from scrap in China will change dramatically. On the other hand, this will be support from the solid environmental regulation that China has implement
There is no doubt about it. We will have the only thing that we need to complete is that if we will need five years or seven. In my opinion, it will be more than five years. We will see that China will be producing a very similar percentage of steel from scrap than Europe.
All right. Right. Fair enough. Then a second follow-up on hedging in China. I understand the that it is too soon to really hedge speculatively or anything.
But do you can you already give us an indication of as to on which zinc price you would actually hedge?
Olivier, it's a little bit too early to tell. But at the end of the day, you know the hedges that we have closed in
the fourth quarter of
last year or beginning of this year, and those hedges were the last hedges we added to the hedge book, and those have been for 2023. And those were all consistently at or slightly above €2,300 per tonne. And we will see where prices are when we get there in the second half when we have stable plant output.
Yes. No, no, I meant Chinese SHFE prices or LME, but
Yeah. Olivier, I think the zinc is a global market. So quite frankly, whether we have as you know, we have hedged Korean volume in Korean won or European volume in euros. Ultimately, it's a global base metal prices. So I don't see a dramatic difference there.
Okay. Fair enough. And then I was just wondering if you have seen any moves by competitors in China, maybe local competitors or international competitors moving in?
Okay. We didn't see any international competitor at least investing or trying to invest. We have seen some people visiting local people, not really any real movement. Well, we have clearly local competition. Well, it is not very clear what are the local people doing with field that.
There is not any, let me say, modern plan state
of
the art plan like the ones we are building. But for sure, we fight local competition And we need to fight within this local competition when we negotiate with the estimator, as you can imagine. But again, I think the market opportunity is very big, and we will be able to fit totally our plans. The question is, we'll be able to get collection fee or not. That will be the second part of the discussion.
Okay. Fair enough. And do you have any update on in Germany on the Hartzmetal plant? Is it operating right now as far as you understand?
As far as we understand, still they running the administrative process. So the plan is running, with the no not with the new owner's fees. Yes.
Okay. And I was just wondering if you were considering the option of going beyond the six potential kilns in China in steel dust?
Let's finish the two first plan.
Let's start with the the
two followings and test, we will take from there. No?
Okay. Okay. Fair enough.
Thank you.
And I have a few more. Just, you know, on do you have any sign on other geographies like India that regulation is about to change or?
Well, India is clearly an opportunity. I think we need to but to have InformaFast a real opportunity in the short term, will need to face more regulations and more scrap. And we are we have been following this geography as close as possible. Let me say that during the COVID period has been extremely difficult to do it. So once the COVID permits us to move again, it will be the moment to realize again the Indian opportunity.
Okay. Okay. And then I'm just wondering if you saw any disruptions. You mentioned South Korea and the volumes that you import of Sealedust. Did you see any impact so far this year from the tightness in capacity in transport capacity that we are seeing in other fields?
No. This year in South Korea, our expectation is that we will have less problems in logistics than the previous year. So our expectation is to improve the figures we achieved last year.
Okay. And we've also seen some plant shutdowns in the auto industry in Europe. Do you see any impact on secondary aluminum demand or No.
At contrary, what we are seeing in the beginning of this year is a very strong aluminum market in Europe. The levels of activity in the first quarter of the automotive industry has been very high. And the expectation for the second quarter are really very high as well. So frankly speaking, we don't see any supply problems in the aluminum side.
Okay, okay. And just a final one on the Q4 EBITDA. Can you comment maybe on what the €3,000,000 corporate and elimination contribution was? Just to give us a sense of what that was.
Wolf, can you explain, please?
I think those were were similar to last year. Yeah. The just as the normal intercompany eliminations as some of the I think you're referring to on the aluminum side, where some of the salt like we produce in the secondary aluminum business, we also treat ourselves.
That's If
that's what you're referring to, then send me a note and I'll Sure.
Sure. Thanks. Thank you. Okay. Thanks for your help.
Thank you. The next question comes from Clarissa Quack from M and G. Go ahead.
Good morning. Thank you for the presentation. I think like other lenders have said, I appreciate the transparency. So just a few questions. The first is a follow-up on South other than South Korea.
Have you seen any impact of COVID restrictions in your other geographies in transport, logistics or raw materials or anything? And then a couple of other questions. The first on the stainless steel division, can you just share some color on how it ended the year? And finally, on working capital, how should I expect it to develop over the course of the year? And have you seen any pressure on receivable payable inventory days?
Thank you.
Thank you for both questions. No, regarding the first question, the area where we have seen some troubles in the last year regarding COVID and in the logistic area has been South Korea. Out of South Korea well, you know what's happened. We out of the 40% that we import from the surrounding countries in South Korea and the rest of the geographies, we create the steel that we keep produced in the same area where we have the plants. So we don't have we didn't have logistic problems because we don't have big designs and we are not transporting a lot of material.
So the answer will is clearly the problem has been basically in the South Korean geography from the 40% that we import from the surrounding countries. Regarding the second okay, regarding the stainless steel market, well, stainless steel has suffered in 2020 more than pure steel, clearly. You know what happened with it's something that we don't explain enough times, in my opinion. We are treating the portion of crude steel that is produced by the electric car furnace. And the decrease of this production in the last year has been really very small.
There has been a decrease in the total production of around 12, but the decrease in regarding electric carbonation, we don't have the final figures from industry, but has been in the range of 2% to 4%. So despite the deep crisis of COVID, we have seen a very stable producing product. But this is not what has happened in the Sainz deal, which has suffered more. So for us, was not a very good year in Sainz deal. We have been able to do some positive EBITDA, but not very high.
And we have been able to don't destroy any cash. And based on the recovery we expect in the industry this year and what we are learning from our customers, Otukum, Puvo, Atelinox, Aperani, etcetera, we expect a better year 2021 than 2020 in the Cyrus Steel division.
Okay. Sorry, just to confirm, so the stainless steel ended the year with positive EBITDA without any sort of cash use of cash?
Yes. Yes.
Okay. Thank you.
Thank you.
Then the last one was just on working capital.
Sure. Theresa, on working capital, so one part of the question was whether in the COVID pandemic year in 2020, so far, we had seen any changes in receivables or payable days. No, absolutely not. No. And you as you've seen from the results, we managed cash very rigorously, and 2020 was a very strong performance on cash.
In terms of working capital for 2021 for this year, at the end of the day, 2020, working capital was flat. Obviously, we'll try our best to achieve this again as we grow. If you want to be conservative, you can put in a buffer of €50,000,000 or so as sometimes in the last years or so we used because 2021 will clearly be an exciting year because we're growing. We'll continue to invest in China, ramping up the Chinese operations. So if you want, you can put in a small buffer or so in working capital.
Thank you. The next question comes from Benjamin Panzaro from Berenberg. Please go ahead.
Hi, good morning. Just a few follow ups from me, please, on China. My first question was the potential ramp of the second plant in Jiangsu sorry, Henan, however. Is there a chance that that one could ramp slightly faster than the
first plant? For example, can you
start already the negotiations with the steel producers there on the basis that you have the first plant running or constructed at least in Jiangsu?
Thanks, Benjamin. Well, the schedule for Hainan is basically six months later than Jiangsu. That means that we expect to do the commissioning of the plant, let me say, around September. So to use the last quarter of the year to do commissioning trials ramp up, etcetera, and to try to start normal operations at the 2022. And regarding the contract with the steelmakers in that area, we have started the contract with them.
We know all the customers and we have a good relationship with them. But we didn't start really the negotiations. To start negotiations, we need to be more at the latest part of the construction period.
Okay. And then looking at the acceleration of the rollout, just to try and understand the strategy there. Did I understand correctly that you prioritize filling out each plot first before considering a new province? How should we think about the strategy there?
Well, our niche the niche strategy was less focused in two areas. These are the GN2 without any doubt, it's the best possible location, I would say worldwide, because in any small territory, we have a huge concentration of steelmakers and we have high proportion of scrap. So no doubt about it. So I think the right decision will be to build a second or even a third kiln in Ijazu. And regarding Hinan, well, it's probably the second base location.
And I don't know if I would see three games, but for sure, probably we will see two games. Any case, and we will be we are totally open to considering any new opportunity. But as of today, we think that the strategy we defined at the beginning is the right is still the right one.
Okay. And last question just on steel dust on stockpiles. Presumably, I mean, in the past, you've had sufficient stockpile of dust to smooth out the maintenance shutdowns. Is that something that you've been able to replenish? Or should we expect a bit more volatility in volumes processed this year with maintenance shutdown?
No. We have been lucky because what we are seeing is a very strong activity in the market in the beginning of the year. So we have been we are able to run the plant at full capacity. What is difficult to is at the same time to create again a raw material. So that we don't see we don't expect any volatility because the markets seem to be very strong.
Okay. All right. Thank you.
Thank you, Benjamin. Thank you.
Thank you. The next question comes from Jaime Skivano from Banco Santander. Please go ahead.
Hello. Good morning. So a couple of questions from my side. In terms of margins, looking to Q4 margins at Saltenflag came at 41%, I guess, due to The UK shutdown. And also, the secondary aluminum margin came at 8%.
So which are also very good margins. So how should we think about these margins going forward? Are they sustainable, particularly the one of Salt and Slugs, but also the secondary aluminum? And then a question regarding when you look to consensus of 150,000,000 EBITDA for 2021, based on all the outlook you have provided, do you think it's conservative? It could be a good base case?
Or what do you have in mind without telling us your guidance? But maybe what
is the issue?
Would be interesting to know.
Thank you. Good trial. Okay. Regarding the first question, the margins. Well, thing to explain clearly that very good margins in the last quarter has been the allude prices.
The aluminum prices, we have seen a rally in the last part of the year that we are seeing right now again. So in the secondary aluminum business, we have, on one hand, the level of price and on the other hand, a high level of activity in the automotive industry in Europe. And the same effect to the solid slag business. In the solid slag business, the effect of the high aluminum prices is even more relevant than in the secondary aluminum. So all in all, in the first quarter of this year, we are seeing again strong margins in both business, even better than or at sell level than in the last part of the year, so very good margins.
And how long will it stay how long will you enjoy this situation? It will depend on the activity of the automotive industry and on the second hand, in the aluminum prices, okay? And regarding the second question, well, we are at the very beginning of the year, but I will try to say something about your question. I think that if the premium charge moves more to levels of 200 as some people are telling the market, the levels of zinc prices and aluminum prices stay at the levels we are having these two first months, I would say that the consensus would be conservative.
Okay. Thank you.
Thank you.
Ladies and gentlemen, we have now reached the end of the conference call. I will now give back the floor to our speakers. Thank you.
You You very
can contact the Investor Relations team of FFA for any further clarification. We will now conclude the conference call and the Q and A session. Let me remind you that you can find the webcast and the dial in details to access the recording of this conference call on our website, www.defesa.com. Thank you very much.
Thank you.