Good afternoon, ladies and gentlemen, and welcome to the Aurubis AG conference call on the occasion of the publication of the second results 2022. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions following the presentation. Let me now turn the floor over to your host, Elke Brinkmann.
Welcome also from my side. Joining me on this call are our CEO, Roland Harings, our CFO, Rainer Verhoeven, and my colleagues from Investor Relations. Roland Harings and Rainer Verhoeven will give an overview of the half results and current developments at Aurubis in a moment. Afterwards, we will start with the Q&A. Please e the key combination nine star if you want to ask a question. With that, I turn over to Roland Harings.
Okay, thanks, Elke. Also from my side, warm welcome to this afternoon, and thanks for participating in our half-year call this afternoon. We closed also the Q2 successfully. As already announced in the ad hoc release on April 21st, we were in the position again to raise our forecast corridor for the fiscal year. We now expect to achieve an EBT between EUR 500 million and EUR 600 million. The good operating performance of our smelter network, a very good supply of input materials, and a very high, stable demand for our products in combination with metal prices, with high metal prices, are the basis for this. Operating EBT for the first six months of EUR 345 million and the ROCE of 19% speak for themselves. We had a very strong quarter in the first half year.
However, we feel the pressure of rising energy costs. At present, we are still very successful in compensating for these. Of course, we underline that our upward adjusted forecast is based on a secure gas supply, especially for our German sites, but we'll come to this in more detail in a moment. On the next slide, you can see a quick overview of our key year-to-date operating figures. Revenues increased significantly by 23%, driven by significantly higher copper and industrial metal prices, higher sales of copper products, and higher sulfuric acid revenues. Gross profits increased by 22% due to very strong market conditions and an outstanding performance. Also here, we will come to more details in the course of this presentation.
Despite higher energy costs, we achieved an 86% increase in our operating EBT YoY compared to the prior year, and our ROCE of 95% well exceeds our target. Coming to the next slide and a bit more deep dive into the market. Copper price continued trends from Q1 2022 and at around the level of $10,000, well above Q2 of past fiscal year. The other industrial metals, especially nickel and tin, developed very positively over the past quarter. Some brief comments about the concentrates. Our smelter network was fully supplied during Q2 2022 with concentrate, and we did see a stable supply from the mining.
Since we set benchmark for clean concentrate in December 2021 at $65 per ton and $0.085 per pound, spot market TC/RCs have seen a slow and steady improvement of treatment and refining charges during the reporting period. This trend is also underpinned by the newly set buying floor by Chinese state purchasing at $8 per ton and $0.08 per pound for Q2 this calendar year. Known benchmark TC/RCs is well supported by expectations of strong mine output over the course of this calendar year. The latest update by Wood Mackenzie confirms the expectation that additional mine output will outpace anticipated growth of metal demand during this calendar year. Aurubis is well supplied with concentrate beyond the current quarter and in line with our long-term sourcing strategy for input materials.
Coming now this year, we saw a stable supply availability of copper scrap, blister copper and other complex recycling materials on our global source markets. In the first half of the fiscal year, we benefited from strong RC for complex recycling materials and also from satisfying RCs for copper scrap for smelting. The availability of copper scrap number two during Q2 was stable compared to Q1, but below the previous year's availability.
Consequently, RCs remained stable during Q2, and our reference, CRU, estimates the average RC of scrap number two at around EUR 278/ton in Europe. The availability of complex recycling materials remained stable during the first half of the fiscal year, with RCs above levels of the year. Looking forward, our production sites are already supplied with material into the fall of the fiscal year, the current fiscal year.
Short substance regarding sulfuric acid. The sulfuric acid market remains tight during the reporting period. Similar market dynamics as Q1 led to a stable price momentum during Q2. A strong order demand, again, met by reduced temporary supply, helped to sustain this good dynamic. The strong market performance coincident with a very good throughput and strong acid production at both sites, Hamburg and Pirdop. Additional capacities will be sold at very favorable spot market terms. ICIS report Q1 and H1 contracts from Europe around EUR 135-EUR 175 per ton. Those markets remain tight through first half of our fiscal year. Coming to ACP, our premium for calendar year 2022 was set at $123 per ton. We planned this already in Q1 quarter. Current spot premium level in Europe and Asia developed in opposite directions.
While Europe premiums developed strongly upwards on the back of low inventory levels and strong demand, Asian premiums declined due to lack of new credits for East China. As for approximately $100 million fiscal year. With the scope of our hedging within COBO hedge strategy, we have hedged 70% for the current fiscal year at 1.147, and around 70% at a rate of 1.134 for the coming fiscal year 2022-2023. Coming now to the next slide, which is new in our pack, which you have not seen before. We want to provide with this overview a new data point and also more transparency as often requested by you in our main income components group and on this level. Actually, profit represents all this income component and does not include base metals.
Here are copper metal gains, income for treatment and refining charges, LME premiums, and products including sulfuric acid. In contrast, the gross profit, the gross margin only includes metal-related material expenses. Other income components like energy costs are not considered. I'm sure we will have some discussion and some questions regarding this new view, and we hope you use you're positive about this additional transparency that we have provided with this new view. On to the next slide, energy costs, a very important topic, I'm sure, for industry, especially energy in 2023. The cost situation remains a very important factor. Although with highest inflation costs, mainly from price peaks on the energy markets. Also, if you see on the chart slides, the energy costs have risen. They account now for 70% of our total costs.
If you see last year, it was 10%. All other cost components have stayed relatively stable in comparison to previous years. Measures from our cost-saving program, it continued to positively contribute to the bottom line. Maintain outlook for the current fiscal year and expect cumulative cost savings of about EUR 90 million arising from programs.
Very positive development, the earnings from FX market, combined with the good operating performance, could more than compensate for the energy cost inflation we're facing during the first half of fiscal year 2021-2022. Now the next slide. Thank you. Yes. Having shown the overall situation, now let's have a closer look into the energy costs of the group. In the first half of the fiscal year, we faced energy cost inflation year- over- year, made worse by the war in Ukraine. Then 2021 completed into 2022 for electricity and natural gas prices.
Following our new reporting format with more details of the energy costs on group level, we continue to show the compensated energy cost to the capital markets. Just as a reminder, deductions arise from indirect to electricity compensation and pig refunds, which are included in this overview. Looking forward, we will introduce different projects and measures to continue to reduce our overall carbon footprint across the value. Our German production site is one example.
We will optimize our electricity sourcing portfolio. We'll decarbonize roughly 30% of our electricity consumption per year from calendar year 2022 onwards, and switch to renewable energy sources. We'll also continue to work on the expansion of our own PV plants, PV plant capacity in Bulgaria. This will help with our goal to, I'm sorry, reduce 20% of our electricity consumption from self-produced renewable energy source in Bulgaria.
Yet again, all energy costs and secure supply of all energy sources remain very relevant topics for us. With more detail, although later in the session. This I will now hand over to Rainer Verhoeven.
Thanks a lot, good afternoon, ladies and gentlemen, also from our side. Looking to the financials, they continue to raise from positive to 20.5% as a result of very strong situation in both segments with a slightly reduced effort employed year-over-year. At EUR 50 million, the net flow was lower than previous year, mainly due to the inventory build-up for the maintenance down in Hamburg in May, June, which just started. Stock build-up always takes place before the major plant shutdown because we want to fully utilize capacity of our warehouses for the subsequent process test. In addition, we increased stocks and finished goods to be able to supply our customers additional demands during the standstill of our line in the coming months. We expect the net cash flow between EUR 400 million-EUR 500 million this year.
Let's move on to the segments. To highlight some financials and figures from the MMR segment, Multimetal Recycling. Operating cost ended at EUR 40 million, 50% above the previous year figures. The strong results from high gains based on metal price, especially for the metals like copper, tin, and nickel, and significantly higher refining charges for recycling materials. The RCs for scrap to normalize year-on-year at a lower but still acceptable. The consumption of other recycling material and the cathode production increased due to the good operational performance of all our plants. Only the input of ore and blister was reduced due to the shutdown in Lünen and reduced availability in Q1. The result of good earnings performance, our ROCE improved to 45.6% compared to 16.8% in the previous year.
The expenses in the MMR segment reduced by EUR 180 million. Cost split on the right-hand side for the MMR segment illustrates the development of input costs. Now look at the CSP segment. The operating EBT increased significantly 20% to EUR 20 million in the CSP segment as well. Significantly higher metal prices, higher metal prices for industrial metals, higher sulfuric acid revenues, and strong performance of CSP. The ongoing strong performance of our plants in Hamburg and Olen leads to higher concentrate throughput and higher sulfuric acid production as a result. On the product side, rod demand was stable at a very high level, and shapes production rose by 6% compared to previous year. On the plant side, we were still limited from the flooding in the first half year.
However, we are wrapping up so that continually and expect that by the end of June should be back on that. Operating ROCE was at 12.7% at the end of Q2. The capital employed was increased by EUR 130 million here. High energy prices had a negative impact in both segments, as already explained earlier. Let's move on to the outlook for our drivers, starting with concentrate price. The concentrate price remains on a growth track, both from the supply and demand side. Both CRU and Woodmac expect global copper production volumes to be outpaced with the growth amount of the smelter. Woodmac expects global copper production to increase in calendar year 2022 by around 6%, while additional smelting capacity is expected to be only 2%. In summary, Woodmac expects a well-balanced global custom smelter concentrate market.
Aurubis was able to fully supply its production plants with concentrates throughout the first half of 2021, 2022, and based on our expected stock levels, our smelters are already well-supplied at the end of this quarter. Let's have a look at the scrap prices. Our core markets, Europe and the U.S., have seen availability during this quarter of the fiscal year 2022. The availability of input materials for scrap smelting improved during Q2, and we expect a sufficient supply with RCs on good levels for the rest of the fiscal year. CRU estimated an average of around EUR 275 a ton for scrap number two during the reporting period. First positive momentum shown here in April 2022, which is still far away from the extremely high levels of last year, but also well above the long-term average.
The availability of complex recycling materials like shredder materials, PCBs, residues, slag, and ashes was more stable than the availability of scrap number two. Only the R-RCs for complex recycling stayed at beneficial levels for Aurubis. We foresee a stable market for RCs, as these volumes rather through long-term agreements. Our production plants are well supplied with recycling materials at good refining charges beyond the end of this call. Let's move to sulfuric acid. ICIS and CRU expect an ongoing high supply of sulfuric acid for the remainder of fiscal year 2021-22 for Northwest Europe due to planned shutdowns, among other reasons. Other markets, like the U.S. and North Africa, have similar market estimates. In the product side and current high demand, we foresee a continuation of positive earnings contribution for the remainder of this fiscal year.
I mentioned before, the copper premium for calendar year 2022 has been set at $123 per ton, reflecting the ongoing strong demand for refined copper with a tight market expectation. Coming to our copper products, rod, shapes, and FRP. We see the strong market demand coming from Q1 continue in Q2, and expect ongoing positive contributions from the product business. We saw strong demand from all customer segments during Q2, with trend expected to continue for the rest of the fiscal year 2022. Flat demand for rods, our main outlet for the copper cathode, and plates remain at high levels and close to sold out. The flat rolled business is in a similar market situation. We expect to reach full production at our Stolberg site in one or two months from today.
With the very positive momentum from the markets, combined with an ongoing good operating performance for the linear business, with a record realized, we informed the capital market on April 21, 2022 about the increased our forecast range for this fiscal year. Based on our renewed assumptions, we now expect an operating EBT between EUR 500 million and EUR 600 million, up from EUR 400 million-EUR 500 million last forecast, and an operating ROCE of 17%-21%. It was previously 15%-19%. We updated the forecast range for the Multimetal Recycling segment accordingly. We expect an operating EBT between EUR 200 million and EUR 260 million. Previously, it was EUR 190 million-EUR 250 million. Operating ROCE between 23%-27%, previously 20%-26%.
For the Custom Smelting and Products segment, we now expect operating EBT between EUR 350 million and EUR 410 million, up from EUR 280 million to EUR 340 million, and an operating ROCE between 17% and 21%, which was prior 14%-18%. With this, I'd like to hand back to Roland Harings. Thank you.
Next slide, please. Due to the Ukraine war situation and the effects on business, we implemented an active crisis management at board and management level at the time when this war started. First and foremost, it's important that Aurubis has a very low exposure to Russian and Ukrainian business partners. To put it in perspective, it's less than 0.1%, I repeat, 0.1% of our revenue that we generated with Russian and Ukrainian companies. Nevertheless, Aurubis is also affected by war. Since the start of the conflict, we managed to keep both smelting facilities supplied with input materials, be it concentrate or recycling metals.
Specific challenge was our smelter in Pirdop, as we didn't know about the development in the Black Sea, we investigated and built up alternative logistic routes in case navigation to ports on the Black Sea becomes impossible. Ports in Riga and other destinations, however, as we are building capacities and capabilities. Important to mention also, in addition to this setup, we source up to 40% of the Pirdop concentrate regionally from Southeast Europe, as long as our transport routes are open. At the moment, I want to stress that this was raised, we see a stable supply and the supply to our port facility in Burgas from the mining companies around the world. At this point, we really don't see any limitation or any cancellations. We have the backup, but at the moment, the normal supply chain works well.
Looking into the energy supply, our production sites continue to rely on a stable and steady energy supply for electricity and natural gas. In the first half of fiscal year, all of our production sites continue to be fully supplied with energy. It is worth noting gas deliveries in Germany from Russia will have different impacts on our smelter sites that are equal to 40%. We distinguish the two German smelters in Hamburg and Lünen are relying partly, like all companies in Germany, on Russian gas deliveries, which they are sourcing from the German grid supply. Other sites like Belgium or Bulgaria are not, or very little dependent on supplies from the Russian gas pipeline port. The current energy crisis. Yeah, Ioannis will speak here. As you know, we are not disclosing this level of detail.
We are giving reference point and clearly, recycling has been a major contributor, giving very strong supply. You see our production was at record levels and the markets also allowed a very good pricing of the product. I would like to refer you to our slide of custom smelting the breakdown of the income components, and you see that the total income that we show here, the gross margin increased compared to last year, same period, from EUR 647 million to EUR 769 million. Metal gains were more or less the same, and the improvement came from premium and products.
It's important to underlie this is also the premium where significant contribution is included here, strong product sales and also a sale of our co-products. We provide no more detail than this at this point. But I think the main drivers are quite obvious. If you look at the slide number 10 on the left side, and you look at the vertical. I think you can also derive some of the numbers from there.
Thanks so much for this. Maybe just to follow up. Looking at the revised EBT range for the year, the low end suggests a very significant decline in earnings in the second half of the fiscal year. Is this a realistic scenario, or shall we be aiming for the high end of the range, especially given your track record of guiding relatively conservatively? Thank you.
Thanks for that comment, Ioannis. Yes, that's obvious. You have to take into account that we have a major event still in Hamburg as we speak. That means we stated that this has a EUR 20 million EBT effect.
Twenty-eight.
28. Is it 28?
Twenty-eight.
28. Which is something as we speak, this will be accounted in the current quarter. We are here conservative, and again, I wanna underline the uncertainty in these markets. Also now by supply chains disrupting. We all see what's happening in China regarding transport. Yes, we are cautious here. However, there is risk that our customers, the producers who use our copper products, they will be faced by disruption of their supply chain. Therefore, not, let's say, optimistic about Aurubis, we are a bit, let's say, cautious what's happening in the market demand from our customers going forward.
Okay. That's fair. A last question from me on the power decarbonization strategy. I believe you mentioned around a 30% reduction around the coming years. On the mix. Can you provide a bit more clarity on the moving parts there and potentially also a comment around your long-term electricity contract in Germany. Have you been able to renegotiate any of the terms, or shall we assume that this remains as is for now, at least?
Yeah. Ioannis, I'd refer to slide number 7, where we show also CO2 emissions. If you look at scope one and two, we have about 1.6 million in the last calendar year. That's just 2021. Still preliminary numbers, but not yet audited, but this is very, very close to reality, certainly. If you look at our statement with the Science Based Targets initiative, we committed to a reduction of 50% by 2030. We have already done significant reduction in CO2 emissions, and we announced end of last calendar year the successful trials of using hydrogen in metal production. This is just one example of how we are progressing in decarbonizing our production.
We also sort of announced the procurement of blue ammonia as another source of CO2-free or nearly CO2-free energy to our smelter network. We are moving on many different aspects to decarbonize our scope one emissions, which are already just 500-600 thousand compared to the 1.6. We are continuing to discuss with electricity providers based on the frame contract that we have with Vattenfall, which is there to last. We have opened this contract now so that we can source from renewable energies, so that we can have clear supply from renewable energy fields, offshore, onshore, and also PV plants into our demand. We can switch more and more in Germany.
We did already 30% for the current calendar year and the years to come, and we continue if there are attractive projects where we see a solid and, let's say also cost-effective supply of renewable energy, we are going to transfer these contracts forward. Here we are certainly able to move to green energy over time. What I mentioned also today in the call is the energy production, own electricity production in Bulgaria, where we have just started last year our first PV plant, and we are working on next projects to increase our in-house production of electricity. I can confirm that we are on track, I would say even accelerate on track, to achieve our 50% reduction target, which we state by the Science-Based Initiative.
Great. Thank you very much.
Next we have Mr. Bastian Synagowitz of Deutsche Bank. The line is open.
Yeah. Good afternoon, and thanks for taking my questions. I have another question on the outlook statement as well. Your outlook statement, it said that you had hedged large parts of your metal gains, which means that you should have pretty good visibility on that part of your P&L in the second half. Can you please give us some sense how the numbers here look like? What you are looking for in the second half versus the first half? I guess the production volume behind the number may be a little bit lower if you get a standstill, but maybe a little bit of inventory, which you could realize in the second half. So just curious whether you could open that up a bit. That is my first question.
Yeah. Hello, Bastian. Good question. We have hedged certain amounts of certain metals, although depending on liquidity on market, also for the second half of our fiscal year and also beyond the end of this current fiscal year. We are not providing here the details, but you rightly pointed that there were, let's say, for some metals, very positive market conditions which we are going to benefit. Our exposure to metal prices, specifically in the second half of this fiscal year, is limited. We will have from the metal gain side, which you also saw our new slide, we will have a continued strong contribution also second half.
Okay. Understood. Basically here the message is gonna be more optimization rather than deceleration in terms of profit contribution, despite this sort of maintenance which you obviously face then. Okay.
Yeah. Correct. Yeah. Yeah, absolutely. Let me add here, please bear in mind that we have piled up huge amounts of anodes now for the standstill. We will continue to consume those anodes during the standstill, reduce net working capital, and with that, of course, we will bring out the metal towards the end in a continuous way. There is no disruption on that stream.
Very good. Thank you. My second question is on energy costs. You highlight here as a risk, but I think so far you've been managing the costs quite well with spot buying. Is there a time you will do a larger hedge rollover, which could cause a step change in energy costs? And if so, would it be more fiscal year end, would it be more calendar year end or maybe not at all? Is this more like a floating process or is there maybe like a step change date? Is my question.
No, it's more a floating process, but yearly there is always step. There's no cliff where we are going to fall off. However, there are derivatives, longer term, but also short term, although different in the different countries or what is available on market there. So there will be, let's say, a gradual move to different price levels by country, but step by step, not in one step. One point is also, again, don't stress, we are eligible for CO2 cost compensation. So again, if you get energy and electricity prices, this will be always paid with two years delay. So that means high CO2 prices of this calendar year are not yet visible in our P&L. Compensation will only come two years later.
There's a bit of a rollover effect, which also will compensate the electricity costs, which are so very high due to high CO2 prices. This will be seen later.
Yeah, also maybe I can add here in the income. You have seen quite an increase there, and one component was, for instance, an energy price compensation in Bulgaria, which we received in the current fiscal year and continue to receive there on a, let's say, regular basis.
Okay. Absolutely. Thank you. Thanks for taking my question.
Next we have Ioannis Masvoulas of BNP Paribas Exane. Please go ahead.
Good afternoon. Question on your position towards conservative guidance. Looking at the market moves over the last couple of weeks. You said locked in good part of the metal gains for this year, trying to look beyond current fiscal year. I know you'll provide formal guidance in December. Consensus is sitting just shy of EUR 400 million EBT for next fiscal year. It's about a third over the top end of current year's guidance range. Where do you think the entire market of today's pricing and terms that your annualized EBT run rate would look like? Or would you think consensus being overly conservative next year versus the earnings power you got for this fiscal year?
Yeah. Thanks, Ioannis for your question. As you know, as we discussed now, since the COVID started, we are in a kind of very uncertain days and a lot of volatility in the markets. I think some fundamentals will remain. The decarbonization, electrification, and the demand for metals that we produce will be strong. Although the demand for circular economy, for recycling will be strong and will increase. Here I'm absolutely confident our business model will even be more powerful, more convincing in the years to come. However, there are some major earnings drivers as we disclosed here, which are very difficult to predict, and therefore, at this point in time, we are not going to comment on the outlook.
Please be patient when we reach that point in time in December, then we'll provide the outlook, which then with much more substance than what we could today.
Just on the earnings composition, thank you very much for providing this additional disclosure. We see two periods compared to last year's composition. In the recycling side, there is only a percentage point gap year-on-year in the margin gap in allocation. On the smelting side, only four percentage points, I think the maximum you see on premium end products. The question is how variable are these composition over time? Because we see two periods, but you have got a longer history built into your own model. Just trying to understand how variable these earnings compositions can be over time, maybe just an annual basis between two variables.
I think, yeah, a good point. I think the overall split, and you see also with the year that we are comparing last 6 months of the previous year and now 6 months of current year. You see that moves are relatively limited between the percentage. I think our business model has these strong earnings pillars which are all contributing and then you see it's good to see it's nearly a third. Every one of these components is contributing by around a third plus minus. If we look at the historical figures, this is confirmed, and we also believe that going forward, this is kind of the principle of our risk.
If you look at absolute numbers, we are talking here for six months, about EUR 1.1 billion at 1% or 2% or 3%. This is already making a difference. Therefore, a third is a good assumption for the history and for the future.
Roland Harings, maybe one last question on acid. How far out do your contracts go into the future, and is there any inclination to change some contract structure to get stronger participation in spot market, believing stronger for longer as prices?
Yeah. No. Our policy regarding selling of acids, sulfuric acid has not changed. Where we could lock in longer term contracts, which is mainly for the Hamburg type, we did in the past, and we do today at better terms. In total, we have a higher share of spot deals given the markets we are serving. The overall ratio of long term to spot has not changed, which I think we sit at around 80% long term, 20% spot. That's the number that we have not fundamentally changed. Maybe to add on the long term side, of course, there is price escalation clauses in and so forth. This is, it's a multi-year contract with future indicator in itself, a pricing data.
Thank you, sir. Thank you very much. Very clear.
We have one more questioner. It's Mr. Christian of Baader- Bank. Your line is open.
Good afternoon, and greetings, Roland, of course. I have just one question concerning personnel costs. Approximately it was more than one third of total costs. The six months number in personnel costs is below the previous year. This has to do something with the asset sale, I would suppose. What is the underlying increase in personnel costs there? What do you plan for an increase? Also, more people and maybe the wage increase. Do you have any kind of problem to get experienced and qualified personnel there? Thank you.
Christian, thanks. Last year, we paid a corona bonus, which was an additional spend, which is not being paid this year. This has influence. Secondly, we see also, especially this fiscal year, the effect of our PIP, our reduction program, which we announced in more detail, so I don't want to go into this again. We see this clearly in the numbers here. Regarding wage increase, the second part of your question, we are now in an inflationary environment, and some countries, like in Belgium or Bulgaria, there are even some automatic adjustment conditions, so where wages are being increased. Fortunately, in Germany, the union, IG BCE, have been very, I would say, cautious, given that companies are under significant pressure by rising costs of energy and other inflationary elements.
There have been only included a one-time payment to the employees, but not a structural, I would say, permanent increase of the salary level. This is something which is good. It gives some relief for the time being. On your last question regarding talent and to find the right people for our company, we are pretty successful in attracting talent also given our attractive business model and the big topic of purpose. People see that we are a very important element in sustainability in the ESG topic. We have to be quite active and see this on our website and on our presence.
The good news is, with our strategy, we decided to increase and build up a central engineering office, and we are on track to achieve the recruiting with very good people and experienced people, also young people, as we do in the other areas of the company. Today, I think we are in a good position to get the right people on board in our company.
Okay. Thank you very much.
We have received a couple more questions. The next in the line is Mr. Boris Bourdet of Kepler Cheuvreux. Please go ahead.
Yes. Hi, and thank you for taking the question. I have a follow-up to a previous question on the gross profit bridge versus Q1. Maybe we can discuss it a bit more on a high level for the whole group. When I look at things, the impressive improvement of your gross profit is maybe partially explained by , an unchanged high sulfuric acid price, lower RCs or scrap, and then you have probably some better TCRCs. You know, it looks very impressive how you improved, so eventually you can provide a little bit of more color. In this context, is it possible to get your breakdown with the metal gains on Q1 versus Q2 basis?
Okay. Sorry. Yeah, we are still on mute. Regarding your question, also around peaking here, I think what you have also to take into account is the metal premium for ACP, which is here for the Q2 , and also metal gains. Volume, strong production in our smelter network leads also to, I would say, more metal output and hence metal throughput and hence metal gains. You're seeing all the treatment charges. We are still, I'd say in comparing to the year before, TCRC, the benchmark went down compared to the same period. Now we're in the period where the higher benchmark, which is now 6.5, is going to fully kick in the current quarter. I think this change will also be a different one.
This number will be a different one going forward. Products, strong demand for products, ACP, sulfuric acid, these are plus metal gains, these are the main drivers, plus very strong operational performance will increase overall the total number of our gross margin.
Maybe on sulfuric acid, can you give us a sense of how the freight costs have developed for the business, in Europe and overseas? Overseas is of course higher. What kind of consumption shall we take to deduct from the market price for sulfuric acid?
That's again a very, very specific question here. I'm just seeing if I can give you some real numbers here in our documents. The freight rate from Europe to Brazil was at $38-$43 per ton.
Yeah.
Europe to the U.S. Gulf region at $33-$40 per ton. That's the number which I could find here on the, let's say, on the spot. This is a very specific question, Boris. You can talk to Elke or to Karin for more details there. I don't have the number here at my fingertips.
Okay. No worries. We'll follow up later. Maybe on the battery process, I think you already mentioned these points here. What timeline do you think is needed to get the process ready for commercial ramp up? And what would you see based on your, long years and longtime experience in metallurgy, but are you seeing any specific obstacles of this compared to what you do already today?
Yeah. We have started the pilot plant after the intensive lab scale trials in March this calendar year. First, let's say, optimizing round and running this pilot plant will turn into end of June, July in order to verify our, let's say, the hydro technology that we have developed. Important is our objective is always to handle very complex and also mixing input materials. Therefore, it's not just the one black mass composition that we are testing there and running, but we are going also in a wider range of different qualities. You know that the battery market is still, let's say there are many different variations of batteries which are produced.
We wanna be as broad and as capable to treat any battery material which comes back at end of life or from the processing plant. In July, we will have more clarity about the process. In parallel, we are designing the industrial scale asset, so the work has started there with a feasibility study. Our aim is to install industrial scale unit to treat black mass by in two-three years' time. That's our objective going forward. Nothing decided at this point, but the initial information, the results we saw from our pilot plant have confirmed the very good lab results that we have seen. For this, we are on track, but decision to any major investment have not been taken and will not be taken during this calendar year, probably.
Right. Okay. Just conceptually, I think you've mentioned it before. I would expect that each and every metal which will be found in a battery, you need a separate process step to extract those metals. How much of those processes would you already cover in your extensive smelter network? Is it just a question of, the lithium and the cobalt, you need to set up a new process step, or is it kind of, refreshing a lot more and finding a new step up in, cost-effective extraction technologies?
Yeah. It's a valid question. I think it would be a bit too premature, or let's say, difficult to answer this very specific question that you posed here at this point in time. I would like to ask for your patience that we present our process and the results and what it really means regarding integration into our smelter network with more documents, with more information. Because it's a complex process, it's linked to our network, and it's largely hydrometallurgy, some very innovative process which we don't have today in the company, but also some process which we are running, which we are very familiar with. It's a combination of the technologies and the innovation that we have in our company.
At this point, I think it would be not enough substance, not enough documents here also available to share this in more detail with you.
No, of course. Finally on BOBB, you're flagging that as a new potential to extract metals from your, residue streams. How should we think about the residues from other tank houses? I guess those are not, those bleed streams or those bleed volumes are not recovered at the moment. Would that mean that BOBB is growing, or would you set up some BOBB-like plants in other parts of your network, like in Hamburg or so?
Clearly, that's a misunderstanding, Boris. We have these bleed treatment capabilities in our large plants in Hamburg, in Lünen, in Pirdop. Olen is for, let's say, historical acquisition reason, a bit of an exception, as we have no in-house bleed treatment. That's what we are building now, and we are enhancing this bleed treatment by specific capacities and capabilities to extract also specifically nickel from the bleed, from the electrolyte stream, which then, with the additional capacity, allows us also to improve our input mix. Take more nickel units from the recycling site into our network and extract it locally, in this case, at the Olen site. The other plants are already fully capable, but also there we are expanding certain multi-metal, which is part of our strategy, multi-metal capabilities. One of them is nickel.
Okay. No, that's great. Thanks for clarifying that. That's all from my side.
We have one more follow-up question from Mr. Ioannis Masvoulas. Please go ahead.
Yes. Thanks for taking the follow-ups. Just two questions left from my side. The first, around the overall growth plans. You just mentioned the battery recycling plant that we could see some investment there over the next two-three years. On top of it, there is a Richmond plant and so some other initiatives. Is there a ceiling on how much you are comfortable spending each year over the next three-five years?
Yeah, Ioannis, good point. I could refer to our presentation in the Capital Market Day, where we have shown what we have planned. If you look at our balance sheet and our financial strengths and how much, let's say, financial headroom we still have, clearly the financials for investments, organic investments, is not the limiting factor in Aurubis. It's really our ability to manage these significant amount of CapEx projects in the various regions. Financial is not the limiting factor, it's really the number of project we could run simultaneously.
Okay, understood. Maybe just on this topic, regarding the Richmond plant, you've done quite a bit of de-risking around the project already. One question I had was around FX, because we've seen the dollar strengthening relative to the euro. Have you also hedged the FX exposure there? Is there anything you can comment?
Yeah. Ioannis, Rainer here. Hello. Thanks for the question. We have a natural hedge in place actually, because we have a dollar long position. We have these dollars available going forward to finance the CapEx in the U.S. Parts of the CapEx is also paid in euros here as well. Those dollars that we need to finance the project are hedged via a natural hedge.
That makes sense. Thanks again.
There are no further questions in the queue.
Yes, thank you. That brings us to the end of our quarterly call. It remains for me only to refer to our next call for the release of the nine-month figures on August fifth, and to thank you for your attention and interest. Have a good day.