Ladies and gentlemen, thank you for standing by, and welcome to Outokumpu pre-sales conference call for quarter first 2021. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question, you will need to press star one on your telephone. I would now like to hand the conference over to the speaker today, Linda Häkkilä. Please go ahead, ma'am. Your line is open.
Thank you, operator. Good afternoon all, and welcome to Outokumpu's Q1 2022 pre-sale and conference call. My name is Linda Häkkilä, and I'm the Head of Investor Relations here at Outokumpu. With me today, we have our CFO, Pia Aaltonen-Forsell, and she will be the main speaker today. Today, we will first start with a short commentary, and after that, we are happy to take your questions from the line. With that said, I will hand over to Pia.
Thank you, Linda . Ladies and gentlemen, dear friends. One quarter has come to an end. What a quarter. I would say there's a number of topics we could easily deep dive into today, the geopolitical war in Ukraine, nickel pricing, et cetera. I would still start from some of the basics of our business that we were also talking about in our guidance for the quarter. I'll start right off first with a bit of information, really from sort of almost COVID perspective. If you recall, when we talked about the volume development for the quarter, we were a bit cautious, saying that COVID is actually spreading quite a lot.
We have a lot of absenteeism at our sites and wanting to be a little bit careful with that could have some negative impact for the volume in the quarter. However, by now it's 1st of April, and I can say even though we have seen high absenteeism rates for sure, it's almost shocking number at times at individual sites and typically absenteeism over and beyond 10% during several weeks. However, our own mitigation has been successful, and we don't think that this has really caused total trouble that we were cautiously talking about. Quite the contrary, we have still been able to operate at very high capacity utilization rates throughout the quarter.
That's a good starting point obviously on the back of the market sentiment that is still strong, especially maybe giving there a bit of a first sort of positive statement also, looking into the Americas and just want to say that sort of from a macroeconomic perspective, it really seems that the economy is having sort of a very good sentiment at the moment. From demand perspective, staying very robust and especially in this geopolitical situation, I just want to say we are very pleased that we have this strong presence in the Americas and in the U.S. as we speak. It is looking mighty good on that side of the Atlantic. The market situation in Europe is robust.
There is indeed still a strong sentiment around any discussions with end users. Distribution side has been maybe a bit more cautious, especially as the nickel price has been so volatile at points, sort of even visible to the point in the order intake. However, we still have the strong order book far into Q3 at this point. Maybe a few words about nickel. That has certainly been one of the really turbulent events especially of March.
Without going into all of the sad details around what has happened in LME nickel trading, I just wanna say that obviously this also had sort of a temporary impact on customer behavior with a lot of questions, with a lot of inquiries on what this whole thing means. I think by now we have the alloy surcharge out there for the month. I think we have been able to respond to the questions that were arising and somehow it seems that the situation is still manageable or sort of rebalancing after that sort of very turbulent peak there. Of course, that turbulent situation on LME nickel trading also had some impacts vis-à-vis, for example, hedging.
You know, our hedging policy is really there to balance our profits and sort of balancing out or offsetting with timing. Now, I think what will happen with this sort of change really late in the quarter is most likely that we will have a bit higher hedging losses than what we will see timing gains. Then obviously if the nickel continues at an elevated level, then those timing gains will be more visible later, for example, during Q2. For Q1, then probably a bit higher hedging losses than timing gains. Finally, maybe still on the energy prices, that was quite a big talking point when we published our Q4. Relating to Q1, I think the situation has remained sort of well controlled.
There is no significant increase in electricity or energy. I'm sure we can still come back to the details, but I do think that our hedging policy, especially for electricity, has been very successful and has helped to keep the cost on a stable level. As you all know, we also do have the main part of the electricity consumption in the Nordic countries, particularly in Finland, and observing also the price curve, the price increases overall in the market have not been taking it to such elevated levels as, for example, in S outhern Europe. The situation with the war in Ukraine has obviously brought a lot of turbulence. It is overall a very sad situation seeing war in Europe.
From Outokumpu's side, we have also taken a lot of measures to make sure that we discontinue business, a very minor business, I would say, from the sales perspective, but obviously from a sourcing perspective, from our sort of operational, sourcing perspective, Russia has indeed been one source or, for example, the highest nickel metal as well as, for example, ferrosilicon, coke, and anthracite. We are putting a lot of efforts into looking for alternative sources. If anything, I wanna say that that is work that we take very seriously, but probably it will take some time to redirect some of the supply chains there.
I think for the first quarter, for the second quarter, we have a good plan in place, but there still remains work to really ensure that we are able to sort of fully redirect the sourcing. We are doing our utmost. As you know, obviously, scrap being the most important source of raw materials, when it comes to scrap, we have discontinued any even minor sourcing from Russia that we may have had earlier. Finally, I feel sort of circle back a bit to other sort of aspects of the Ukraine war, being then, for example, access to gas, energy more broadly, but particularly gas.
Obviously, even though our purchasing comes directly from, for example, Finnish or German companies, we all understand that in the background, indirectly, we may very well be consuming gas also of Russian origin. In that context, obviously, we have to have a very tight dialogue with our suppliers and also asking there for alternatives. With that said, I think summarizing the sort of first quarter and both sort of operationally and from a market perspective, I think we are still just completing a quarter that has been very much along the lines that we were foreseeing and operationally then even avoiding those challenges or mitigating the challenges with COVID.
Obviously, then, when it comes to sort of further outlook for Q2, that we will come back to in our Q1 report in early May. With that said, operator, we would be ready for questions, please.
Ladies and gentlemen, we now begin the question and answer session. If you wish to ask a question, please press star one on your telephone. The first question from Luke Nelson from JP Morgan. Please go ahead.
Hi. Good afternoon. Thanks for taking my questions. Just firstly, on costs, your comments around, sort of qualitatively indicating strong control of costs quarter on quarter, at least in Q1. Can you maybe just give a bit more quantitative color around what, if any, sequential cost increase is coming through in power, natural gas, and I think previously you'd also talked about ferrosilicon?
Yes.
As well? I'll start there.
Indeed. Luke, thank you very much. Yes, indeed. The language that I used earlier was to say, on the energy side, we had even a sort of EUR 40 million and EUR 50 million increase quarter-on-quarter from Q3 to Q4. Then I did say that it could become even double in the first quarter. I think with sort of the most recent view that I have, obviously I don't have the accounts ready, but just sort of observing the price curves and then our hedging results, I would say it's probably a little bit more sort of modest than that. I think overall, less of a sort of price pressure from electricity and natural gas.
Obviously there is still a bit of a sort of increase compared with Q4, but maybe not as high as I was foreseeing earlier. On the ferrosilicon, I think it's really pretty much that order of magnitude that we were thinking. You know, is it EUR 15 million, EUR 20 million, that sort of quarter-on-quarter increase. If that was sort of the energy and the ferrosilicon, then I would still say that of course there is sort of generally a very inflationary environment out there. You know, whatever sort of consumables or basically anything we are looking at, I mean, there are price increases coming up. I think that's also something that we will continue to see sort of through the year.
To some extent, you know, in 2021, even though prices started somewhat to increase later in the year, we were still protected by contracts, et cetera, and some of them indeed are renewing now. Maybe Q1, we still have a bit of buffer from, can I call it just sort of inventories, still being consumed sort of, you know, with the old prices, et cetera. Inflationary pressure indeed is there. I just don't wanna sort of over-interpret that for the first quarter.
Okay, great. I suppose then just circling that back to your guidance, which was similar to high levels, and a part of that was obviously the COVID potential issues which you talked about maybe being.
Yeah.
Less of an issue in the quarter.
Yeah.
It also seems like energy is not as much of an issue as previously indicated. Is it fair to say that clearly the lower or similar part within the Q1 EBITDA guidance is now off the table and we should be thinking sort of towards the upper end, if not above? Is that a fair comment given the moving parts that we've talked through?
Yeah. Luke, I think what is really fair to say is that some of those risks that we were foreseeing di d not materialize. But I would feel in this context, as you asked a very direct question, I just need to bring along the sort of turmoil that there was with the LME trading and then feel the situation that we had sort of overall then with the sort of combined timing and hedging impact, which I now know or you know obviously don't have the accounts yet, but just based on where nickel traded yesterday and what happened during March, we know that we will incur some hedging losses. I just wanna say that out loud, I have no intention to change the guidance that we have given before.
I think that indeed, you know, some things went sort of good where we were foreseeing risks or went well where we were foreseeing risks. These hedging losses will be there a bit sort of as a negative. Ca n I call it a surprise? Obviously, you know, what happened was fairly unprecedented, at least to my knowledge. I have not really seen these sort of movements before.
No, that's very clear. Maybe final question, and I'll hop back in the queue. Looking further afield into Q2, Q3, just given what you see at the moment, can you maybe sort of touch on the key moving parts of how profitability could move based on your order book, what you see from power, ferrosilicon and those type of effects, and pricing? Just trying to get a sense of-
Yeah.
The key building blocks.
Thanks. I think obviously, you know, in the first quarter, we were very clearly indicating that, you know, what we see already from our order book, we know that prices, higher sales pricing on our side will more than offset the inflationary pressure. I guess that's really sort of without now giving the guidance for Q2 and Q3, I think the elements to consider is really the, you know, continued strong order book that we have for the second quarter. Obviously also knowing that those orders have been taken still in a kind of positive market environment. At the same time, you know, inflation will push even bigger. I think the ferrosilicon, for example, pressure is going absolutely nowhere.
For most of consumables, et cetera, you know, we will also see pressure upwards. You know, can the inflationary pressure be sort of on a full year basis if we think about more like conversion costs, you know, how big could that be? Well, still, you know, looking at the overall margin, you know, could there then sort of throughout the year be maybe sort of a 100 EUR per ton increase if really everything is pushing up? That's certainly possible before we sort of get to the end of the year. There are also kind of moving elements within that.
I just think that the order of magnitude of the cost inflationary pressure from the various conversion costs could still be something to really sort of take in the calculation. But at the same time, we have still been, until now, seeing this market environment continuing as positive. I'm not as much worried about that balance, but I think that the overall macro environment and, you know, having now experienced one month of war, what are the sort of consequences of that when we look a little bit more into the autumn? I guess we would all like to know and we simply don't know yet.
Just giving one example that our sort of overall tendency or trend already for a really long period of time, for example, nickel has been, you know, upward. When is then the point in time when that will change. I think much more about that kind of sort of changes and elements sort of worth considering. I think the sort of logic in the margin development otherwise has been sound.
Sorry, just to follow up on the ferrosilicon, which you mentioned sort of still in line with the prior guidance of EUR 15 million-EUR 20 million sequentially. If that's the base in Q1, as things stay, would that? Would that fully reflect sort of pricing where it is at the moment, or would there be an additional step up in costs from that in Q2 relative to Q1?
Yeah. As far as I can see, there could still be a little bit of increase into Q2. I think from what I know right now, it seems that, you know, that sort of level change has happened. It is still an area where, you know, these changes then happened really quickly.
Yeah.
Yeah, we'll have to see.
Okay. I'll step back into line. Thank you.
Thank you, Luke.
Thank you for your question. The next question from Carsten Riek from Credit Suisse. Please go ahead.
Thank you very much for taking my questions. I have more a question on the demand side right now, because what we see is that especially the austenitic grades are getting quite high price-wise. Do you see, Pia, a change in the customer patterns asking for more ferritic grades rather than austenitic given the price differences? Or is it still a level where we don't see the switch coming yet? That's the first question.
Right.
The second one, just on the inflation. In your opinion, is the inflation which we see right now, which probably causes also higher interest rates, could that be a potential negative factor for the global stainless demand going forward?
Very good question. Thank you, Carsten. First, I think I could give sort of the short answer. We don't yet see a move from austenitic to ferritic, but obviously, you know, links to the high nickel price. I do think that there have been historical periods before, at least in 2007, when there was sort of a clear shift happening then. Let's not forget that then we were sort of $50,000 per ton nickel for a long period of time, or sort of rising to that level also over several months and then staying at that level for some months. Obviously we are not sort of in that level yet. We are also not for that sort of long duration there yet. We do not see that yet.
Okay.
I think your question on inflation is so interesting, because it could somehow of course make sense that, you know, from a sort of consumer's perspective, there will come a point in time where money is just sort of flowing into the basic essentials of everyday life. There could of course be a theory saying that that would then impact demand for, I don't know, appliances for example, or for automotive or other sort of end user applications. But I have some hesitations to that statement, and I base that on, let's say, facts, both of sort of consumer savings, especially in the U.S.
It actually seems based on some stats that I was reviewing very recently that, you know, people from the sort of bottom, you know, 10%-20% of income earners actually are better off now than before COVID. The savings rates are still pretty good. In Europe of course, COVID was overcome by a lot of support also from the state.
It does seem that, you know, before the war in Ukraine, we were both in terms of sort of European and, you know, U.S. economy really, you know, in a sort of rather strong position, with sort of a kind of a good savings rates and, you know, sort of cash amply available also for the lower income earners. I think it may be sort of too early to draw that conclusion yet. We certainly don't see that from, let's say, the contacts that we have into, I don't know, appliances, et cetera, customers.
The theory of course would be that if inflation then really is here to stay, I mean, if it really also goes into areas where it's difficult to increase productivity. If we talk, for example, I don't know, more about sort of services, et cetera. If inflation gets persistent, also kind of through those segments, maybe there then is a risk that we go into a situation where interest rates will be just sort of even more elevated than maybe the sort of 2%-3% that I think could be in the cards now. This is maybe more sort of just enjoying the question. I think it's a really sort of interesting one, and you might be onto something, but I don't think we are there yet.
Probably, we are sort of pretty well positioned as economies to at least sort of withstand the first shock and not go sort of directly down the drain, so to say, this month.
Thank you very much, Pia. That's very helpful.
Thank you.
Thank you for your question. The next question from Bastian Synagowitz from Deutsche Bank.
Yes. Good afternoon, Pia. I hope you're doing better by now. I just-
Thank you, Bastian. Yes, indeed.
That's good to hear. I just want to follow up on your point on hedging. I know that's probably the most difficult part of your accounting to work out, I guess the effect between timing and hedging. Can you give us any quantitative steer in terms of what the number could look like? Is this more like a negative minus, say -EUR 20 to -EUR 30? Could it be higher than that? We've had obviously very extreme moves. I guess it's gonna be difficult to say, yeah, if you could give us maybe at least a bit of quantitative steer at this point, that'd be great.
Yeah, yeah.
I appreciate that.
Thank you, Bastian. Indeed, it is very difficult. I mean, we spent a good part of the day yesterday sort of looking at the closing price around EUR 32,000 on nickel and then kind of doing a bit of sort of tentative calculations. I think you know, this is still at this point not sort of a solid figure, but I get that the net impact of you know, the timing gains that we get, but they are not so huge because you know, the nickel price really only was higher sort of clearly in March. That doesn't flow through that much yet. Then at the same time, we are already taking some of the hedging hits.
Obviously, if nickel stays this high, there could be some more negatives from hedging also in Q2, because for a part of the hedging, we apply hedge accounting that we kind of better match the cash flow, and the hedging result. For a part, we do not. Then we have the mark-to-market at the end of the quarter. I mean, I can easily foresee an order of magnitude where the net of timing and hedging is exactly as you said, maybe EUR 25, maybe EUR 30, maybe it could even be EUR 35. That's on our figure that we'll need a bit more diligence before we are really sort of closing the books.
Mm-hmm. Okay. Okay. Excellent. That's great. Great color. Just on the volume side, I mean, the picture you're drawing on volumes seems to be still very, very constructive. Basically what you've been saying, I guess, is that you have been seeing another increase in shipment volumes in the first quarter versus the fourth quarter. That is correct, right? In terms of volumes, you've been really on that uptrend.
Yeah. I do think we were sort of able to overcome those challenges, so yes, indeed. I mean, it could have been, you know, also kind of ending up at a fairly sort of neutral development. I think with overcoming those challenges, again, there's a bit sort of a leaning to the positive side.
Mm-hmm. Okay. Okay. Understood. Just, again, to frame the situation into the second quarter, I guess again, also what you said on margins, I mean, it seems to be fairly constructive. It seems to me that the main risk is volumes. You have a very, like, decent order book. The question is obviously will customers really take off those orders? May they potentially walk away? We don't know. Could obviously happen. But, is this the way you would look at it at this point? I.e., like overall margin environment still continues to be good, even net of costs, but then the main risk obviously is volumes?
I do think that's sort of the headlines there. Then obviously, you know, just looking into particular development in the first quarter, I think there is the sort of, I don't wanna call it one-time impact, but the sort of unique annual impact of, you know, also the annual contract repricing in the first quarter. Obviously that sort of change vis-à-vis the previous quarter cannot happen again in Q2, kind of caused by the annual contract. But even having said that, I do think there is still kind of a constructive environment for the margin. And what I really will be observing is more, you know, that there is really an unprecedentedly difficult geopolitical situation again.
With the nickel movement, I really think that the higher risk is then on, you know, if we would face situations where customers would not be taking their orders. I think I have commented this in earlier calls, and I've said that, "Hey, we have a very good sort of contractual framework." I think we are sort of, you know, pretty certain that we have all the rights to deliver. You know, even saying that, it's clear that we are here for the long term with our customers and, you know, we would always be sort of yeah we would always try to sort of find a constructive solution.
That is one of the things to sort of have an eye on and, you know, kind of almost I would say with a reflection on what's happening more broadly in the whole society.
Okay. Great. Look, my very last question is on the market supply situation and mostly on the trade balance. Over the last couple of months, we obviously have seen again another uptrend on the import side. I guess one could say that could be driven by probably three factors. I guess the arbitrage possibility, obviously, is significant given the price differential. The European market obviously has been very strong. Maybe there has been an element of anticipating maybe also the additional trade measures in terms of anti-dumping and countervailing duties, which now have been announced. The trade data we all receive, obviously we all get that with a lot of time lag.
Have you seen any, from your market sources, any indications whether there have been any early changes to how the trade side has developed? The price differential obviously continues to be very large.
Yeah.
Have you maybe seen any changes nevertheless?
Well, I think the January stats were showing a lot of imports, really, you know, over 40%, but it seems that that's kind of a typical monthly pattern as well within the quarters. It's probably sort of, yeah, there's really not any sort of conclusions that we could draw based on that. I do think that the high nickel price obviously makes this sort of arbitrage or the price differential quite meaningful at this point in time. You know, I always keep reiterating that it is of course this sort of price differential, but it's also logistics, availability of logistics, then it's the trade measures, and then it's of course domestic demand in, for example, China.
Is there sort of an opportunity for more goods to flow into Europe? I'm not sure if it's sort of yet the time, but at this point, I mean, we are observing the statistics a lot. I think with distributors being sort of very careful with how to place orders in this nickel environment, I am sure that they are looking into kind of what's the opportunity with an import from Asia. That is sort of the other side of the coin.
Okay, great. Thank you. Thanks so much for taking the question.
Yeah. Thanks, Bastian.
Thank you for your question. We have the next question from Faisal Qureshi from Jefferies. Please go ahead.
Hello, hi. Maybe this has already been covered before, so apologies in advance. I think maybe you mentioned about the timing gains that we're going to be seeing in Q1. Could you perhaps comment on that again? I mean, I guess the other question I had was, given how fast energy costs have increased over the quarter, I mean, do you think that you would also see some timing-related squeeze, or are you able to pass through these costs to customers? Thank you.
Well, thank you. Thank you very much. Maybe I thought the energy costs, and you are of course sort of right that there are some markets where the energy cost increase has been super high. If I look at, for example, the U.K. in our portfolio, they have been more brutal than in some other countries where we operate, and we have had to sort of find mechanisms to pass that through to our customers as well. I think that's given when the increases are so high. When you kind of look at Outokumpu overall, obviously the U.K. is sort of a very small part of the portfolio.
More relevant is what is happening in Finland particularly, but also for example in Sweden and U.S. of course for that matter. I would say that, you know, observing the kind of absolute levels of particularly electricity costs, that's really the big bucket of costs here. Also the changes, I think we have been in this quarter, you know, successful with our hedging and contracting measures as well as then, you know, not really seeing those peaks so enormous or so aggressive in the Nordic market. I still continue to have sort of a really tight eye on this topic. I think that the sort of rise quarter-on-quarter probably is a bit smaller than I thought initially.
It's not sort of the main topic from our perspective, even though it might be from someone else's, but not from ours. I'm not particularly worried. When I initially said, you know, that it could be even sort of double sort of sequential cost increase compared with what we saw from Q3 to Q4, now I just wanna say there will be a cost increase, but it's not gonna be as high as it double that I thought earlier. Q3 to Q4 we saw it. I think it was EUR 14 million increase. That's maybe about the energy.
When I talked about the timing gains, I mean, we would see that of course when nickel price goes up, that is kind of the lever is also positive for us because obviously we have some inventories where we can then see this gain when we are selling. Indeed there will be a timing gain, but they're really not so much that we can materialize just sort of during the late part of March. We will see more of the sort of hedging losses pass through for the same period. Our hedging policy on nickel basically is there to offset this sort of inventory related, you know, timing gains and losses.
We really sort of wanna lock in margins and protect ourselves from this volatility. I think we've been fairly successful in the last eight, nine quarters or so. This quarter, sort of there will be a bigger move or a bigger shift. I cannot tell you the exact amount because simply this is still sort of being calculated. You know, there will be a net impact of both somewhere, as I said earlier, probably between EUR 25 million and EUR 35 million net impact of both. Really I say that figure a bit in brackets because it's really quite complicated accounting before we have all the impacts on paper.
Thank you.
Thank you.
Thank you for your question. We have the next question from Luke Nelson from JP Morgan. Please go ahead.
Hi. Thanks a lot for my follow-up question. Just one for me on working capital, and apologies if you did touch on this in your opening remarks. Can you maybe just talk through how we should be thinking about that? Obviously, Q1 is typically seasonally weak, but given raw material pricing is where it is. Can you maybe just give a bit more of a quantitative framework around that? And also, I mean, have you been proactively taking advantage of any inventory during the dislocations when in Russia and Ukraine that would I suppose exacerbate any working capital build?
Indeed, we have, but let me just sort of frame that a bit first. Thanks for raising this question. Maybe I didn't really cover it in my opening because usually, of course, the pattern is that Q1 is seasonally burdened with an increase or investment in working capital. That's typical sort of going from, you know, the volumes kicking in, a good demand situation and now really then looking at the very high price levels, raw material sales prices, et cetera. That of course even adds sort of a certain flavor to that. I think overall already sort of without any disruption from Russia, we would have been looking at, you know, a fairly substantial increase in working capital during the first quarter.
Obviously, sort of overall cash flow perspective, again, predominantly supported by good margins, good results and then some investment in working capital really, of offsetting that to some extent. Now what we will see in addition is I say approximately, but I think maybe about EUR 100 million, where there have been maybe not only that we sort of took some inventories early because of this disruption that the war in Ukraine has led to, but also just simply because we had to redirect some supply chains. We had to change some vendors. Maybe there were some old contracts that were really advantageous also in terms of, I don't know, consignment inventory or long payment terms, et cetera.
Now in order to adjust to this situation, we have had to make some concessions. I would say it's sort of my best estimate that these sort of extraordinary measures, really because of the war, probably increases working capital with around EUR 100 million in the quarter.
Sorry, just to be clear, that is the normal seasonal Q1 build and then EUR 100 million on top of that?
EUR 100 million on top, on top of that.
Okay.
Which I would really say is the sort of war-related, because there have really been quite significant sort of changes in how to sort of source certain metals, for example.
Okay. No, that's clear. Thanks a lot for that. Thank you.
Thank you, Luke.
Thank you for your question. The next question from Harri Tiitinen from Nordea, please go ahead.
Yes. Hello, good afternoon. Thanks for taking the question. Just wondering if you can sort of give some color on that, you have had the kind of competitive advantage in the sort of very high usage of scrap, but now, I mean, just wondering how watertight is the link between nickel and scrap prices and how that kind of works operationally and that. Also like thinking of the with scrap, you obviously there's quite a lot of cost element related to collection and logistics, and those costs have been going up as well. Just wondering what is the kind of relative attractiveness of scrap versus nickel in this kind of environment? Is it sort of changing in any meaningful way?
Harri, thank you very much. They are so good and intriguing questions today. I think that's a very good observation. I would say particularly on the point also of, you know, the cost of collections, logistics, et cetera, obviously kind of with the overall inflation, those are also increasing. There is still today a sort of a very clear correlation or a very tight sort of correlation between the LME nickel pricing and then the scrap or for the nickel component in the scrap.
I think that's sort of the fact of the matter that this sort of paper trade of nickel in LME, even though it's only a fraction of nickel traded really in real terms in the world, it is still very meaningful in terms of sort of a price calibration mechanism. It still works that way. As you can maybe appreciate, there's also then the link to sort of margin management both at producers' end, like for us, but I'm sure also for the scrap dealers, that you know, the sort of timing aspects here.
In a functioning LME market, they can be managed because you can hedge and you can take a position to sort of lock in your margins.
Mm.
That has really been sort of the setup and I don't think that we have yet seen sort of that being disrupted. Of course, it has been questioned now that with this sort of extremely turbulent movement in the LME nickel price that what is sort of left, what is the benefit left here? You know, it's kind of the whole stainless industry is very linked, as well as also then other industries who take sort of the hint to the pricing from the LME nickel. There is still sort of a tight mechanism around that. I think the benefits of scrap are undoubtedly there when it comes to just the whole sort of heart of the recycling, the low CO2, the sustainability.
There are so many sort of strong benefits that we need to find sort of ways of just managing the situation now also this turbulent situation. We all know that we also need some nickel in other formats. I mean, sometimes it's ferronickel, sometimes it's cast also or briquettes that are needed there to really sort of ensure the exact right content and qualities and properties needed. Still, I mean, scrap is the basis and so it will remain.
Yeah, yeah. Okay. No, that's interesting. Thank you.
Thank you, Harri.
Thank you for your question. The next question from Anssi Raussi from CEB.
Yes. Hi. Thank you. It's Anssi Raussi from SEB. I have a couple of questions, and, to start with, about the mix. Have you seen any significant changes in your product mix because of the current conditions and availability regarding grade one nickel, for example? That is the first one. Thanks.
Yes. Thank you, Anssi. The short answer is that this availability of nickel has not impacted our customer's behavior in any way. I don't see a link there. What I do see is that we still have an increasing sort of share of the pro grades and of the value-added grades in our order intake. I think it's sort of typical also of how the cycle goes. We are now later in the cycle. We started off with sort of you know typical items closer to the consumer, and now we are getting to the more sort of investment-driven demand.
Not yet that substantial change in the actual, but really in the order intake, I think we can now say that we really see this sort of return of the investment cycle.
Okay. Thanks. Maybe I continue on demand side. I know that this could be a bit difficult question, but have you heard or do you see that the demand is currently strong because end user customers are fulfilling their last contracts and then the demand will cool down? Or is the underlying demand really that strong as it looks like right now? Because I'm just thinking that many industry players have been commenting some demand problems and consumer confidence has plummeted recently. Have you-
Yeah.
Heard anything about this?
Yeah. Indeed, I do think you know, looking at some of the statistics out there, indeed, consumer confidence seems to have plummeted. You know, what we are doing, obviously, is having a tight contact with sort of a fairly large group of our key customers. They are still signaling at this point that they still have long order books and really sort of wanting to ensure that they are not stranded with non-existent or very low inventory as maybe happened during COVID. Maybe this really sort of emptying of the supply chains in COVID, and then the difficulty of really sort of benefiting from you know, the growth when it kicks in again, has somehow also made everyone really conscious of this, that you know, not driving inventory too low.
I still have to say that, you know, the signals that we get from our customers, from our end-use customers, they are still talking about a very robust demand. You may believe that we are following this extremely tightly, because some of the sort of macro indicators indeed seem to talk about sort of something being a bit broken on the consumer side now.
Okay. Thanks. The last one from me is that, do you think that you have possibly gained any market share because of some uncertainties regarding your competitors being able to keep their mills running with high energy costs?
Anssi, it's a really good question because obviously the news flow has been, you know, really sort of talking about extreme problems in some other areas of Europe, et cetera. Still, I think it would be premature to say that, one reason being that, you know, statistics are always quite late, so you know, anything that is happening right now, we would see a couple of months from now in the statistics. There, I really honestly don't know.
I also think that, you know, as we have been having this order book still for Q2 and, you know, bookings in the third quarter, it's still, you know, what is happening here and now, if it's then impacting order intake, you know, then we would see that in the delivery only in, you know, several months' time. Also, that leaves the situation where I really cannot answer the question yet.
Yeah. Of course, talking about order intake side here. Thank you.
Yes. Yeah.
That was all from me.
Thank you, Anssi.
Thank you for your question. There are no further question at the moment. I will hand back the conference to you, ma'am, Pia Aaltonen.
Thank you very much, operator. Thank you all for super interesting and good questions. I just wanna say, I've also personally experienced now what it's like to have COVID, along with so many others, I'm sure on the line and throughout the world. I think it's just reassuring to be out on the other side. I hope that there is some sort of more positive news and sentiments coming across our ways in the next weeks and months. However, now we are sort of entering the silent period, and then we will talk again when we publish our Q1 results. Thank you very much, and please stay safe and take care of yourself. Bye now.
That concludes the conference for today. Thank you for participating. You may all disconnect.