Pre-Silent Call

Oct 1, 2021

Ladies and gentlemen, thank you for standing by, and welcome to Otkumbu Presellance Conference Call Q3 2021. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. I would now like to hand the conference over to your speaker today, Linda Silla. Please go ahead, ma'am. Thank you, operator. Hello all, and welcome to Odokumpu's Q3 2021 Pre Silent Conference Call. My name is Linda Herkila, And I'm the Head of Investor Relations here at Outokumpu. With me today, we have our CFO, Piazza Nefazel. We will again first start with a short update from our CFO, and then we are happy to take your questions. But now without any further comments, I will hand over to our CFO. Thank you, Linda, And good afternoon, good morning, everybody. This is Pia Harned for Shell. And let me take you through a few of the highlights of And then I think we will fairly quickly move over to the Q and A to address your specific questions. But if I start with the market situation, I mean, this has been a strong market. The market environment has continued On a strong level through the quarter and our order book has remained strong. We currently have Very long order books, I mean, when we talk about the European Flat Business, we are already booking into Late Q1 of next year, early Q2. So our order book is there at 6 months duration at the moment. In U. S, as per sort of the normal practices, it is more on this sort of 3 to 4 months duration, but market situation also remains really, really strong in the U. S. As well. This has been visible in the prices. So CRU data Indicates that stainless steel prices have continued to increase also during the Q3, as I'm sure you all know. And we have seen this in our order intake. What I also want to say is that we see the strength throughout market segments, and we also now in our order intake Start to see the more investment cycle driven, value added grade demand to come back. Still, I want to say that when we see something right now in our order intake, then due to this very long order book that we have, We will see that realized as deliveries then only clearly into 2022. So that also means that the realized prices that we will see in our deliveries during the Q3 Are the ones where we booked the orders probably late in Q1 or early in Q2. So that's sort of the way to think About the delay from what we see in order intake and in CRU statistics relating to prices and then what we actually see In our deliveries and also then through the invoicing in our P and L. So I think those were some encouraging sort of facts when it comes to the top line. Obviously, when we look then at Some of the challenges in the quarter, I would clearly say anything around logistics, availability of trucks, etcetera, Continues to be something of the sort of daily operational battle. As you know, we are very regional in our approach. So Many of the sort of huge challenges of global supply chains have not been top of our list. But some of these Logistical bottlenecks, etcetera, have also been fairly regional. And if nothing else, I think it's at least visible then through the cost pressure That could also come through in transportation. Other well known facts When it comes to cost pressure are, for example, around electricity and energy. And obviously, as a very big electricity consumer, We do have our practices for contracting, for hedging, which means that we are normally sort of well for those immediate spot price changes or they impact us only for as part of our electricity consumption. But obviously, this is something more to also keep an eye on going forward. There's also inflationary pressure in other parts, Whether it's coke, ferrosilicon, etcetera, I think these are fairly well known facts through the market. And as there also, I would say, by sort of inventory management and contractual arrangements, there's always Some delay before that hits the P and L, but certainly topics to be aware of also going forward. Then when it comes to our other BAs, let me talk just very briefly on ferrochrome. First of all, I I mean, obviously, still in this quarter, we know the benchmark price was stable at the $156 in dollars. And then going forward, For the Q4, we now know that we will have an increase to 1.80. Maybe more about that later when we also talk more about Q4 when we publish our Q3 results. And then maybe still a final point on the balance sheet. It is clear that the emphasis on deleveraging, strengthening the balance sheet, which in practice now means also further reduction of debt, I mean, that is still an important part of our strategic direction and remains a focus. What we can see is, I think a continued discipline when it comes to, for example, CapEx and all of the items that we may have discussed also earlier. When it comes to working capital, there is certainly still the Final sort of stretch of the year, which usually brings us a fairly significant Decrease working capital. I think this year will be a bit different on that part and particularly still also in Q3. We do see a good top line. We also still see some pressure when it comes to, for example, metal prices upward And all of this does increase also the working capital investment still somewhat during the quarter, But with that said, I think I would rather go next to the Q and A and then answer your So operator, could we please We'll move over to the Q and A session. Thank you. Ladies and gentlemen, we'll now begin the question and answer session. We have the first question from the line of Sandeep Betti from Morgan Stanley. Please go ahead. Good afternoon, Pierre. So I have two questions. One is related to energy prices. It's No secret. And as you highlighted, it's increasing in a straight line. So against that backdrop, can you provide some earnings sensitivity To rising energy, electricity and natural costs. And also any color on hedging strategy would be beneficial. Thank you. Yes, Yes. And on the hedging strategy, sorry, just to check, was that also on the energy and the electricity? Or was it around Mikkel? I'm sorry, I didn't hear you correctly. Yes. So it was around electricity and natural costs, natural gas prices. So both have increased. So if you have any Hedging strategy in place and how long is that for? Yes, indeed. Thank you very much. Maybe I'll start with the hedging policy because I think that also, To some extent, explains the sensitivity question there. So with the hedging policy, what we basically have in place is first Sort of a base load of long term strategic agreements and one of those an example of those is the wind power 10 Megawatts agreement that we signed very recently and also released some information about that was with Gasum very recently. So first, we would sort of make sure that we have a number of these more long term strategic contracts. And then we would usually look at our electricity contracts on something between a 24 36 month rolling basis. And here, I think the trick why it's a bit difficult for me to just give you an easy sensitivity calculation If that they are within this range of 24 to 36 months, we could then have A bit of a falling curve, so trying to make sure that we are more protected sort of In the short term and then the longer in the future we go, we would have room to maneuver how high or high or low percentage We would then drive their electricity contracting. So our policy there gives us Some room to maneuver, even though it clearly sort of sets the tone of ensuring that we do Have sort of a fair amount of commitment that takes us pretty far into the future. Let me sort of make that a little bit more concrete, how I see sort of the here and now. I would say what it means is that When we talk specifically about Q3, there would have been sort of only a top layer of a very small percentage of Our overall electricity and energy consumption that would not have been contracted in advance of the quarter, it still means because this still is a big Part of our annual cost, I mean, this is somewhere between above 10% of our costs. So I mean to sort of give you a big round number, I mean, we are certainly talking kind of north of €200,000,000 per year. So it definitely means that when we are then seeing this fluctuation, very sort of rapid increase in prices as during the quarter, It will be a high single digit number negative impact in the quarter. Yes. Could even be sort of just above the €10,000,000 mark for the quarter. And I still need to be a little bit specific and say We do need a lot of the electricity consumption also, particularly the figures that you may have from Finland. Obviously, it is our ferrochrome mining and smelter activities are also taking a significant share of that. So sort of just to have a bit of a sense between the BAs. And with that being said, then that is sort of the best The sensitivity I can give today, I'm sure that it's sort of easy to calculate that from a cost base per se, You can sort of imagine what the sensitivity would be, but the challenge is then that I cannot give you sort of one answer on what the hedging policy Yes. I think as this now has such a big impact, it's probably something that we just need to be more transparent on for sort of the upcoming quarters That's how we would then see as part of our sort of outlook going further than how we see that. Okay. That's really helpful. So it's like $50,000,000 per quarter, which implies 20% increase in the energy cost for this quarter, It sounds a bit significant since you mentioned that you had you have already 24 to 36 months of rolling contract. Okay. Yes. We have rolling contracts, but just to be clear, we don't have 100% of rolling contracts. I mean, we have it sort of with More emphasis on the short end and then we sort of take a few steps down in that as well. Okay. Okay. That's very, very clear. Thank you for that. And just second question on net working capital. So the previous guidance was between €100,000,000 to €150,000,000 of Net working capital build during the entire year. And you clearly pointed out that prices have increased even ferrochrome is up And the new prices are higher. So what should we expect for full year and more specifically for Q3, if you can point For Q3, I can be a little bit more specific because just the normal sort of seasonality for Would have been already to get some of this usually cash out for working capital Q1, Q2, some cash in Q3 And most of the cash in Q4, that would have been sort of our historical pattern. And now I think that it's like a wave that we are Sort of pushing a bit always sort of moving, it's a bit sort of ahead of us with the increasing price levels. And what it means is that I would say that when normally in Q3, we would have expected already to have some cash in, I think that, that is less likely now because this Sort of tying in more capital just because also of the higher prices will continue into Q3. And then for the full year figure, I will come back when we have the Q3 release. But I will say that for the very same reasons, The range that I have given before, I think we will need to factor in the higher prices. So The range could be somewhat lower, but we will need to come back with more clarity with that then in our Q3 release. All right. Thank you. Thank you for your question. We have the next question from the line of Luke Nelson from JPMorgan. Please go ahead. Hi, Peter. Thank you for taking Questions. A couple. Firstly, just on shipments. Obviously, you've got it down 0% to 10%. Can you maybe just give a bit more color on how that's tracking? And if at all, Any granularity on by region or by BA? That's the first question. Yes. Thank you, Luke. Hi. So the guidance was So then 0% to 10% down. And that was maybe raised quite a lot of questions of why do you say that The market situation has remained good. Certainly, it has remained good. But clearly, we still keep that same guidance. And I think it's very much just sort of looking from the business environment. This is much more a European question. I mean, we typically do not See the seasonality in Americas. So just sort of on the back of that, I would say it's very much sort of looking how the business develops in Europe. And I would say We have had still the same pattern, especially then also we had to take annual maintenance that we had In flat stainless in Tornio, as I would say, sort of the most significant standstill. That is already now behind us, and I think sort of everything Well and according to plan, but did impact the quarter. So I would say, we are going to see I would always be sort of most comfortable being approximately there in the middle, but I think it's middle or a little bit sort of more on the low end there, depending on now how really the last day's invoicing goes. And it's really not a demand question. It's more really how much we can actually push out to the markets in these conditions as well with the maintenance breaks. And then also, I would say logistics tends to be by now sort of a daily I still call it a headache and not No problem, but a daily headache for sure. Okay. That's interesting. Can I just maybe just on the Demand slides, you touched on them? And to the prior question on power, maybe looking at it a different way, are you having any incoming or Discussions with your customers around them potentially rationing their production schedule and that's sort of Pushing up towards how you're thinking around production maybe into 2022? No. I would The sales, I suppose. Yes. Yes. Like briefly, I would really answer no. I mean the questions are really Availability and then I think that's sort of the first and foremost focus of any customer contact Would really be around the availability, and that's really the sort of primary focus area. And then there have been some disturbances when it comes To the semiconductors, as everyone knows. And despite that, I would say, throughout our segments, really the main focus area, the main Attention area is on availability of steel. Okay. And one final question before I come back in line. Just on maintenance, which She touched on, Antonio. I think prior guidance was a €10,000,000 increase quarter on quarter. That's Still happy with that and then That is yes, yes, absolutely happy with that. It's around the €10,000,000 figure. And if anything, it could be just slightly lower, but the €10,000,000 is a good figure. And that is all basically in BA Europe? It's very much in BA Europe. I'm not saying there Absolutely nothing. I mean, there is some smaller stuff happening all the time. But if we really talk about the increase, it is clear. And then so just to follow-up then, looking into Q4, is there any sort of any maintenance schedules That we should be aware of in the division? Yes, yes. I think we will still refine our really sort of final plan. So with that I think you can appreciate that there's nothing like super significant plan because if you have a really big spot plan that needs to be planned like a year in advance. But we will still take some maintenance. Certainly, I would say even through the BAs, it's quite difficult that something is still happening in like November, December, and I think it will happen now too. There will definitely not To be an increase in maintenance cost quarter on quarter, I think the question more is then that how significant can the decrease be In an environment where still there will be some maintenance, we also really need to prepare for Q1, which sort of seasonally usually is the That's very clear. Thank you. Thank you, Luke. Thank you for your question. The next question from Roos Bodo from Kepler Cheuvreux. Go ahead. Yes, it's Roos Bodo from Kepler. Hi, Pierre. Maybe just a brief add on the demand comments you just made. Can you give us a bit of a sense What kind of differences you're observing in demand from the end customer business versus the distributors? And how do you think about inventory levels in industry, both for Europe and U. S, please? Yes. Thank you. I think what I sort of I would start with where I see a little bit of difference, which is really around the inventory levels. I mean, when it comes to distributor inventories, both in the U. S. As well as in Europe, I mean, here we usually have some facts and some figures. And there I can say that all of the latest figures that I have still seen point to lower than average inventory levels. So the restocking sort of Still hasn't happened. I mean, we are still definitely especially, I tend to follow the inventory days and they are still clearly below clearly below the historical average levels. Then For the evidence of the end users, I would say I have at least anecdotal evidence that their inventories might be getting a bit more sort of closer to some sort of normal levels. But here, the sort of challenge for me is always that the evidence still is more anecdotal. So and It's from customer talks. It's sort of hearing through the organization and in some cases from facts and figures, but more often just from sort of the dialogue. So there I can say there may be some anecdotal evidence of inventory levels being kind of Normalizing or at least not as low as they have been sort of in the post pandemic recovery. But with those differences, then I would say, I really could not point to anything significant. I mean, we still see the segments that Started out strong in the current recovery, appliances, automotive, they continue strong. And our visibility, of course, is As long as our order book, so that is what I can comment, but also I think a lot of evidence is in what the true orders are and they certainly still Show this strength. If there's anything, then I would say that it seems that beer kegs and stuff like this, sort of The catering cutlery sort of thing really seems to be sort of at the high end. But that's only kind of A sub segment of the biggest segment. So it may be more sort of just mentioning it to see it seems people are kind of more back To old habits somehow or at least that's sort of being foreseen, which is, of course, sort of super encouraging. And then as I said before, I mean, we do see now a better order intake also when it comes to the more value added grades. So We are not talking scrubbers here. I mean, we are talking other sort of big industrial projects, also oil and gas projects there, which are clearly not I mean, the invoicing will be there more in 2022 and perhaps not even Q1, could be even Q2, but sort of bouncing back there clearly on the project activity. Okay. You mentioned, you had the only pocket of weakness being automotive. Would you say that that kind of volume shortfall has been more compensated by No, the restocking or would you say this is still more the end demand from other areas, which continue to be Well, I mean, this has for sure been a year of rebound and restocking. It's just There has to be end demand as well because the inventory levels are not creeping up. I still want to be really If you can and say, I don't even see automotive as weak. I mean, I still see the order intake here good and our order stock being good. But there clearly have been, I mean, automotive specifically automotive, but also some other segments have suffered from semiconductor issues. However, that has been there's been obviously been some ways of mitigating That has still led to a situation where I couldn't say that it shows sort of a weakness towards our demand. But clearly, there are sort of the The signs are in the air that it's not there are issues around semiconductors clearly in that industry. All right. But maybe briefly on pricing. Looking at CRU data, so obviously, we have moved now above the €1800 level on the spot market. Is there anything you're noticing in terms of pricing mechanism? Energy is now a hot topic. Are there any discussions about energy surcharge? Or shall we expect that all that kind of Inflationary cost items you mentioned before, these are just kind of implicitly baked into the base price number? I think it's an interesting question because as I'm sure you know, I mean, historically, there have obviously been Sometimes successful and sometimes not really sort of fruitful range of surcharges. But I would say that I'm at least not that I would be aware of, then I'm not saying that I'm sort of in every sort of commercial discussion. I think there is sort of clarity around sort of the alloys being really then part of the alloy surcharge. And then On top of that, we have the base price that should then react to other inflationary pressure. And certainly, we have this other inflationary pressure right now. Of course, then as well, we have had, based on the order intake, also improved base pricing. So And maybe I have mentioned it before, but I'll just repeat it as well that I think that by Q4, we will see sort of The return also based on the existing orders that we have, then the invoicing also in Q4 We'll return to the sort of old balance, the historical balance of being really pricing on the base price and our surcharge. But of course, there are still some types of business that are done on effective price exactly as it also was historically, but we will be back on that historical balance by the Q4 in Brazil. Right. And then maybe last point on realized pricing. So in order to get the head around this, the one thing obviously is the long order book to 6 months where we have to Factor in a time lag of this. The second thing is the contract structure. Maybe can you update us how much of the U. S. And European business is subject to the kind of annual contract agreement. Yes, yes. And I would say, let me really put this in, let's say, 2 really different categories Because the U. S. Market has a certain dynamic, a certain sort of pricing mechanism, etcetera. And if I could just summarize that, I would say that we tend to see sort of a faster cycle of seeing either price increases or price decreases Really sort of carried through invoicing. Of course, that's already on the back of the order book that typically is 1 quarter ahead. So that's sort of the obvious sort of answer there. But it is also as to sort of the nature Of how contracting is done. So even with, let's say, a fairly significant part of, For example, annual contracts or half year contracts, you will still have a range of mechanisms that would ensure that the pricing actually Move sort of along with the market pricing pretty quickly. But then the European situation is a little bit different. It's also the sort of market dynamic, the market structure is different. As you know, we also sell a lot more directly to end users In Europe, whereas the Americas sort of typically is much more of a distribution market. So that's why we have more sort of a mix of different types Of contracts in Europe, and it's more difficult to just give this sort of one overarching answer. And we also typically have more stability that If you have agreed on a certain pricing type, etcetera, I mean, if the contract duration is a period, then you would typically stick with that for that period. So It means that there is like more stability from those long term contracts, and that's, of course, exactly also what we have targeted with those. So we have never really given exactly in Europe that X percent. I have read interesting sort of various reports So where there's been sort of speculation on those numbers, and I'm sure that there's some fencing sort of In the market of what that could be, but I would still say it's clearly less than 50% that we have sort of on a long term contracted basis. So it means sort of in theory, we have quite a big percentage there, more subject to the kind of spot pricing. But then in practice, you still have this almost kind of 6 months delay. And I think that really needs to be factored in right now. So then I would say that what it also implies for Q3 It's clearly that we took these orders in predominantly still even during Q1 or perhaps Early during Q2, so it means that we are sort of having these price increases in the order intake. I mean, they are sort of only gradually realizing in the P and L. And I think you saw that in our Q2 P and L as well. I mean, there was already some price increases in that, But we are here also sort of pushing that wave in front of us. Okay. That makes sense. Thank you very much, Kia. Thank you. Thank you for your question. We have the next question from Kichman Agarwal from Citi. Please go ahead. Hi, Pia. Hope you're keeping well. My question is It's more towards your guidance for the flat EBITDA in Q3. When I look at your competitors, I mean, they are We are publicly announcing the price increase this time around, particularly in the U. S. Market. So I'm assuming you're sort of getting Similar kind of a price increase for your portfolio as well. So we are looking at a situation where, I mean, the ferrochrome Sort of flattish because of the pricing, but better volumes. Europe is looking better because of the price increase coming through and the U. S. Price increase are also coming through. And on top of that, I would assume that there is an inventory mark to market sort of gain on a positive side. So when setting the overall picture, I mean, I know, I mean, there's a little bit of lower volume in the Europe, but my sense is that Your guidance is looking a little bit conservative for Q3. Is that the case? Or you would say that no, no, most of the upside will be delayed in Yes. Well, I clearly think that this pricing and the long order That we already experienced also earlier, it does explain why some of these improvements are clearly still ahead of us as we already can see now that We have the orders. They are waiting there to be delivered, but at higher price, we'll realize later. So I guess that one of the really big questions then is that in the Q3 realized invoicing, exactly from which time periods will those deliveries be, when did we take that order, what was the size level that And how will it realize? And that's obviously something that we will see once we get one once we get sort of the Final results figures, we'll sort of also have that sort of final certainty on that. And you are, of Of course, right. If I just sort of take this a little bit VA by VA, ferrochrome, obviously, I mean, the flat pricing per se, Maybe on the negative side, what I did flag earlier was around the energy prices increasing, which clearly You know, Ferrochrome is one of them that kind of has to pay for that. But still, you know, generally, Generally, of course, nothing kind of super big happening as the pricing there was flat. And then really looking at the dynamics of the markets that we just discussed during the previous question, it is clear that We will see in the invoicing. We will see some improvement there on the back of the orders received already earlier And then just how much that sort of pushes the price, of course. Then I would say you are right on this inventory Mark to market, I mean, we sort of split it into what we call timing differences and hedging differences. There's not much to be said about hedging. I mean, sort of Clearly small amounts, at least on the group level, like nothing I would really write home about. And then as to these inventory or Signing differences. Yes, I would agree that with sort of price levels continuing to push up and also on the metal side, ferrochrome side, I think usually that would indicate that, that would be more on the positive side. So again, I don't want to give any sort of like really big number there. But clearly, that will be somewhat positive for sure. And then we have this maintenance that took a little bit of toll in the quarter as well with the standstill in Tornio, etcetera. So Yes. All of those factored in, I just have to say, we gave the guidance sort of When we published Q2 sort of based on the best knowledge that we had then and many of those attributes we have discussed today. So that's what we have. I understand. Just to clarify, the total maintenance cost for the quarter is only EUR 10,000,000, right? No, that is the sequential increase versus the previous quarter. So it's €20,000,000 and 10% percent? Yes. Yes. Okay, understood. And then finally, slightly longer term. So you mentioned about 24 to 36 months Sort of a time lag into the power cost increase. So you must be having discussions with the power suppliers as of now. So How much confidence do you have that even if you were to allow the increase into the power pricing, the spot is probably not the indicator of the level of You will take into those contracts. Probably the increase will be much more muted than what the spot is implying. Is that a fair you're thinking? Well, I think that's sort of at least historically what we would have seen. Obviously, There's a lot happening in the energy markets. Part is really sort of more cyclical availability, Low levels of water or sort of the hydro power being impacted by that. And then you have all sorts troubles with cables being disrupted between the U. K. And France and what have you. So I think there's been a number of sort of very, Very sort of physical or like extremely tangible reasons, but there's also a lot happening in the whole area of So, I mean, this is sort of a this is a really big and complex Overall picture, where I guess sort of guessing what the future price is would be is not the best medicine. I think the best, Mehdi, thing is for us really to make sure that we have a sort of longevity in our thinking And that we also don't lock ourselves up completely because there is certainly always something that where you sort of need to Ask yourselves that how likely is this level going to persist for a long period of time, and that is absolutely what we are doing. So I still feel that I want to sort of make it sort of even more clear that this 24 to 36 months, It doesn't mean that we are 100 percent locked for 24 to 36 months. It means that we have these Strategic projects that could be even more long term as a base. And then we look 24 to 36 months ahead. And we have some room to maneuver within our hedging limits that how much we contract for that period. So it doesn't mean that we are 100% covered for that period. Okay. Slight clarification on that. So even if you have these rolling contracts, these contracts are much more your discretion rather than any kind of automatic reset, right? Yes, yes. That's another way of saying it. Yes. Okay. So we and with rolling contracts also, I would say, It's okay. That's all from my side. Thanks a lot. Thank you. Thank you for your question. We have the next question from the line of Sebastian Zangelis from Deutsche Bank. Please go ahead. Yes, good afternoon all and thanks for taking my questions here. Pierre, I just wanted to get back briefly on the annual contracts, which Rojas already asked about. So first of all, can you just explain to us How does it actually work in terms of the volume commitment here? Because I remember, I think at some point in the past, some of the customers, if I'm not mistaken, actually jumped off some of those Basically, just buy cheaper in the spot market. So can the customers basically do they have a very wide volume range they can choose from? And can they just pick sort of Best of 2 worlds? Or is this actually like a very narrow corridor in terms of the volume numbers which are penciled down in these contracts? Yes. Thanks, Bastian. It's a really good clarifying question, but I mean, we also when we peel the onion, we sort of bring more and more complex So we are also into sort of getting the sort of understanding this. And I would first of all say that, yes, indeed, because of sort of historical patterns where For a range of reasons, customers may have jumped ship from certain contractual obligations. I think we have really sort of tightened this up to have more sort of clear contractual arrangements. But I so sort of Theoretically and contractually, that really shouldn't be the case anymore. I can say contractually, it's not the case anymore. Still, however, I want to say, I mean, I had, for example, the pleasure this week of visiting a customer, who said, Indeed, we have actually cooperated for such a long period with Autopumpo and its predecessors. It's like 111 years. So you know that sometimes you have customer relationships that you want to protect. So I'm not saying that this could never ever happen. I just think that contractually, Surely, we are probably very well protected. Okay. I think that's pretty good news that you did take that opportunity to tighten Now just on the timing, and you said it's only there's not like one single contract structure timing probably. But Is it still clear to expect like most of these contracts are mostly renewed in January when it comes to the annual ones? Yes, yes. In terms of when is the Sort of the reset date of the pricing, the frame, the volume, everything. It's typically 1st January. Of course, we could have some contracts It would be half year contracts, etcetera, where you would then have sort of 2 dates. And I think there are, let's say, 2 differences Compared with previous years this year, the first one I would say is that due to really the main focus being on availability, We have had a lot of customer interest to conclude annual negotiations earlier than normal. So we have already we have concluded a large number of annual contracts by now, where typically you would sort of go into Q4 and late into the year to really sign on those. And we can see indeed that the annual contracts are reflecting The current size development and the improved pricing environment. So therefore, I do agree that this sort of 1st Jan Date then for kind of the re implementation of the contract is it's an important from that perspective, it is an important date. The other thing maybe still worth mentioning that it has also been our intention then to accommodate for needs from our important customers, etcetera. So it also means that we are probably going for a bit higher volumes also For 'twenty two when it comes to the annual contracts than before. Okay. Okay, that's great. And just a very last question on this, and I I promise it's going to be the last one because you've been given a lot of good color here already. So just on these contracts which you mentioned, you've been rolling over ahead of schedule already. Will this come into effect as of now? Or will they those come into effect as of January, I. E, you started early, but the contract will start in January? Or you started early, contract will start by now? Yes, yes. Contracts will start in January. Okay, got it. Okay. Thanks, Tia. And have a good weekend. Thanks, Tia. Thanks. You too. Thank you for your question. We have the next question from Luke Knutsen from JPMorgan. Please go ahead. Hi. Thanks for taking the follow-up question. Just I'd be interested to a couple of questions on Sarah Crone, firstly, just on price realization, any additional color on the Some usual sensitivity that you've given in the past, given which obviously volumes Have improved a bit. So can we expect maybe more towards the €10,000,000 per €0.10 Yes. And I suppose, has there been any opportunity to maybe take advantage of pretty strong spot pricing Given what we're seeing in the Asian market? Yes. So that's the first question. And secondly, just any color you can give on what you're hearing From suppliers, maybe around power interruptions on ferrochrome production in China? Well, indeed, I mean, yes, really good questions. And I as a CFO, I think I learned a little bit of Hard lesson in the last quarter, the sensitivity and the EUR 10,000,000 for the 10¢ per quarter has not Quite realized and I guess we are probably looking at least sort of I probably need to be a little bit more conservative around that figure. I don't have a new sensitivity figure for you right now, of course, for Q3 per se. I mean, it's not super relevant, but I mean, I do understand the question. So maybe I just need to say, I need to be a little bit careful on that figure. Perhaps I'll need to I usually don't like to change these figures too often because sometimes you have these impacts of whether it's some specific contractual arrangements, Whether it's some delays or whether it's in some cases some kind of even prepayments, as I think we had sort of A bit between Q1 and Q2 that we saw some of the kind of price benefits already in Q1 rather than in Q2. But I think sort of my lesson learned this year is just that I should probably be sort of a bit on the conservative side there when I'm sort of Talking about the sensitivity, let's see if I give a new figure or if I just say, it used to be 10, probably be a bit careful with figure this year because of the kind of very it's a very special kind of COVID recovery year as well. And then I would say sort of on what we hear from the supply And I think this is really the thing that certainly has impacted the market a lot. And just sort of continuing to hear about the energy and sort of coal related challenges for the energy Supply, particularly in Mongolia and China, but like this really being, at the moment, still a topic. I mean, this was a topic, I'm sure, like last time we But this continues to be a topic. So yes, I don't know whether I should say unfortunately or fortunately. Maybe I'll just leave it as that it seems that it's still a topic and still an issue and certainly also leads to somewhat restrictions then in the supply Now, Petrochrome, in China in particular as we speak. Sorry, Luke, did I answer all your questions? What's the steel one? Yes, that's it. Thank you. Appreciate the follow-up. Thanks a lot. Have a great day. Thank you. Thank you for your question. There are no further questions at the moment. Ian, would you like to say a few words or should we close the call? Well, at this point, I just want to say thank you. And then Linda, maybe I'll hand it over for you for closing remarks And you know when we'll talk again next time. Thank you. And thank you all for participating in our pre silent conference call today. Before we close the line, I would like to remind you that we will start our silent period on Tuesday, October 5, and will continue until our Q3, 2021 result is published on November 4. But now, thank you once again and have a great weekend. That concludes the conference for today. Thank you for participating.