Good afternoon, everyone. My name is Johanna Henttonen , And I am having the pleasure to welcoming you to Outokumpu Capital Markets Day 2015. We are here today in Berlin, which is also a very exciting city, and happy to welcome you here. We are hosting today and tomorrow our Outokumpu Experience event, which is our semi-annual customer event. First time we were in London in 2013, and this year we are here in Berlin. I will briefly give you a short introduction of today's program, and I am trusting that we will have a good, interesting dialogue today. If we look at the program, we will start with our CEO, Mika Seitovirta , talking about our progress in the turnaround, what we are implementing. After that, we will have José Ramón Salas to talk about our Coil Americas situation. Of course, very interesting topic as of today.
Then we will have Olli-Matti Saksi to talk about our Coil EMEA, how we are moving forward with our improvement actions there. Then we will have our first Q&A session together with Mika, José Ramón, and Olli-Matti. After that, a coffee break. When we come back from the coffee break, which is actually in this room, and also we have the terrace available for us, we will have Markus Moll from SMR to talk about the stainless steel markets. After that, Pekka Erkkilä, our Chief Technology Officer, will take a look at our R&D side and new solutions for the automotive industry. We will close with Reinhard talking about our financial situation and the turnaround in our profitability. After that, we will have again Q&A, and then at the end, we will have drinks together with management before going downstairs for dinner.
For everyone to know, we are webcasting this event live, available on our website, and also all the presentation materials will be available on our website. On the Wi-Fi related topics, there is a Wi-Fi connection available throughout this building. It is Outokumpu network name, and then Experience 2015 is the password, and first letter E should be with capital letters. Before I welcome Mika, I would like to remind you that certain information we will be discussing today is forward looking, and includes uncertainties which may result our actual results then to materially differ from our current expectations. With this, I warmly welcome Mika, please.
Johanna. Thanks. Ladies and gentlemen, warmly welcome to Berlin, and warmly welcome also to this capital markets session where we give you an update of the current status. I hope that you all will have the opportunity, if you did not have the opportunity to participate in our morning sessions today or tomorrow in the sessions, that you will at least have an opportunity to look at our exhibition area, because it will give you a good flavor on what products, what kind of trends, what kind of innovation we are able to provide to our customers. Three major elements when it comes to Outokumpu journey for the time being. The first one being that the overall group performance, although it is far from satisfactory, it is still heading towards right direction. There are two key elements. Our biggest business area, which is EMEA.
That is very much on track against our own plans and targets, and we have very clear steps how to go forward. Then we have, of course, the headwinds in Americas, very much based on the technical breakage and the market change after that, and we are ramping up now in a delayed schedule, in our commercial system there. Taking action, getting Americas back on track. We haven't changed our strategy. It's untouched. If we look at the key elements there, of course our strategy on a longer term is very much based on the growth in this industry. We feel that we are in the right industry. Each and every mega trend is supporting the recyclability of this material. As you can see, we are already on a level of 85% out of the 100, which is possible with stainless steel.
That is an important driver for further growth. On the other hand, we have a very strong market-leading position in Europe, where we have more than 30% market share. We have very good asset base there, and we are now concentrating in Europe to get out of the synergies, efficiencies and really capitalize the different market opportunities that we can see there. We have a good number two position in U.S., and in after region it's more than 20% market share. That is going to be our second pillar. As you know, we are ramping up Calvert there. We have a very good asset base there as well. In APAC, and especially in China, we are concentrating on the most demanding applications. It goes very much towards specialties which we mainly produce in Europe and in the projects we then export to China.
That is the area where we can see that we can well compete over there. Also, if you look at the sales per business area, it's not exactly the geography because also long products and Quarto Plate have good, profitable, sizable operations in U.S., but it's more balanced now between Europe and U.S. and with the rest of the world. That has been our target and objective as well, all the way through the transaction that we did 2013 beginning. The second thing is that we wanted to have a good split between the different industries and also a split between the different routes to market, meaning how much end customers, how much distribution. The split is pretty equal now. It's slightly more end customers than direct sales. That is a good split, we feel, together with the geographical split we have.
We can serve our customers globally. This is increasingly important as well because in industries like white goods or automotive, the customers are very often global. However, the stainless steel companies aren't. Our intention is to be a global player who can follow our customers where they need to be served. On top of this, of course, you can see here the industrial platform. There is a very large service center network, not to talk about our sales offices. We are present in more than 40 countries. Here you can see the development. As said, we are everything but satisfied with the level of our profitability because we have been loss-making. However, the trend is there, and we need to continue working on that.
The thing that impacted now our second quarter guidance was, of course, the Calvert situation and the American market, but there is nothing new in that respect. What we informed about the production volumes, we took them down from 620,000 to 540,000 around. That is still the valid information that we have to give you today. We are, of course, currently discussing with our customers. We are learning about the market. We are learning about the imports. Whenever there is something to give you as new update, we will, of course, do that. We are not happy with the current profitability, of course not, because we are still eating up our equity, but we have clear plans how we go forward from here. If we look at the main building blocks in our restructuring.
I think it is fair to say that synergies and efficiency programs, they are proceeding ahead of the plans. What we have said earlier, we say also today that when we identify new opportunities for savings, we go for it because that has been the area on the cost side where we clearly have been lagging behind our competition. We want to close that gap and because of the synergies, we also want to pass the current levels of the best performance there. Secondly, EMEA, I mentioned already, very much on track. You can tick that box as well. Calvert, it is not on track. The reasons we know. There we need to accelerate and try to minimize the delay what we have because of the known reasons. The balance sheet much stronger after last year's arrangement.
Working capital management and CapEx, we are still able to have a very low CapEx level and very much so because we have a good asset base, so it is very much maintenance. Then it is, of course, the investments in Germany, what we are doing in Krefeld. Working capital management, we are not yet there. We can be better, but it is, of course, a new way of working we need to learn. It is taking some time. It is about finished goods. It is about work in progress. It is about raw materials and everything we need to master better than what we have been able to do. Then we have the new leadership as from last year's July, actually, and partly from September. It is much more stronger commercial focus now on that.
We try to develop ourselves from a conservative company in stainless steel to a very customer-focused, profitability performance-focused company in stainless steel. Here you can see the latest SMR numbers because Markus Moll is going to speak to you later on today. I will not make too many comments on this one. Just note about the changes here from last time we have seen. You can see that North America, U.S. especially, has been taken down to a more or less flat level against last year. The second thing which has been changing here lately is, of course, China. China is to be forecasted with 8% end demand this year. It is, of course, downwards from the very high numbers couple of years ago. Europe now is looking and developing actually quite well.
There is a clear underlying demand, and there is also end demand for stainless steel products in a different way than earlier. Supply-demand balances. I have been saying many times that if we look at North America, actually it has been the most balanced market from the supply and demand point of view with four players. If we look at Europe, it is developing, and it is becoming much more balanced as well. It is also four players, by the way. The reasons being that we are cutting capacities there, we are restructuring, and that leads to a better market situation than earlier. Asia, especially China. China is 50% out of the total stainless steel demand, so that is a very unbalanced market. There are still projects generating new capacities.
It is currently also very turbulent market because of many reasons, because of government actions, because of less growth, because of anti-corruption, because of nickel pig iron access, and so forth. Not to forget the environmental investment needs that you have there. Short comments about prices. Actually nothing new against our Q1. We have a slightly still softening trend we have had in Europe so far. In U.S., it is a little bit similar situation after a strong increase in prices last year. The import is something to follow up now. In the European situation, it works as anticipated. We have seen a decline in Taiwanese and Chinese imports during the beginning of the year, bringing the total amount of imports from a level of more than 30% to a level of more or less 21%.
At the same time, we have seen that the Chinese imports, and of course through that, the overall import number as well, has been increasing. A good rule to remember is that if you take 2013, the Chinese imports to U.S. was 4%. Last year was 8%. However, if you take the last quarter of 2014, that was more or less 15%. We still have a double-digit number in the beginning of the year, but however, it is less than the fourth quarter so far. Here you can see the trade flows. The interesting things are, of course, what is impacting on this. Exchange rate, definitely, cost advantages, government subsidies, different regulations. These are all factors which are supporting the exports. Game changers could be EU anti-dumping case, nickel ore ban, and also possible U.S. anti-dumping. About European anti-dumping, there is nothing new to report.
We are still waiting for the final decisions of the commission and final levels of the tariffs in September. What the final decisions will be, of course, very important there, and before that, it is very hard to give you any more precise picture how this will impact. Concerning U.S. anti-dumping, the only thing I can add from the past to you is that we are working on that in U.S. as a company. Efficiency programs, as I mentioned, very well delivering what we have promised to deliver here, both on the cash release and the total savings. However, on both sides, we are looking for more opportunities. When we will identify those opportunities, we will also then update to you what they are and what does it mean. Headcount reduction. We have not been talking too often about the headcount reduction.
When we did the merger, we said that by 2017, there will be 3,500 less of us at Outokumpu. We are pretty much heading towards that target, and that would mean then that we are under 10,000 as total headcount here. We have still unidentified areas as well, which are depending on different structural arrangements, administrative arrangement of the back offices and so forth. When we have identified those in detail, we will then announce what exactly are we doing. But currently, we are reducing exactly as planned. Q1 this year was more or less 300, and it will be more or less to double for this year, the total number that we are going to reduce this year again. The trend is very clear, and we are very determined on that one. You will hear more about EMEA from Olli-Matti Saksi.
Maybe I just give the bigger picture here and couple of next steps here. I think as we started to close the Krefeld melt shop, we learned how to do that quality wise, how to move and reallocate the volumes as well. We are now doing the same with Bochum, actually, and it's the very last period of Bochum melt shop, so that will be closed before this quarter is to be ended. That is giving us fixed cost savings, but also the higher utilization. The next big move, of course, which is structural and earlier announced, is then 2016, the Benrath closure. The cold rolling mill, because we are investing in Krefeld, so we can move that 2016. So it's a three-year investment we started last year, this year, and next year, we can do the next move. Coil Americas.
Maybe just to add on here that it all started with the breakage of the cold rolling mill. We were off the market. Before we got all the three lines back, it was year-end. Many of our customers had been forced to take imports instead of taking our material. The market was also a bit softer, so the inventory levels were rather high. We are now currently ramping up then towards hopefully as soon as possible, a more normalized level. We had a bad EBIT number first quarter, and we guided also for negative underlying EBIT for the second quarter. This is, of course, very much coming from Americas because of the reasons I just went through. However, we need to remember another reason is, of course, the ferrochrome maintenance break, which we have currently now.
Instead of having the normal four weeks maintenance break, we have a five weeks maintenance break. That is unfortunately on the same quarter, or fortunately, who knows? José Ramón, you will hear as well, in his own session. So, maybe only the highlights here. So it's very much about seeing that when the market is going to be normalized. It's also about seeing very carefully the inventory levels and then how the imports are behaving. Currently we are, together with the team in U.S., we are formulating a view there that how this all is going to develop. I'm currently located in U.S. just in order to understand better the market and support the team over there. Quarto Plate. We had a very bad year last year and we were making a lot of losses. We had difficulties to ramp up the new investment.
I would say that that bottleneck we have now passed. We had a very bad delivery reliability and we just couldn't get the products out as planned. Now the material flow is much, much better. We have been improving month by month. We are currently heading towards delivery precision, which is around 80% from the last weeks. It means that the bottlenecks we have solved. There is a decent market outlook. It's not a supermarket, but it's a decent market outlook, and we believe that we can continue with some good development here. Of course, we have a long way to have a good utilization for that capacity because our capacity now in Europe is 150,000. We have said that we are slightly under 100,000 level this year.
There is a way to go with the full commercial ramp-up, but I would say that the steps that we are now taking are the right ones and very firm ones. Just to remind you that we have also this U.S. operation in North America with Quarto Plate, which is in Newcastle, and that is a very profitable, nice operation. That's moving well ahead. We told you earlier this year that our target is really to deleverage to go towards EUR 1.5 billion or below by 2017. This ambition is intact, of course, slightly impacted because of the U.S. situation. The delays is, of course, impacting cash flow development as well and our ability to reduce the debt. But we need to find other means to try to close that gap now, and we are currently working on that.
But we want to get to a lower level, and this is very high priority on management agenda. Many of the industries, our customer industries, are doing actually quite well. Here you can see some of them, some of the end customer industries, some of the industries we are serving through the distribution. The good thing is that in Europe, for instance, when the EUR now being very low- valued. So we have good outlook for many of our export industries here, and you can see it in the volumes. Of course, it works the other way around in U.S. that some of the export industries there, because of the strong dollar, are having slightly weaker market. It tells about globality nowadays and how fast the market situations are changing, because we saw it still the other way around only last year, and now you can see it this way around.
Also what we are talking today and tomorrow to our customers, so we know what they want. They are telling us that we are clearly giving them a superior quality. We think we can still improve, and of course, there is always room for improvement, but that is what we are known about. This is what we stick to as well in our strategy. The second thing is that we need to improve our delivery reliability. So we have been improving. During the last two years, we have actually improved 5 percentage units in delivery reliability, but we want to go for 100% because we want to respect all the customer promises.
This is something which is not only a commercial issue, but very much for the whole operations process, because in order to be able to do that, you need to be able to do it right first time with the right yield also in the production process. It is of course a win-win situation. So that is really the objective that we have for our production process. We also introduced today to our customers a new way to look into our products, the different grades and alloys that we have in our portfolio. Because sometimes it is really difficult for the customers to really find it out what is the right material for exactly this application. Because that has very much to do that you have also the right cost. Normally you start with the corrosion properties, but there are other properties as well.
We divide it into Classic range and to Pro range, where we have the more demanding products. This regrouping and branding at the same time of different products is one way to have more customer focus. So it will be interesting to hear from the customers now that what is the reaction at the end of today, how they feel about it. At least when we were developing this, they felt very good about it, that this is the direction where we really should go. So we are moving towards sustainable profitability. We are moving a little bit too slowly, which we know. The reason being that we, this year, had a surprise with the U.S. market. However, we are convinced that we can overcome those challenges.
We are also convinced that our asset base, our customer base, what we have in U.S., is going to be as valuable asset for us and market as EMEA is currently for the time being. Thank you very much.
Excellent. Many thanks, Mika. We will move forward right away. I have the pleasure to welcome José Ramón Salas to the stage. José Ramón , please.
Thank you. Thank you, Johanna. Good afternoon, ladies and gentlemen. I am José Ramón Salas. I am the Interim Head of BA Coil Americas. I have been in the industry for over 27 years, most of them in Mexico with Mexinox. I had the opportunity to be already for three years in the U.S., in Calvert, during the ramp-up of the cold rolling works and the very first days of the hot rolling mill and the melt shop. Let me tell you a little bit about what is going on in BA Coil Americas. First, we are going to touch on the long-term established customer relationships that we have developed over the years.
We are also going to talk about the focus we have today on bringing Coil Americas back on track in this challenging market that we are facing today, and also how Coil Americas' potential, long-term potential, remains intact after what we have seen in the last few months. Let us start with a brief summary of where we are coming from. Basically, this established market presence comes from nearly 30 years back, where the Mexican operation started shipping material to the U.S. That basically led to the work or to the project in Calvert. Together, we have today a production capacity of 600,000 tons of cold-rolled product, flat product. That today has already reached over 20% of market share. Throughout the years, we have developed a very experienced sales team.
Most of the sales team that contributed to the approval, the construction of the project in Calvert remains there, and therefore, those customer relationships are in place already. Calvert is a greenfield project. It started from zero. As you must have heard already, basically the technical ramp-up has already been completed. It started shipping product at the very end of 2010. We have tested most of, or all of the production lines. We know that the products can be produced. Now we have already moved into the commercial ramp-up, and that means completing the process of taking volumes to the market, to the customers that we already had in the past, plus the new ones that we are going after in order to be able to place all the production that will come out of this mill.
Basically, that will be through a product or mix optimization and also in combination with the production capabilities of Mexinox. Therefore, we will then have a balanced product portfolio, and we think we feel we will be able to meet customer expectations. On this chart, you will be able to see on the right-hand side that Calvert was, or Americas, sorry, was on a very good track to place all the volume into the market. 2013, we already had 465,000. We were aiming for 620, as Mika already mentioned, for 2015. However, because of the challenging market conditions that we are currently facing in the U.S., that has been revised down to 540. Nevertheless, we were on the right track. On the left-hand side, you will see that looking at the same development on a quarterly basis, the growth path was there.
We were meeting basically the targets, the goals that we had set to ourselves until we had the breakdown of our cold rolling mill around the middle of last year. That is when we were negatively impacted by this unforeseen problem, taking us down to 126,000 tons shipped in one quarter, in the last quarter of last year. Overall, that meant a loss of around 40,000 tons in the year, last year, which would have then brought us much closer to the target that we already had in mind for this year. Which definitely was taken into account. This 40,000 tons is an important number that we should keep it in the back of our minds.
We are aiming then for 750,000 tons, the combination of the cold rolling capacity of both Calvert and Mexinox, together with some hot band white or CMP, the way we call it, hot roll product that makes it to the market, to the customers directly. Same way, profitability was on a similar path. We were improving. We improved substantially last year as the ramping up of the mill was progressing until we were able to basically reach breakeven at the end of last year. As it is already been announced as well, quarter 1 was not favorable. It was negative. We have already seen some of the first impacts from a weaker demand in the U.S., also the result of not having had enough orders to be able to balance production in a reasonable way. We were somehow inefficient, low optimal.
That also led to higher operating costs in Calvert and the conversion, the exchange rate between the U.S. dollar and the euro also affected us negatively. Let me tell you now a little bit about how the market is looking, how we are approaching commercially the market, and the operation status. First, let us look at the growth of the market since 2006. It went down together with the economy in 2008, but it has been gradually coming back up for NAFTA. You can see there in 2011 that Calvert basically brought on stream to the market around 100,000 tons in that year. We basically grew alongside. By 2014, we had already reached 22% market share with an additional 120,000 tons into the market.
The 40,000 tons that I asked you to keep in the back of your minds could have been part of that number, which would have meant perhaps closer to 150,000-160,000 tons. That in turn, would have made the 130,000 tons that we have that set to ourselves for 2017 to bring on the stream a smaller number. Again, the message here is we were on the right track. We were basically meeting customers' expectations. Customers are there looking for our product, and the market is growing alongside. Perhaps even interestingly enough, somebody else has already announced that they will bring on the stream by 2017 another 100,000 tons of capacity, which means that there is an expectation from other parties that the market will be growing, will continue to grow as we have seen in the last few years.
Prices in the U.S., Mika already pointed to this. You have seen that there has been a deterioration, mostly in the last few years, together with a drop in nickel prices. Everybody has been concerned about that, but it has been publicly mentioned. There was a positive development last year, especially in the U.S., when prices started going up as demand started picking up. But in the recent months, as you can see on the right-hand side, pricing has started going down after all the pressure that is coming from imports on the one side, but also from the domestic producers, where we are trying to grab whatever is out there in the market available for us to meet. Volumes have gone down. That is coming from the lower order intake that we have seen, the weaker order intake. Talking about imports.
You can see that imports have traditionally been present in the U.S. market, that have been somehow part of the U.S. market development. In the first half of 2014, they were still in line with the historical levels, but they started increasing substantially towards the second half. What could have happened for imports to increase dramatically? First, there was a high level of demand in the U.S. market in the second half. Unfortunately, towards the end of the first half, basically end of June, early July, we experienced the breakdown of one of our cold rolling mills when our order book was full, similar perhaps to the competitors, and that started extending lead times too far out. Typically, lead times in the U.S. are somewhere around four to six, eight weeks max.
They extended four to six months out with a series of price increases already announced to the market, and that could have led to this high level of imports where customers were trying to make sure they would have enough material available at year-end and beginning of the following year to meet their demands, also following the momentum of the market, which again, at that moment in time was very good. You can see in the chart that at least on the reported figures for imports, they have gone down. We do not know what is going to happen in the coming months, but at least there is the development that you can see right there. Most of these imports are coming from China at the moment. Mika has already mentioned it.
We will explore all the options, all the tools that we have available to see what we can do going forward about that. Why are imports an important part of the U.S. market? The cold rolled, flat rolled market is 1.6 million tons per year, and out of that, domestic suppliers deliver to the customers around 76%. 24% is supplied by imports. Outokumpu, in that part of the market, has 18% market share. Service centers, out of the total 1.6 million tons, has slightly over 1 million ton demand. There imports play a slightly bigger role. They have 30% of that portion of the market, and we have 70% as domestic producers. Outokumpu has, in that segment, 24% market share.
Imports go more into the transactional part of the marketplace, and that is where service centers, in other words, distributors, that is the way we call distributors in the U.S., has that role and take those materials. Why are distributors so important for us in the U.S. and in the U.S. in general, in the U.S. stainless market? You can see in this picture that service centers, distributors take 43% of the flat rolled product, and 23% of that goes through service centers to an end user hand-in-hand with the supplying mill. In other words, when the orders are placed with the supplying mill, we already know who the material is going to end up with. But we partner up with service centers. You can see here then that service centers are two-thirds of the overall market for flat rolled product in the U.S.
That is why it is an important or very important part of the market. Then the next most important segment is automotive. Automotive is 20%. Then you have pipe and tube, automotive, and to a smaller portion, the other applications. I missed appliance. Appliance is also very heavy in the U.S., 5% stainless, and we have also strong participation there as Outokumpu. Coil Americas' approach to the market has been to channel 60% of our product through service centers, distributors, and the rest through end users or processors. You can see there that because of the history of our two production units, Calvert, just again, a greenfield operation starting up back in 2011, is today still very much focused on distributors or service centers. 75% of the volume goes there. It is part of the natural development growth or development curve of a new producing mill.
End users only 25%, but with a very experienced mill like the Mexican one, which has been in operation since the late 1970s, the mix is exactly the opposite. Only 25% goes to distributors and 75% goes to end users. On the end user side, you can see that we have a strong participation in consumer goods, medical, automotive, metal processing, which means sinks, industrial kitchen equipment, et cetera, a little bit in heavy industries. Then there is a myriad of applications, including coins. If you look at the structure of our customer base, you will see on the right-hand side that we have end users with around 40% of overall OTK volume, Outokumpu volume sold in NAFTA, in North America, with some of the well-known brands there for different products like the home appliance manufacturers like Whirlpool, Electrolux Home Products.
You also have Casa de Moneda, that is the Mexican Mint that I just mentioned, but also some of the larger or the largest service centers, distributors in the U.S. like the Ryerson's, like the Reliance Group, who together with some of the other ones, really make up for most of the volumes that I just mentioned. Here, just as an example of the very close relationships we have with customers, the Mexican Mint buys solely from Mexinox in Mexico. We have counted with the support of one of the developing distributor service centers in the U.S., like Specialty Rolled Metals, who have been gradually shifting most of their purchasing volumes to us because they have believed in us. They know us from the past.
They value the service that we can provide as an integrated mill in North America, having also the flexibility of more sophisticated, more value-added products coming out of Mexico, and they see the potential that we have to grow together with them. First-tier distributors take 50% of the volume, and then second tier, third tier, I would say we can include that portion in that 10% that we have shown there in this slide. You also see other applications like Faurecia, fischer. They produce pipe for exhaust systems for the automotive industry and some of the other distributors, service centers like thyssenkrupp Materials in the U.S. is also one of our customers. Talking about the market in general demand, the underlying demand seems to be there according to external sources like SMR. The outlook for growth in the different segments that we can serve and are already serving is positive.
That gives us also optimism that we will get back on track pretty soon. Once we manage to get over this inventory situation that most of our customers are reporting, we should get back in good shape. Their reports are also that their underlying demand remains fairly stable, which is positive for us. Talking about synergies of the two mills. What are we planning to do now that we have two facilities that are in general producing now very well, one less experienced than the other? One located in one country, Mexico, and the other one in the U.S. We will combine the strengths of both to serve customers mainly in the North American market where it makes sense.
Because of the nature and the very young life of our Calvert mill, we will focus Calvert at least in the next few years during the ramp-up curve for sales. In austenitics, 72 in wide, we are only producing mill in the Americas that has that capability. Nobody else can match that. We can also produce polished, and we can also sell hot-rolled product, call it CMP, hot band wide, directly to customers. On the other hand, we have Mexinox that will focus in Mexico mainly, but all those value-added products that we can benefit from demand, customers in the U.S. looking for that type of solutions, where they can be labor intensive, where they can be bright anneal products, which we cannot produce in the U.S., we will certainly take advantage of that and also ship product to the U.S.
We are estimating that going forward, we will be shipping somewhere between 30%, 40%, perhaps 40%+ , of Mexinox's production in Mexico to the U.S., as long as it makes sense. Also something that is very important, ferritic production. Mexinox has a very good production quality of ferritics due to the long experience in producing these type of products. Talking about the ramping up of volumes in Calvert. You can see, as I mentioned, that since we started shipping material to customers back in 2011, the volume has been going up gradually, both in the cold roll side, and then when we had the availability of the melt shop and the hot rolling capabilities, the volumes have been substantially going up as well. Not only for product that will end up with customers as CMP, hot band wide in the U.S. market, but also to supply Mexinox.
Mexinox is entirely being supplied out of Calvert. Mexinox is only a cold rolling works, and the idea from the outset was that all of the feedstock required by Mexinox would come out of Calvert. We can see in the picture that is going very well in line with the project that we had put together several years ago. The reduction in the cold rolled products has to do with the weakness of the market that we have experienced in Q1, plus the problems we experienced with the cold rolling mill in the second half of last year. Now, areas of further optimization, delivery performance. Customers have mentioned it. We value customers' opinion. Mika has already put it on the table. We suffered a lot in this area last year. We need to improve there, especially in Calvert.
And obviously, a good portion of that problem came as a result of the breakdown of the cold rolling mill that we experienced in Calvert. Product portfolio expansion. We continue growing our product portfolio in Calvert as we move forward. The next steps are to become efficient in producing light gauge, becoming consistent in the quality of our 430 polish product, optimizing the load now that we will have in the near future the opportunity to have higher volumes, most likely, and then combine better our operations, our batches. Yield improvements. We need to become more efficient. It's part of this learning curve where we need to improve our operation. Right first time is linked to the previous one, and that one internally means don't rework process or don't have material that needs to be reworked.
Do it well, do it right the first time so that you can improve your performance, reduce your cost, and become more competitive. And finally, scrap ratio. In this industry, it is very important to be able to produce as much material out of stainless scrap. And talking about that, I can show you this picture where you can see that we have been making very important and very nice improvements here since the melt shop started operating. And at least in the last few months, we are basically top of the class within Outokumpu in the lowest usage of pure nickel. You can see there that we are basically reaching near zero levels of pure nickel, while at the same time, we have been able to increase the utilization of the scrap for our production, which is one of the lowest sources of raw materials in our industry.
We are also working on being flexible in general, but raw material flexibility is also one of the areas where we are strong. Continuing with product development. We have already cast and hot rolled some duplex material. This was done within the last four to six weeks. And we will continue working on this one because it will be important to be able to offer customers in North America all the different materials that we can produce within Outokumpu. So this is another good example that we keep moving forward, and this allows us to then continue thinking that we will be successful. We are very competitive cost-wise in Calvert. Raw material availability is one of the strengths that we have in the region where we are located. Energy, we have very good sources for electricity and gas, and that's an important part of our cost. Labor, they are flexible.
We built Calvert from the organizational standpoint with the idea of being flexible so that we can accommodate the market swings that we know are taking place from time to time and we have experienced in the past. We know that they will come in the future again. We need to be prepared for that. That is also one of the strengths. We are also competitive in freight, maintenance, and rents. What is left going forward? We will continue building on our strengths. We have a very strong regional producer with long-term customer relationships. Hopefully, I have been able to show you that during the presentation. You have seen perhaps some familiar names there. We have been working with them for years, so we know each other.
We have an integrated operation, cost competitive operation in Calvert, single site, which also will make the difference going forward in the North American market. We have a broad product portfolio with the advantage of having both Mexinox and Calvert operating in the same region. We will definitely leverage on the experience of a leading producer like Outokumpu in the stainless industry. Definitely with the support of the entire Outokumpu organization, as Mika mentioned, with the task force, we will definitely very shortly bring Calvert back on track and America in general. Thank you very much for your attention.
Excellent. Many thanks, José Ramón. I am happy to welcome Olli-Matti Saksi, Head of our Coil EMEA business area. Olli-Matti, please.
It works. Thank you, Johanna. Good afternoon, everybody, and thank you for coming to listen our presentation. Now I am going to talk about EMEA. Just couple of words about my own history in Outokumpu. I have been Head of the business area EMEA since last summer, and then before that, since early 2013, was Commercial Director of EMEA. I am going to talk about Coil EMEA, and the main theme is the progress of our plan. We are well on track overall. The messages I want to send here today, we have the right assets in the right places, very good factories, very good technology, and logistics as well. We have our efficiency plans in place. We have presented them many times already. I am sure many of you have heard about it. We have not changed them. We are very much on track.
We are executing, and we are successful there. We are also in a good position to make use of improved business environment in our home markets. We are definitely prepared for that and ready to go. This is just a repetition of our structure in Europe and our mills. We are very much North European actor in the market, with really the home market being Germany here, where we are today. We are extremely strong, obviously, the Nordic countries being the cradle of our production, Tornio. Sweden, not to forget that, Avesta, the assets there. On top of that, we have an excellent service center network, very efficient, very quick, very agile, that supports our business. The last but not the least, we should not forget the chrome mine that we have also in Tornio. That is a great asset for us.
Overall, you can see the key numbers here. We are about almost two-third of the whole business of Outokumpu, and we have over 30% market share in Europe overall. Our capacity is close to 2 million tons in melting, 1.9 million to be precise here in the picture, and cold rolling, we are between 1.6 million and 1.7 million tons a year of capacity. Looking our customer segments route to the market, you can see here that on the left side of the picture, distributors are about 41% of the total sales, and then we have 43% for end users. Then you see that here, this part, 7% and 16% represents our service center network sales to customers. Out of the total sales, we have 16% + 7% is our own distribution network. 23% or roughly one quarter. It is a very sound and very balanced portfolio.
We have access to end users. We have direct shipments to end users, and we have very good relationship with our distributors. On the right side of the picture you see here the end use segment split. Here you can see the most important and largest ones being consumer goods, medical and automotive. Automotive being mostly exhaust systems. Pekka will talk later today about opportunities in automotive as well. That is what is currently. Obviously, also metal processing tubes are almost 20% of the end use. Depends how you see it. Is it end use or not? It is also conversion, but it is here in the pie as such, heavy industries being 23%. Looking our business metrics more in detail. You see here our quarterly deliveries on the left side declining, as you can see.
I would say not anymore, but if you look longer back in the history, yes. Of course, there are good reasons for that. We have been shutting down capacity here, especially in Germany. Not limited to that. We have also taken a different commercial view and different commercial conduct in our market. We are not prepared to sell a product with loss with any price as long as we get volume. That is not any more what we want to do. We want to make profit with our sales. Actually, we can demonstrate here on the right side that has been very successful. Despite of lower volumes that we delivered, we have been able to increase our profits, and our results by focusing on costs and focusing on also the margin customer mix, and of course, the geographic mix.
Now, I am going to talk about these three items later here in this presentation. First of all, as you know, we have been rightsizing our capacities in Europe. There was a chronic lower capacity in Europe, too much melt shop capacity, and that led to poor pricing as well in Europe, as well as poor utilization of assets, meaning, too high costs. That is why we started this strategy, actually. Secondly, we are focusing very much on operational efficiencies. On top of that, obviously, the right sizing of the capacity will bring efficiencies as well. But as such, we believe that there is very much in this operational efficiency for us to get more in the coming quarters and coming years. Yield improvements, right first time delivery performance are the extremely important factors here. Then we have the commercial focus. I talked about it already.
I think I would put it just very shortly. It is about profit. Profit-minded organization. Be aware everything I sell, every item I sell, counts. So, talking about now the very near term items. The next milestone for us is closure of Bochum factory, not so far from here. We are going to make the last melt in the end of June, so it is just couple of weeks ahead. I must say the whole process of closure, including negotiation, has gone extremely well. We found very good understanding with the unions. Mika was very much involved in the discussion as well. Since then, we have been able to operate, plan very carefully, very safely as well, the closure operation. So, we have a very good feeling about that progress, even though it is of course, always a sad event that you are closing things.
But I think I would say it has gone as well as it could. On the right side, we actually tested our remaining steel production units in Tornio and Avesta in February. We pressed them to the maximum to see how much we can really get out. So it was a four-week period in each plant where we put the throttle down to 100%. Then these are the results. You see here that for Tornio, the orange bar represents us the target that we thought that we would be to reach. Every week we were able to achieve that and a bit more. For Avesta actually, we were surprised by the results. You see here by far better results than we were expecting in the nameplate capacity and so on. Actually, this result would represent we are running this way all the year, almost 550,000 tons a year.
It is definitely a very positive outcome of that. So, what are the parts of so-called EMEA restructuring package? It is the Bochum closure I talked about, but it is also building something new. We are going to close another cold rolling mill here in Germany, in Benrath. It is close to Düsseldorf here. That is going to happen now next year. It is also progressing exactly like planned. Investment is already ongoing in Krefeld. We have the crane up there. We have precise plans how we are going to achieve it, and it is going very well. So that will bring us more efficiencies. We will instead of having three cold rolling mills like we have today, we have Dillenburg cold rolling mill, we have Benrath cold rolling mill, and Krefeld cold rolling mill. We have only two sites. It is quite obvious to you that we will save a lot of fixed costs.
We will save a lot of freights. Overall, it will be more efficient. On top of that, the Benrath plant equipment was very, and is very worn down. If we would have kept it open, it would have meant very large CapEx. It just makes a lot of sense. Mika mentioned also that in that investment of EUR 108 million, we are also going to build a new research center for mainly end-user customers, automotive, domestic appliance, surface sensitive customers here at the specialty here in Germany. We have already made a lot of efforts to improve our service center network, I believe I mentioned in my last presentation as well, and the results are very convincing. Our service centers are now profitable. We have closed some service centers in Europe. We have streamlined, we have cut costs, and we changed the business model there as well.
We have changed the business model to be entrepreneurial, P&L model, where each service center needs to perform. That is bringing us already benefits. We are not stopping here. We will also keep on looking opportunities and rightsizing if we see a further opportunity. Mika talked about also personnel cuts. Also not a very pleasant topic, but very much necessary for us. We will reduce around 2,500 jobs until 2017. That is starting from 2012, so it is quite a large number. Around half of that 1,300 is already done, and about 1,200 remains to be done. Out of that, you can see the split here. Bochum impacting around 300 net. Benrath, as I spoke, 270. Then we have other measures worth of 630. That is exactly the plan we are following, and that is what our financial projections are based on.
Looking at the financial impact of the different programs we have, you can see here. I will not go into the very much detail. It is a little bit busy slide here. I would highlight that you can see the gray bars here on the left, that is the group results on those programs. Probably Reinhard will also mention that. I will talk about the blue part, which is the right one, which is EMEA's share of that. EMEA's cumulative savings from our programs in quarter one yielded to EUR 131 million per year. If you look at in the middle right here, 2015 projection is EUR 162 million. Means that between now and end of the year, we have another EUR 31 million benefits ongoing annual running rate that we will save.
Then 2015 to 2016, we have then another nice EUR 60 million from EUR 162 million- EUR 222 million savings. Then some still in 2017, EUR 20 million. That is the package that these personnel reductions and other efficiencies will bring us. Operational efficiency, like I said, is one of the very key themes for us going forward. It is not about cost only. It is also about getting more out of our assets that we have. It is about really squeezing the last drop out of the assets, and I think there is still some way to go. We are not going to invest a lot in new capacity in Europe. That would not make any sense. Destroy again the balance of demand and supply. But what makes a lot of sense is squeeze the assets, and that is what we are going to do.
It is continuous improvement, small steps, very structured, detailed work that we will carry out in our plants. Here you have some key KPIs on the right side, for instance. These are not the only ones, but I would say one of the most important ones. Delivery performance impacts customer satisfaction in a very important way. If you would go and ask our customers there in the hall what is important, I am pretty sure that most of them will say that the product comes exactly when I have ordered it. That is one of the key things. That is an external satisfaction driver in a very big way. Then we have right first time. That is when we plan a slab or hot rolled coil to be used for a customer order that also goes into that customer order instead of another customer order.
That of course, obviously it means cost, it means working capital savings. Yield is that you have a slab or coil, and how many percentage of that actually goes into the final order and how much goes to scrap bin. Obviously the less goes to scrap bin, the better for us. A scrap ratio is a KPI where we measure how much of our slab production actually is made of recycled scrap and how much is, on the other hand, coming from virgin nickel, virgin raw materials. We are trying to maximize, obviously, the scrap part. Then talking about ferrochrome. It is an important asset for us and also a big contributor to our success now and in the future. Why is that? There is some industrial synergy being connected to an integrated steel plant.
For instance, we have big by-production of carbon monoxide coming out of those furnaces of ferrochrome, and that we can use again as a fuel in our process in the steel plant. If the two were not connected, you would have to just blow that out as waste. That is an example. Another one is that we can charge liquid hot metal from the furnaces directly into our steel production, and obviously we can save a lot of energy also there. Just two examples. There are also other ones like freight savings, once we are so compact. Here on the left side, you see the production volume. I would say that is one of the main drivers for our profitability. Apart, of course, that we are efficient in our production and costs.
That is our main lever because the pricing side is much more, I would say, global world market pricing. Therefore, we are focusing very much on getting everything out of this plant as we can. This year's forecast is 470,000 tons. The original projection was 500. Unfortunately, we have had some production issues in our furnace number three. It is now, as we speak, after the maintenance break, starting to operate again, and we believe that the issues are now solved, so that the next year's figures should go higher than what we have here, clearly. On the right side, you see that we have a very great cost competitive position. We are one of the cost leaders in the world in this production. That is extremely important in this business. Needless to say that. Here, one part of our improvement is mix improvement.
Here you see product mix as one aspect. That is not the only aspect. The other aspect is, as I said, geographic mix, customer mix. Here is product mix. You can see on the left side, 2013, we sold 61% as cold rolled, 20% as pickled or white hot band, and 15% as black hot band, 4% as slabs. I assume most of you know very, very well the different categories and the flow of production. I will not spend time on that, but the less we sell those, I would call semi-product, which are slabs and hot rolled coils, the better. Simply because we can add our knowhow, we can add our value added to the product. The further we go, the more demanding the surfaces are.
On the right side, you can see that actually we were able to improve tremendously that ratio from cold rolled being 61%- 72%, and that black hot band going down from 15%- 4%. If you then look at quarter one this year, I do not have the exact numbers, but I have quite a good touch and feeling about that. I would say that the 4% and 4% are both going quite rapidly down further. I would expect still improvements, and driving close to zero with those semi products. It means that we are going to utilize our valuable assets and bottlenecks in the most efficient way. Also now, in this new commercial environment, cold rolled product is expected to be by far the most profitable product. Therefore, it makes sense to optimize and maximize that part.
Talking about the role of our business lines, we have three business lines. As you know, Tornio, Nirosta, and Avesta. They all have their distinct profiles. Overlapping is relatively small. Though we have common sales organization, common commercial, so we are not competing or representing Outokumpu differently in the market, but still, each mill has a very distinct role here. You look at Tornio, it is the large, very cost efficient producer of commodity grades. Also, some specialties are there, but still Tornio is the big beast. Nirosta is much more the service-oriented company, has high share of end user customers in its portfolio. Daily precise just-in-time deliveries are important for automotive customers. Same thing with white goods, surface sensitive items. Avesta, again, has a slightly different profile. It has project business, very metallurgically, very demanding applications in the various chemical industry, oil and gas, and so on.
I would say they are product specialists. Also, R&D department in Avesta is very strong. Looking at the market and the market growth, Mika, I think you showed in your slide Europe growth around 2% projected for 2015. That is, of course, in globally looking not a great number, but it is still growth. That is, I would say, positive news. You look at all across these customer segments here, there are not great differences. We cannot single out a segment which is completely better than the other. But it is all in all, I would call it all steady. What we have had in the last, I would say, already two years is very strong German automotive industry. Their exports have gone very well. The demand has been very good. Also this year automotive car passenger car sales here in Germany have also increased.
It is not only any more export demand, but it is also domestic demand that is improving. On top of that, the weaker euro helps greatly now our customers to succeed with their export sales. I would say that our customers are extremely competitive, which should help also the underlying demand and real demand to be very healthy and strong in the second half of the year and even further than that. Here we have, I would say, a strategic matrix. We have spotted our main customer segments into this grid. We have the x-axis, we have the market attractiveness, and the y-axis, we have our relative competitive advantage. Market attractiveness you can translate to be profitability more or less in this picture and our competitive advantage. How good we are in that product and in that segment.
The message here is that the biggest volume, which is the biggest bubble here, distributor, is not particularly attractive in terms of the very high-end solutions. On the other hand, that is and remains a very important segment for Outokumpu since it is the biggest customer segment for us. We are not planning to leave that. Neither we are going to leave the tubes segment. The situation and the result here is quite dynamic. It is well possible that when we draw this picture in six months' time, this was drawn, by the way, already six months, eight months back. When we draw that in six months' time ahead, that may look different. In terms of attractiveness of market, these two bubbles here are exposed to imports mostly, whereas the bubbles here on the right side are less exposed to imports.
Means that also pricing here in this side is more volatile, subject much more to the demand and supply balance of the market. That being better, I would expect also those bubbles to change positions. Talking about demand and supply balance in Europe, Mika, you again mentioned that it is improving. My gut feel is that we are, as we speak, not very far from a healthy balance of the market. We definitely see the market being okay, being I would say steady, and we see less of issues. The second half of 2014 was a very tough period from market point of view. We had a huge surge of imports into Europe and also inventories were built up. In 2015, we see much more steady development. Our actions in Outokumpu have contributed greatly to this picture, and we believe that we have done the right thing.
Talking about prices, I mentioned that we had a big crash in the end of 2014. That was result of those imports. You see here on the right side, first, a nice run upwards from the very low levels in early 2014 at almost historic low levels, coming to an end after summer and crashing. Reaching the bottom in quarter one, and now you see some small improvements in this picture. Imports, they have been discussed extensively already, I am not going to spend so much time on that. Just noting what Mika also said that we are coming down from around 30%, 31% import levels. At the very peak in Q4, they were 33%, 34% of the whole consumption in Europe. We have come down to around 20%, 21% in March and April, quite a significant change. Talking about anti-dumping procedure, that is here.
Eurofer filed that already in May 2013. Commission started investigation in June 26, 2014. In August last summer, there was also a separate anti-subsidy investigation initiation by the commission. Then now we got in March the preliminary duties in the European market, and the final decision will fall in September. Until then, we have to remain and wait. We have nevertheless, even though we have to wait, we have been able to analyze ourselves in our company what that could do to European market. Here you see some elements. I am not going to share numbers for obvious reasons, but you see the elements here, the variables if you want. On the green you see the positive elements, but hence, in our view there are also some negatives that the anti-dumping will bring. We have to be considered.
First of all, the obvious positive is that we would expect European players to gain market share in Europe to benefit from lower imports. Obviously, Outokumpu should be one of those players benefiting from that. Along with that, we would expect that the market balance in the cold rolled product would improve. Demand and supply would be well-balanced, would enable a sustainable price level as opposed to the last two, three years when it has been unsustainable. On the negative side, as you know, the anti-dumping is addressing only cold rolled. It does not address hot rolled products. Hot rolled is free to come, and that we expect to activate as our Asian friends are not able to sell cold rolled, so it would be quite obvious to try then to sell hot rolled.
The good news there is that hot rolled market is clearly small, about one-quarter of the size of the market of cold rolled. Therefore, that potential damage is limited. Secondly, at the moment we are actually, I would say, we are using the word enjoying double shield in Europe. We have the preliminary anti-dumping protection, but we also have very competitive euro-dollar relationship. My reading of the market at the moment is that that itself, the dollar euro, protects European hot rolled market so far well, but that remains to be seen. I would expect some pressure, nevertheless, coming in the coming months. Then we have on the bottom scrap or raw material dynamics. If you think that the European players would gain share, that would lead to logically higher melt shop production in Europe.
Again, that would induce more scrap demand in Europe, and that could distort the balance of demand and supply of scrap in European market leading to scrap price and hence cost increases in the mills in Europe. All in all, we are very much in preparation and prepared to take advantage of the better market conditions to come. We have as one measure already taken on stream, annual and pickling line, annealing pickling line number one in Tornio, which is about 5,000 tons a month capacity. We also prepared, if the market so demands, shift further volumes out from outside Europe into Europe. Of course, we do that if it makes commercial sense, if it makes sense from margin point of view. But we will do that if that is necessary. Further potential that we could also do and will do is productivity improvement.
I talked about the small step improvements that make sense almost in any market environment, especially here now. Small steps. We could also ramp up some of our cold rolling mill we have, for instance, the Sweden Steel capacity in Nyby that we could use also here in Germany to some extent. Not to exclude even company, say, intercontinental or other sourcing. We have Calvert asset in the U.S., which we could utilize if the market demand would go beyond what we believe. At the moment, there seems to be also capacity in the U.S., so that could make sense as well for the company. At the moment, I would say we are on a very clear path. We know exactly what we need to do, and we are doing that. We are implementing our industrial plan. We have specialized our mills.
They have very clear roles. Our capacity utilizations, as we speak, are increasing. They are actually very much in the range that you see here in this slide or even beyond that. We will have very competitive cost structure. Our saving programs will bring more than EUR 240 million of cost advantages. About the commitment in commercial, it is about profit. I am talking almost every day about that with my teams. It is also about mindset. It is about looking at the business differently. Germany is very important market for us. About the product mix, I talked very important, active pricing, understanding the market, making the moves rather quicker than later. We are on very much track on to become a sustainable company within or a sustainable division within Outokumpu. We have all the means that it takes. We have the right assets.
I believe we also have the right people. We have very good expertise all over. We have very balanced customer portfolio. We are not standing on one leg or two legs. We have several legs we can stand on. We have the efficiency measures that are coming 2017 fully in place. Overall, we think that we have very competitive business model. Thank you very much. That was the last slide.
Thank you, Olli-Matti. You can actually remain here because I will invite the others. I would invite all three gentlemen here. Olli-Matti, Mika, José Ramón , we have time for Q&A. I am sure that everyone has lots of questions. We will have roughly, I will say, 20 minutes for this, and of course, we have the opportunity to continue during the coffee break. There is a lady down there with a mic. When you have a question, kindly raise your hand, we will bring the microphone to you. Also, kindly introduce yourself, and your company before the question. Kindly one question at a time so we can also keep up with the questions at this end. Please, who would be first? Here in the second table, Seth.
Good afternoon. This is Seth Rosenfeld at Jefferies. If I can start with some questions for José Ramón, with what's happening in the Americas. Within Calvert, historically we've always heard a lot about the competitive cost base there, and you commented on this a little bit today. Can you just walk us through in a bit more detail between raw materials, energy, labor, how you're stacking up both in the domestic market and also versus imports? Whether or not you think that in this kind of race to maximize volumes in the next quarter or two, if that cost advantage is proving advantageous for you. Just one second question on the Americas outlook. You spent a lot of time in the presentation this morning talking about increasing your direct sales to customers.
This would seem to be quite different than what we hear from some of your competitors in the U.S. region, where distribution centers remain a key part of shipments. Are you getting any pushback from your customers that really you're adding more competition to their own business mix by doing this?
Thank you for your questions. The first one, our cost position will continue to improve as a result of increasing the volumes that runs through the mill, basically increasing the size of the batches, making the overall production process more efficient. Also from an organization production team that is learning more and more every day as we continue growing in our production volumes. From the raw material standpoint, we don't see any changes. Basically, we continue to see that we have access to competitive raw materials, and the overall inputs for our production continue being competitive. So we don't have a concern in that respect. Regarding the approach to the market, if I misspoke, I apologize. We definitely in the U.S. have to continue going through service centers. Obviously, as we mature, perhaps in the future, we will try to go to some end users like other competitors do.
But definitely, as it was shown in the slides, service centers play a major role in the overall stainless market. Therefore, we might start going through service centers to some end users, but definitely that is part of the partnerships that we have also developed in the past with Mexinox, and that's the way we also market our product already in the U.S.
More questions. I think we have one here in the first table.
Bastian Synagowitz from Deutsche Bank. Good afternoon. My first question is for Olli-Matti on the European business. You just presented a slide where you basically showed that Avesta production yield, which was much better than expected. Just looking at the chart, it seems like it actually exceeded your expectations by a bit more than 20%, possibly 25%, which is quite a bit. Why wouldn't this give you any more incremental cost savings potential? You basically said that you basically want to squeeze out of the assets. Obviously, the market hasn't been growing much as of late. Why wouldn't you actually use this capacity to further improve or top up your cost-cutting targets? Maybe if you could just let us know where you stand relative to the EUR 240 million, which you want to achieve.
Those are my first two questions, and a few more on the U.S. as well.
So, basically the question you asked first, whether we should use that capacity in Avesta, I think definitely yes. It's obvious. We need to, of course, find the right demand for that, and now believing that the market environments will be healthy, going forward, it's well possible that we could use that capacity. So obviously we are looking at that.
Sorry. You will use it if the market is growing, but if it is not growing, would you use the capacity to incrementally take out costs?
Well, like I said, all sales that we do need to make sense and need to be profitable. Just producing something that reduces your cost is not rational to do so. But I would say that with all probability, we would find the right address to those additional sales in the future. Basically, I think your thinking is absolutely in the right line.
Thank you. Then you said you want to achieve more than EUR 240 million of cost savings until 2017. Where do you stand today?
Yes. I showed in my presentation that we are exactly on target. On that slide which I showed, it was partially, it was EUR 131 million so far. Against that EUR 240 million, I do not have the exact number, but I would say that we are precisely on the timescale also achieving that total number. There is very little that is open actually in our programs at the moment. Mika talked about some unidentified personal reductions. Here we can talk about very low number of unidentified persons at the moment. At MAI, it is around 140 at the moment. We are working on that part with internal benchmarking, and we will definitely find a solution for that.
Okay. Thank you. My next question is for José on the U.S. again, and sorry to keep pushing you. On the one chart where you have been showing your shipment breakup, it seems like the main progress you made in the last couple of quarters was mostly from the transfer of basically loading semi production onto the Mexinox mill. While actually the cold roll shipments were basically stable or flat for the last seven quarters, which really means or at least suggests that the commercial progress is rather a 1.5 or two year delay rather than the 6- 12 months delay we basically talked about so far. Which are the customer groups where you are really lagging behind, and then which are the product segments which you need to really push your profitability?
Well, as you can see in the presentation, most of our volumes in the U.S. are mainly going through service centers. That is around 75% of our production. The volumes were going up all the way through the second half of last year. It was not until the third quarter of last year, after we suffered the breakdown of the cold rolling mill, that the volumes started coming down. Then further down in Q4, and they remain more or less at the same level for Q1. Even though the cold rolling mill was back in operation at the end of December, we experienced a very low order intake in the last quarter of last year and the first quarter of this year as a result of the excessive number of imports that were reported towards the end of last year.
Again, it is a consequence of the very extended lead times that we experienced after our cold rolling mill broke down, after the market was so demanded. That actually pushed some of the imports into Q1, and that is why they remained flat after that.
Are there any particular customer segments or product segments where you are lagging behind? Which are the ones which you really need to?
It's basically distributor service centers, the ones that import the raw material. As you could see also in the presentation, they are the ones that are taking most of those imports. Similarly to Europe, as Olli-Matti described, most of the imports traditionally go to distributors because they are the ones that have the flexibility of accommodating the material and demand basically lower levels of service. So basically, it's coming from distribution service centers.
Okay. Thank you.
Okay.
Mika, I've got one last for you. Sorry for asking that question. I think it's possibly still early. On the other side, obviously, the company still has a very distressed balance sheet, and we basically know the example from thyssenkrupp, which basically has been ramping up a mill and obviously was losing a lot of money, was losing particularly a lot of cash, which currently you do at the moment as well. I guess the company is obviously not in the shape from a balance sheet point of view to digest another probably two to three years of heavy cash burn in the three-digit million region from the U.S. business, which I can read from your numbers you lose at the moment.
Is there a certain time frame or is there a pain level which you set yourself where you would go and basically sell, say, basically, it's an asset which is not a bad one, it's in a good market, it's in the right place, but maybe we are not the ones to turn it around in the next time, and we are basically selling it because obviously it would have a big leverage to both your P&L and your balance sheet at the same time? Thank you.
First of all, we need to look at all the programs, of course, together what we are doing here. Facing the fact that we have a one-year delay now, let's say. It means that, yes, we have a deviation against our original plan to deleverage, and we need to seek for other actions in order to catch up and close the gap. That is what we are doing now. We are not at all giving up that we wouldn't be the partner who would ramp up this successfully. Because the 22% of NAFTA market share and having the top of the range asset there with the people who are having a very good learning curve there, with the customer confidence that we are still having there.
I think that is absolutely vital part of our strategy because we have been too dependent on Europe, and we want to make it as good as now MAI is proving that it can be.
Thank you.
I believe we have on the same table, we have in the corner. Next one.
Hi, it's Steve Benson from Goldman Sachs. Mika, I just had a question for you on Chinese demand or Asian demand, given and maybe it's switching hats to your ISSF role. But the industry's very proud of the 5% growth rate that it's enjoyed for nearly 50 years. But the charts that we've seen today point to much, much lower growth, it seems, for the next two or three years. With your meeting that you're just back from, what are the Asian companies saying about demand, about capacity, about imports? Because we might be back talking about the same thing next year if things don't turn around out there.
Yeah. Of course, in a meeting like this, it's not very much competitive issues, actually, not at all you discuss. You get, of course, a certain understanding of the global economy, of certain understanding of the statistics like we saw today based on all that public data that we go through. Clearly, China is very, very turbulent for the time being. So it's not only that what we hear that a lot of the manufacturers are loss-making. There are temporary closures, there are permanent closures. However, at the same time building capacities, this environmental pressure, governmental pressure, then also the different interests between the provincial governments and the central governments. So I would expect that, together with the nickel problematics we talked earlier already, so it will be very turbulent for the coming years.
It's not going to be solved very fast, bearing in mind that there are 50 players only in stainless.
Okay. Just one other question on the Americas division. Why do you want to have a production target for the Americas business, given how difficult the U.S. market's been to read during Q1, the volatility in the dollar, how manufacturers out there might struggle to export? None of your competitors have an annual production target. So, we all know the plant's probably capable of doing that in the long term, but why do you need to have this target this year?
Well, as you could see in the presentation, we had set targets for ourselves to try to place all the volume, the capacity of the mill in the market in the lapse of three-four years. We seem to be making a good headway until we unfortunately hit, first, the breakdown of the mill, and then a weak market condition. As we commented, we are already evaluating all the different options that we have. That is what we expect to resolve in the next few weeks with the task force that Mika mentioned already. We will decide how to move forward. But the message here is that we are flexible to adjust to the market conditions, and from there we will decide what is the best course. At least with the information we have today, those are the numbers that we are thinking about and we are targeting.
And maybe just to add on that one. I think it is fair to say that we have proven each year that it has been very difficult to give targets for a certain ramp-up, like we have in Calvert. But originally, of course, we have wanted to give also to the market, to the financial community, some targets, how we feel that what are the steps that we can make technically, and how do we read the market for the time being. It is not, as I would call a production target. It is very much, of course, kind of a delivery target, because obviously we need new orders in order to be able to produce. We are not going to produce just because we said that this is the production target. But it would be easier to live without any kind of guidance on that, I agree.
More questions at this point of time. In the middle, let us take the second table first and then move backwards.
[Harri Launonen, Nicos.] Regarding anti-dumping, if I read the papers right, the duties were put on March 28. If that is correctly understood, it is two months ago, and I would be interested in the change of the behavior of the various players since March 28.
Unfortunately, this is an area where we cannot make very clear comments, as it is forward-looking. Therefore, sorry to say, no more comments on that.
All right. Let us take the next table then.
Hi, good afternoon. [Sergo], Swedbank. To Olli-Matti, you showed us a picture of your strategic positioning in different customer segments, and you said that you are not going to get out of tubes and metals processes segment even though there is no growth. You obviously do not have any relative competitive advantage, and I assume not making any money there. So why do you have to stay there?
Well, that last assumption is not fully correct. We are making money, even with the lowest of the segments, because we are cost efficient, especially in the plant of Tornio. Therefore, we can be profitable in any market segment that we have in Europe. That is why we are staying in, and keeping the cost efficiency, improving it. Obviously, if the market allows, those segments will potentially improve more than the others, which are more steady in profitability level.
Okay, thanks. The second one about your ferrochrome cost position. In the graph, it seems that there are a couple of companies that really stand out in terms of cost competitiveness. Do you want to name them or what is their secret? Anything to learn from them?
That is also something that we do not want to disclose here. Johanna, do you want to say something more?
We can say that the front runners there are from Kazakhstan, and there are some benefits we do not exactly know, but against our cost base. That is true.
Okay, thanks.
Excellent. I believe we have time for one more question. I think we take at the last table one more question, and then of course, we have the other session for the Q&A, and we have opportunity over the coffee break to also discuss with management.
Okay. Hello, everyone. Johannes Grunselius with Handelsbanken. Just want to ask you how I should interpret the press release you sent out here before the CMD, when you actually use the word, "The Calvert operations run smoothly. Order intake continues to be disappointing." We know about the troubles in Calvert. Can you give some color on what the recent status is? How has orders developed over the last week or so?
Well, so far we have continued to experience a weak market condition. There was a big overstocking process, as I mentioned, towards the end of last year and in Q1 as the import figures reported. That is all we can say for now, and we expect that this will soon be corrected. We are permanently talking to our customers, and the expectation is that it will be corrected.
It sounds then that things continues to be challenging in the same way as we have seen over the last. What we see in Q1 is basically continuing.
But this is more or less also what we have said, because we very clearly said that we are going to have a weak Q2 and very much because of Americas. That is exactly correct what you said. We cannot yet give any other update concerning Q3 or Q4. We need to learn how the market is now behaving first.
Then another question on Europe. There is typically this seasonality with a very strong first half and weaker second half. What are you seeing now in this second half, please? For seasonality.
Yeah, of course, I'm seeing that, but whether I can comment on this is a different story. I've been trying to be very careful not to just say nothing. Let's put it that way. I see a steady market underlying demand development in Europe. Automotive, like I said, is pulling very well. Also domestic appliance is going very well at the same time as we see imports coming down.
And maybe we can just add that I personally, I don't believe anymore that there is this old normal, kind of that the first one is the best and the third one is the worst. It looks to me that things are changing if you look at this year's first quarter. So it was not that strong as it was like last year's first quarter.
On the other hand, last year's third quarter was not that bad drop, actually, from the second quarter than it has used to be. We try to do everything in order to mitigate those traditional patterns, and we have very many factors that can impact that right now because, like the anti-dumping could impact that, of course. I think that world is changing also through the import flows because they can rapidly change and come. It's different world now.
Excellent. Thank you, everyone. Thank you, Mika, José Ramón, Olli-Matti. We have now a coffee break of 15 minutes. We will continue 15 past 3:00 here again. Thank you. Let's continue the program. It's my pleasure to welcome Markus Moll from SMR, and Markus will talk about the stainless steel markets. Markus, please, the floor is yours.
Thank you very much. Thank you, ladies and gentlemen. Great to be back after. Exactly, that's the one. After London. That was the last time I addressed this forum here. In the meantime, I have spoken to some of you on the phone. I know that who call me more or less regularly to get my forecast, and just the simple fact that I'm invited back tells me that I'm not so far off the mark, hopefully. Before we start here, I would like to start with what we call the base case scenario. Where does this industry stand at the moment worldwide? First of all, this picture you are familiar with. Growth mostly in China, growth outside the world limited, and in total 5%. Stainless, and this is still a fact, is still winning new applications every day.
Stainless is still growing faster than its competitors, aluminum, copper, carbon steel, et cetera, PV. From the market growth dynamics, we don't have a problem. But you should never make the mistake and forecast this to the future here, because the future will look different. We are in a different environment now, and at the moment, you see it highlighted there for the next five years, we see a significant slowdown here in China. We always been called the pessimists of China, and now it shows that reality sinks in there. We draw our conclusions from the end use segments. That's it. We are not talking about crude steel projections and things like that. We look into individual end use segments, and that tells us that for the next five years, China will grow only at 5% per year, which is below GDP probably even.
That's a new reality we have out there. The less you are exposed to China, the better it is. Look at the exposure of stainless mills and the ones who make the best financial results are the ones who have the least investments in China. That's unfortunately as things look like. The rest of the world continues to grow at 2% per year, as you can see here. That's what we think. This is now, and I'm not going through you now into a product segment. A producer like Outokumpu is playing in many markets. In long products and flat products. Outokumpu is a one-stop shop. With few exceptions like seamless tube or so, they are only indirectly in, otherwise, they have all these products in their portfolio.
The key takeaway for somebody like you is if you split these products into commodity products, value products, and high-value products, you see that, for example, on the long product side, half of the market is commodities. Commodities means the bottom line is everything. The lowest cost producer makes money, the high-cost producers are losing money. The customers don't care where they buy it from as long as the specifications are met. This is unfortunately a big part of the market. The value segment is the segment where usually a domestic supplier gets a premium. Where they say, "Okay, I buy from India, I buy from China, but not at the same price. My domestic supplier gets a premium." That is that part which is, in long products, about one-third of the market. Then you still have this high-value segment where still the producer sets the price.
That's cost, profit, that's my price, take it or leave it. We still have them, and this is unfortunately in the big part of the market, which is the flat products here, the commodity share is bigger, almost two-thirds, and the high-value share is relatively limited. As soon as Chinese producer gets into this high-value share, what they tried with duplex, et cetera. A standard duplex is no longer a high-value product since they are in, then immediately that turns amber or it turns even red. That is the thing. Long products have a better structure here, a more segregated one than flat products. These were the growth rates last year in 2014. That's the complexity. Looking on the supply side of the market, we have a new leader in terms of volume terms. That's that company, Tsingshan.
You can hear it and forget it immediately again, because outside China, they are not relevant. They are not playing a role. That's a Chinese producer supplying the Chinese downstream industry with semi-finished products. That is what Tsingshan is doing. Then we have, as you can see here, these are all the mills who have their headquarters in Asia, many of them in China, and Outokumpu is the only one, and together with Acerinox here, so to speak, who can still stand and stay in this leading group here. All the others are already here in Asia. Outokumpu has an Asian component, of course, but that is a relatively small part of the company, Shanghai Krupp Stainless near Shanghai there. Okay. This is a highly dynamic picture, as we see. Tsingshan yesterday announced that this year they want to produce 4.3 million tons.
They already have a capacity of 5 million tons. I mean, what's going on there, this race for the 5-million-ton club in Asia, it still seems to be that the Chinese are continuing with their growth dreams and whatever. Actually, I will go to TISCO on Monday, which is, I'm expecting a relatively unfriendly atmosphere there as a European, specifically. But I will go there in order to find out what will be their strategy, how will they deal with the fact that they are banned from the European market, that they know exactly that there could be a similar action in the U.S. against them. They already told me that one of their retaliation acts will be to flood the markets with the products that they still can export to Europe, means hot-rolled products, 2-m wide, things like that.
Let's see what they are up to. What I heard is, first I want to see them, talk to them, and then draw my conclusions about strategically what TISCO want to do. We have to say one thing. TISCO is the company that I would say single-handed destroyed the profitability of this industry in the last five years. I mean, that you have to say. It's a state-owned company, and that's why they have been banned from the European market. How can you compete with the Chinese state? The next picture also, it gets better thereafter. I tell you, this is all the depressing stuff at the beginning here, is an ugly picture. This is pricing. We are doing our monthly price sensors. We have more than 100 distributors and end users who report their prices to us.
And you see if you take inflation into picture, we are in Europe at the moment at the record low level for stainless steel 304 commodity products, ex stock here. When we compare the States, used to be better. It's also heading south fast now, but there is a gap now between Europe and North America. Of course, some of that has to do with the exchange rates. Last but not least, and here comes an interesting thing. In Europe, you can buy stainless steel 304 ex stocks cheaper than in Asia. That's a first. That never been the case before. That's how the situation is in Europe at the moment. When we talk about the future here, we have to talk about the raw materials, and here are a few key takeaways for the raw materials.
Now, in nickel, as Mika said this morning, the more you look into nickel, the more you understand that you cannot predict it. I'm doing that since 25 years, and believe me, very often we hide our forecasts. And afterwards, you always know why they were wrong. Clear. But key takeaway for nickel for me at the moment is the following, and it's all in China. We are as low with the nickel price today because China is consuming way less than what was predicted. What was predicted is that China consumes a lot nickel, big iron is running out, and they have a problem, and the nickel prices will significantly soar. Now the story is still intact, I tell you that. The ores from Indonesia have been depleted. I think that is consensus now.
The nickel pig iron that is being produced at the moment, around 30,000 tons per month, has to be produced from Filipino ore, and let's say, the economics for doing that are not as good as from Indonesia, so the costs are up. Secondly, depending on where the stainless production in China in the first quarter has disappointed, it was lower significantly than the fourth quarter production. There is also a new situation there. Depending on how that recovers, at the moment, we see stronger production rates out of the Chinese mills. The delta, there will be a delta this year. The Chinese will have to look for new nickel sources in the second half of this year because the NPI production will fall short of last year's number. That is a given. The question is just how do they fill it?
They have more domestic scrap, but now we see also more ferro-nickel imports. We see more class one that they use, and we see serious inquiries now for whole ships from Europe to China, bulk deliveries of scrap. I think, and this is, for me, an early indicator that something is wrong with the nickel pig iron supply situation at the price levels we have today, that the Chinese will change their purchasing behavior. So that, for me, is an indicator that probably nickel has stronger fundamentals than others. Quickly on chrome. Chrome market is well supplied. There is sufficient ore from South Africa. There is a new capacity in Kazakhstan coming on stream as we speak. The consumption is weak because the Chinese stainless production does not go as well as thought. So we do not see much movement on the chrome price side. Molybdenum, similar situation.
Molybdenum is a metal that is highly exposed to oil and gas. The slump in oil and gas, CapEx reduction is leading at the moment to actually weak demand side for molybdenum. At the same time, Sierra Gorda, the big copper project in Chile, is adding 10% to the moli capacity worldwide, and therefore, the molybdenum market will remain oversupplied this year. Now comes stainless steel scrap. Stainless steel scrap for me is the invisible hand in the whole stainless raw material supply chain. It is always a good indicator, where this is going. I can tell you the scrap market in Europe is thriving. It is really, it is hot. From the scrap processor's standpoint, it is great for a long time. They are sold out. Now the mills produce, including Outokumpu, on a relatively high level, clear.
But what is hanging over our market is still these stocks of Chinese and Taiwanese material. Wait until they run out and Outokumpu and its competitors get a lot stronger in the second half of this year than they already have. Then let's see what happens to the scrap market and to the scrap price here. So at the moment, the scrap price knows only one direction, and this is up. Here I have this graph, which is a very important one, comparing the costs of buying nickel in scrap versus buying nickel in NPI. The Chinese had for a long time an advantage here. This turned into an advantage of the Europeans at the end of last year. At the moment, you see how fragile that is with highest scrap prices for May in Europe and the NPI price actually flat or even slightly down.
The advantage is back on the Chinese side. That is something for Outokumpu, and they need to get their scrap suppliers back on their side again and to see these partnerships that they have. Because one thing is clear, if the Europeans cannot buy their nickel competitively, they will continue to reduce mill capacity. Then where should the scrap suppliers sell their scrap to? Okay, now the anti-dumping case. This is what we think, and I click it all in. These are the four components for volume-wise. In 2014, you saw that enormous spike here in imports from China and Taiwan. But one thing is also clear, this material was not consumed. A part of that, and we think it is as much as 200,000 tons, went on stock. We are already on the way of de-stocking.
The de-stocking is going particularly in Italy and other markets where these big service centers are who have that material. But almost every distributor I speak to, even here, tells me he has a little bit of Chinese and Taiwanese material on stock still, and it still sits there, but we want to reduce it, et cetera. That means this de-stocking needs to continue. The European mills will get more volume, assuming these are the assumptions, this market growth 4% and 3% in the next two years in Europe. Taiwan declines to withdraw. There is still a question mark because Taiwan only has 12% import duty, and specifically for light gauge material, they could absorb it. But we assume that they mostly withdraw and also that the Chinese disappear from the market basically, which is pretty clear that they will.
These are the assumptions, and also that the exchange rate stays below that 110 to the U.S. dollar here. Otherwise, if the euro gets much stronger again for some or the other reason, then definitely Taiwan could absorb its 10% and be back. But the key takeaway that we are having here is that after you see that part from other imports here, I think that they will get a significant share of these volumes that are free from China and Taiwan now. Here, who is that? That is the POSCO group. They have five channels to shoot on the European market now. That will be Jindal from India and from Indonesia. They cannot replace Taiwan and China. The European mills definitely will get a portion of that, but not all of it. A lot depends on the pricing policy, of course, also.
If the European mills decide to increase prices significantly, the more imports we will see from other sources. If they do not want to increase it at all with the current thing, then probably the other imports will not go up that much, and there will be more volume available for the European mills. It is mostly in the hands of the Europeans to steer this volume. Okay. This is our market bridge here, what we see for Europe, and that is good news because we have that structural growth which we have had in before. From the market of 5.8 million tons, 5.9 million tons in 2014, and then over two years, that grows to 6 million tons from the structural side. Then the weak euro helps us to replace imports and gain new exports. Both brings us then to way over 6 million ton market.
Then we have a little bit setback. There is some exposure of the oil and gas industry in Europe. It is not as high as in North America, but also that oil price will reduce the long end of flat product market somewhat. That means that we think our base case scenario now within the next two years, the European market will grow by 5%. This is different from what we have seen half a year ago, to be honest. We significantly upped our European market forecast. The next talking point in the industry here is the oil price. These pictures speak for themselves. That is the Baker Hughes weekly rig count. You see how fast the industry reacts in reducing the active rigs that are producing oil and gas.
But that is not so significant for stainless steel because these are already existing rigs, but they try to get supply out of the system. It is not true that they continue to pump. There is a strong reaction there. The next thing is you have to watch the CapEx of the oil majors. This was in 2013 of these companies, their CapEx. Already last year, they saw problems coming. They reduced between 20 and, let us say, some did not even increase it, like Pemex, for example, and ConocoPhillips. But generally already last year, their CapEx was reduced. At the moment, this is what they say for this year. It is a moving target. Every quarter when they come out with their quarterly numbers, they will present a new number on the CapEx numbers. I fear at the moment that this is not the worst picture that we see.
That on the already reduced CapEx from last year, it is between 12% and 30%- something another reduction there. This has an impact on the oil and gas projects, of course. Every dot that you see here, the analysis is stolen from one here in the room actually, but I find it very good. Goldman Sachs here, they say, first of all, this is the level. Every project is an active project. It is not just a plan. It is a finance decided project somewhere in progress already. This is the oil price these projects need to make sense. This is the owner of the project, how strong his balance sheet is. Now you have specifically two areas where projects probably find it difficult to get through. First of all, high cost projects.
That is high cost owned by financially sound companies, but high cost projects were. At the moment we are here with the oil price, where they might say, "Look, this is too distant until the oil price comes to these levels again, we give it up." Then you have projects which are owned here on the right side by people who have a weak balance sheet, who are hungry for cash, who need fast to get something, and they probably also cannot just sit it out because people who are strong and/or are sitting probably here, they say, "We just sit it out. This will come slowly up and we sit it out." But these projects and these are under jeopardy, and that is quite a high number of the oil and gas projects. That is emptying the project pipeline at the moment. We are still having projects.
Some people say, "No, we haven't seen anything," but they know exactly that the follow-up projects they are missing and the cliff is coming this year, not next year. A little bit when you look at the products in stainless products, and these are the flat products, that shows what is the exposure to oil and gas and how important are they in stainless steel. Fortunately, the biggest products, which are cold-rolled coils and welded tubes, for example, have a limited exposure to the oil and gas industry. On the long products, it looks different. Some, like seamless tube here, they are highly exposed. They are highly exposed to the oil and gas industry. But here, a key takeaway, the Outokumpu products are very limited exposed to oil and gas. It is more a problem for some segments of the stainless industry than for this particular company here.
Now let us look on the NAFTA market, which is an important one for everyone and Outokumpu as well. Here we are having two countries which, when you look at the U.S. curve, the recovery was fantastic. It is slowing at the moment. But we have reached in the United States or even exceeded pre-crisis levels in terms of stainless steel. In Canada, we are just about or a little bit below, so Canada is underperforming in recent years. But here is where the music plays, and this is Mexico. Let us not forget that Outokumpu is the clear market leader in Mexico, and this is a highly dynamic market, as you can see here. It almost tripled its market volume in only the last 10 years, and it is becoming the workbench for the North American industry, for the automotive component manufacturers, white goods.
It is like what we see in Europe with Turkey, that these fabricators go to Turkey where they have a skilled labor workforce and very good conditions and unit costs. That same here is true in Mexico. That is the dynamic market there. Now we are doing the bridge for the NAFTA market here. Actually, for all products all together. You see we had that higher structural growth here for the next two years. Basically, there were more growth dynamics, but then we have a double headwind now from the strong dollar and from the oil and gas segment, which is in the short- term driving the market down. There are two things with oil and gas because you could also say America is a consumer-driven economy. People have more money in their pockets. We see also at the moment already they are buying bigger cars again.
They do that immediately. Bigger cars means more stainless in them. But overall and net then in the short- term, I think the oil price will take some market here out. The upside potentials here, as I say, higher consumer spending to that. Because what we are seeing, basically key takeaway, the U.S. will be rather a flat market in terms of market growth for the next two years. This is also a change to six months ago. The lower oil price, so that means higher downstream profits, increased spending in petrochemicals. That is also a thing very difficult to say now what additional products will there be in petrochemicals based on the low gas prices, ethylene projects, for example. There are some. That could be, and then the bigger cars that I said here, more stainless for that. Okay. Outlook. Market drivers here.
That's the whole market, 37 million tons worldwide. Consumer goods is half. Appliances, high-quality cookware, bakery equipment is going very well at the moment. Whilst at the other side, there are negatives as well, like kitchen surfaces and sinks. Here we see that designers are going away from stainless. When you speak to one of the biggest kitchen sink manufacturers who's here, for example, he's saying, "You know, I like stainless, but we make more money as a company on the plastic and these other alternatives that they have than on stainless." The same we have, for example, in water pipe systems and things like that. You have to consider that sometimes. So one thing is fashion and what designers do, and the other thing is really what is the margin of your customers if they have alternative products here.
Chemical, petrochemical here, the seabed factory, moving the processing of the crude oil down to the seabed from the platform is a clear driver for stainless steel, duplex, et cetera, and no longer engineering steels. Then increased downstream investments is a plus. Slump in upstream is going on. We talked about that. Power generation is still wobbly. It's not that strong. So on the automotive transport, that's a wonderful area. Truck exhaust systems, increasingly in stainless steel. That has to do with the new emission laws. Then we see increasingly stainless steel fuel lines. That's a product that didn't exist before. And sensors. Cars are full of sensors here. And new high-grade engine materials as well, including turbochargers and things like that. And then building and construction. Here we have water infrastructure, the swimming pools. Swimming pools are the new status symbol.
It's no longer the Porsche or the Ferrari. If you want to impress your neighbor and make him jealous, you have a stainless steel swimming pool. Glass to metal systems. Architects love glass. In order to fix glass, put it in position, you need stainless steel. And thermal insulation windows. Look at these are two-panel windows. In Austria, we are more or less using three-panel windows. I think in Finland also now. In between you have a stainless steel strip as an. On the other side, negative is elevators. Here we see clearly a designer trend away from stainless steel again. So that goes and comes in waves here. And in heavy industries, pipe and paper, some activity from a low level, and also seawater desalination. We see some recovery for the next two years. More projects definitely than we had in the last two years.
These are these drivers. We're coming to the last slide here. This is my guidance for the market for short- term. That means this year and next year, midterm to 2020, and after 2020. In EMEA first, as I said, we upgraded it in the short- term, but then realistically, we are coming down over the years, and even after 2020, it could become negative. We are still living in a saturated market with offshoring being the place. It has a lot to do with the exchange rate, of course, also. And also with no growth in population here in Europe. So in Americas, the other way around. At the moment, short term, we are thinking that the growth will be limited for two years.
Then it will recover and improve again, also based on a certain normalization on the dollar strength compared to other currencies, and slow down thereafter. In APAC, we stay in a very narrow range, 4%-5% at the moment. When I look to Asia at the moment, funny, it is Japan who is doing well. So it seems to be that the old markets have a certain renaissance at the moment. It shows also that in the old markets, we have some damn competitive supply chains. They are playing their strength at the moment. With Abenomics and a little help from the currency, you see Japan is definitely growing faster this year than this, what you see here. China is holding everything down.
Next year, I think in the term 2017-2020, we could have an upside potential on the growth in Asia, and then slowing down with the slowdown in growth in China. That is, of course, dominating this whole area here to between 3% and 5% annual growth after 2020. That is how I would see it. Last thing, I was asked to talk about stock levels. There is not much to comment. Stock levels, when you see the first quarter figures in the States were up. The U.S. is at the moment in a heavy de-stocking phase. Some stockists are buying only 50% of what they used to buy a quarter ago or something like that. They tell me they are slowly reaching their target levels. So you will see that second quarter stock levels in the U.S. will be substantially down on that.
They were going up since two years. They are upstocking there. Germany under control, but also, let us say it that way, definitely not too low. Germany is the market where there is not so much Chinese and Taiwanese material. If we would show, there is no number for Italy, for example, or Spain or France. Spain, they have more of these Asian materials still on stock. So I would say including that, Europe is still overstocked. Japan has an overstocked situation at the moment, and also Chinese stocks has been rising again in the first quarter here. So that is why they are in a de-stocking phase as we speak at the moment probably also. So this is how it looks from there. That is my story for the moment, and I am waiting for your questions to clarify the rest.
Thank you, Markus.
Thank you.
Yep.
I stay here?
Yes. You stay here. We take a few questions here, before you need to run to the next one.
Markus would be ready for a few questions if you have at this point of time. Again, raise your hand if you have a question so we can offer the microphone to you. This one here. The second table.
Johannes Grasberger , Nordea Markets. What is your view actually on the South Korean stainless steel producer cash cost versus the Chinese ones? If we assume that the Chinese and Taiwanese are out of the market, then the South Koreans start shipping to Europe. I suppose if the cash cost is higher, theoretically we would have higher base prices in Europe, even though we would have the volumes from South Korea.
It is a very good que`stion because they are definitely significantly higher than the Chinese. When you look at the raw material mix of POSCO, for example, they take their nickel units from an own nickel plant they have, but the price formula they have built in there is not very competitive for them. Scrap they need to import, either from America or from Europe. On the raw materials, they have no advantage. They have some advantage on gases. That is not decisive. They are pretty competitive in labor costs and so on. Overall, to sum it up, yes, they can replace China in Europe, but at higher price levels. They cannot make the same prices that TISCO offer, for example.
So that more or less these minimum price offers that companies like Outokumpu will be confronted with in this year, they are higher definitely than what we have seen before. It would be a great moment for the Europeans to pump up the base price now by, let us say, EUR 100, EUR 200. The question is really, you open the door then wider to somebody like POSCO, to ship here and make money.
Then follow up. Other countries, India was mentioned as one exporting country. What is the cash cost there versus South Korea?
India's cash costs, I believe, from this new plant from Jindal in Odisha. Cash costs should be pretty comparable with POSCO. Their problem is then the overheads. Their problem is the depreciation, financing, et cetera, pp. They made a little trick now. They sold this plant to a group company, and I think they also changed the balance sheet and everything here, in order to reduce the future interest payments, which were, believe it or not, up to 10% of their revenues. It's unbelievable.
The final question on the hot-rolled material. It was already discussed that we could have some hot-rolled coil imports in the European market from the Chinese because that's not touched by the-
Yeah.
-commission's anti-dumping ruling. Maybe any discussion on that one, how would that impact the cold-rolled market then if we would have cheaper semi products in the chain, and will that. Any discussion, that would be helpful.
Look, we have no big rerollers in Europe. This is different from Korea, Taiwan. We have OTELINOX in Romania. They could enjoy low prices here if they want to. But, it's more than also what they could sell to is some service centers. Of course, there is a much smaller than cold-rolled, but there is a hot-rolled coil market in Europe as well, and this will become competitive. That's what I think. On the service center level and tubists, people who make welded tubes, who they buy hot-rolled coils, which could be the addressees for these low cost or low priced material.
Actually, one more question, which is related to the U.S. market. What do you think, is there a case for an anti-dumping ruling in the U.S. stainless market?
At the moment, none, but wait until. From everything I hear at the moment, things are slowing down there, which we will see probably in the financial results. As soon as they can show, and this means AK Steel, Allegheny, who show that one or two quarters of falling profits, then they have the classical X curve. It's a hypothesis. Will the imports really go up in the States? January, February, March, what we've seen were still high. There are also indications that due to the better delivery performance of the U.S. mills, probably we will not see in the rest of the year rising imports compared to what we had. The imports in the fourth quarter were very high, for example, last year. It's always a question of how good are your lawyers, how good is your lobby?
I barely seen the U.S. lawyers losing a case, to be honest, even very weak ones. If the U.S. industry starts the case, I think there's a good chance that they will win it. Okay.
Thank you, Markus. Unfortunately, we need to end it here.
Okay.
Markus, many thanks for your time today. You will be escorted to the next one. I would with this actually welcome Pekka Erkkilä to the stage. Pekka is our Chief Technology Officer, and Pekka will speak to us about automotive industry solutions. I will just clear this out. All right, Pekka.
Thank you, Johanna. Good afternoon, ladies and gentlemen. It is a great pleasure to be here today. I have been in Outokumpu quite a while. I started early 1980s in Tornio as a young engineer, and in my current position as Corporate Chief Technology Officer, I have been since September 2013. Outokumpu has a long history and a proud heritage in innovation. We consider ourselves as leading innovator in the entire stainless steel. We have been developing products, processes in this business. Today, we have more than 200 R&D experts based mainly in three locations, Sweden, Germany and Finland. This is now switching slides automatically. Okay. Really, we are active in both product and process development all the time. As Mika already introduced, we have now regrouped our product offering into two main product families, the Outokumpu Classic and Outokumpu Pro.
In the Classic, we have the high volume standard grades. In the Pro family, specialized, targeted steels for particular applications. But we are still doing development work in all these product family groups. As an example, I would like to elaborate a bit one really exciting new offering in the Pro family, Forta, a product that we call Forta H500 family. That is targeted mainly for the automotive business. The demand of automotive and heavy transport segment in Europe is roughly 1 million tons annually. Stainless steel is used in automotive mainly in only one application, and that is the exhaust system, which represents almost 95% of the volume of stainless into cars.
But we see there a great new potential, a new market area, because stainless steel has also outstanding properties when it comes to mechanical strength, and therefore, in the structural parts of car, there is clearly a new market potential. One of the key challenges with the automotive producers is the CO2 emissions. Of course, CO2 emission of a car is proportional to the fuel consumption. This pie chart shows you where the energy of the fuel goes in a car. 42% goes to the powertrain itself, 23% is in the car weight, followed by aerodynamics, 19%, and rolling resistance, 13%. The weight you can, of course, impact by clever selection of materials. Using high strength, low weight components, you can save weight and thus reduce the carbon dioxide emissions.
When breaking down the weight of a car, you can see that not only half but almost 70% of the car weight comes from chassis and the body in white. Those two areas we are going to attack with this new fascinating product family, H500. In this picture, you can see the currently available materials for car. On the left-hand corner there is aluminum alloys. Aluminum has a lower density compared to steel, but the handicap is that the yield strength is quite low. But still many components made of aluminum have clearly lower weight compared to steel components. The yellow boxes, they are various carbon steels, including the really highly sophisticated ultra-high-strength steels, which have a yield strength well over 1,000 megapascals.
The handicap with those is that the elongation, i.e., ductility, also goes down and many of the steels in that right-hand side corner having extremely high strength, they have very limited elongation and therefore making components of that material is extremely difficult and using cold forming, it is practically impossible. Our H500 series is these blue boxes, so it is really attractive combination of high strength on one hand and high ductility elongation on the other. These are examples of components that we have already fabricated in partnership with the automotive producers. As an example, lightweight chassis, Audi A8. There we have reached thickness reduction from current component 2.5 mm down to 1.5 mm. Then below there is a prototype of a B pillar, 50% reduction in material thickness. Nice example also is the fuel tank.
There we have replaced original plastics fuel tank with stainless steel and we have reached a weight reduction of 3 kg for the tank, and as a bonus also more volume by 3 L of gasoline with the same external dimensions of the tank. Another great example is Bentley crash absorption components. So there is really very exciting potential available. This explains you the total CO2 footprint of a car component over the car full life cycle. On the left-hand side, you can see the CO2 footprint when the car component is manufactured. In case of aluminum, the initial footprint is high, mainly because making aluminum is very energy intensive and therefore a lot of CO2 emissions will be the case. In case of carbon steel and our H500, we are on a low level, and they are pretty comparable.
On the right-hand side is the graph of illustrating the CO2 emission during the life cycle of the car. In this example, the full life cycle of the car is 250,000 km. With the aluminum component, you start from the higher initial footprint, but then as the component weight is low compared to carbon steel, it does not take so much fuel to carry that component over the car life cycle and therefore you end up somewhere. With a carbon steel component, you start from a lower level, but the slope of the graph is much steeper and therefore, before the end of the life cycle, you have achieved a higher footprint for the carbon steel.
With the H500 series, we start from a lower level as with the carbon steel, but as the component weight is less, the steepness of the graph is same as in aluminum case, and therefore the grand total cumulative footprint is clearly lower. Another very important aspect in car business is the safety. Here you can see a nice illustration of a simulated car crash. They are hollow beams. On the left-hand side, you have H500 beam. On the right-hand side is the sophisticated carbon steel. In this simulation, 186 kg weight is dropped from height of 10 m. You can see what happens. This is filmed with a high speed video. You can see the energy absorption capability of H500 is really great, and it is folded in a beautiful manner really to maximize the energy absorption. Oops. Sorry. Yes, now goes the other one.
As you can see, the ductility of the material, of the carbon steel is not enough to take the deformation, therefore it cracks. No further comments on that. Just to repeat it. Looks pretty bad. Okay. The added value of manganese chrome steels for car companies, the CO2 footprint over the life cycle is excellent. The lightweight index of the components is very good. Price is stable. There is additional safety because of the ductility, and this ductility can also be utilized when making integrated parts. Material is worldwide available. This material is fitting very well into the current OEM's production requirements in their production machinery, which is of course, vitally important. We have done some calculation simulations that what is the business potential, and here you can see the total component cost of some component in the chassis.
The breakdown of the cost elements is on the left-hand side. Then at the middle, you can see the total cost of component made of sophisticated carbon steel, 22MnB5, and that component has to be produced using hot stamping because of limited ductility. On the right, you have the same component made of H500 series, and there we can use cold stamping. Taking all those cost components into account, there is still additional cost saving potential. We have been working together with these very well-known companies. We think this really is material having a great potential for the future. Thank you. That was my last slide.
Thank you, Pekka. Excellent. Next one we have our CFO, Reinhard Florey. Reinhard, please, the floor is yours.
Thank you very much. Thank you. Good afternoon, ladies and gentlemen. You have heard now a lot and hopefully very appreciated variety of angles, on stainless steel, on the industry as such, on the technological achievements lately in Outokumpu. I would like to round it up by giving you an update on the financial situation and the key financial aspects around Outokumpu. Outokumpu has seen in the past two years a massive turnaround, massive transformation. More or less the three main messages about this transformation, about this path are the following. First of all, we have succeeded to improve the balance sheet, to strengthen the balance sheet, and also significantly deleverage this company.
We are not at a point where we say all of the work is done, but I think the progress achieved has been extremely useful, has been extremely helpful in stabilizing the financial position of the company overall. Secondly, regarding the profitability, we have made progress and specifically also where we have made promises on the successes with our efficiency programs, we have delivered on that. I will show you also some details to what you have heard already in parts from Mika and from Olli-Matti today. Thirdly, we have, of course, from the very beginning on, talked about the ramp-up situation in the U.S. The ramp-up situation is still going on. It just faces some headwinds at the moment.
We have been talking about the 6-1 2 months delay, but it is also to confirm, and you have heard that also from José Ramón today, that it is ongoing, that there are the markets in a condition which are currently difficult, but where are also opportunities to improve further to the future. Let's go a little bit more into detail here. Regarding the Outokumpu turnaround, we can see that there is a quite clear trajectory to the positive regarding profitability. Profitability level overall, and Mika has emphasized that, is not satisfactory, of course. But it has been clearly improving, and it has been improving quite steadily, as this graph also shows.
We can also see that at least in the first quarter 2015, both on the underlying as well as on the EBIT, excluding NRI, we have reached then for the first time also positive values here. We can also see that the deliveries, which means the volume of the business as such, has not increased and is more or less on a stable basis. We are also foreseeing that in 2015 we have more of a stable development in that sense. Regarding the cash flow, I think it is important that also cash flow is very much in the focus. I will come to that in more detail to explain a little bit what the path forward regarding the deleveraging will be. The balance sheet.
We were coming, of course, after the merger and after the difficult year 2013, from a level that put significant strain on the balance sheet from some EUR 3.6 billion of net debt. This has been successfully reduced to a level of about EUR 2 billion over the past 12- 15 months. We have also seen that the critical developments regarding gearing and the total equity situation have been improving. So we came down from a level of 188% of gearing to a level of 91%. So clearly below this 100% threshold, which we feel also is important. Also the ratio of total equity to assets has been improving quite significantly. Regarding the progresses on the efficiency programs, I think there are three things to mention. First of all, we have shortened the period of time in which the delivering of the improvement is going to happen.
The two projects, the Synergies 200, as well as our cost efficiency project P250, have been shortened from a duration until 2017 to a duration only of 2015, delivering the same amount. You can see already in the column of the realized that we are very close to the targeted full scope achievements here already right now. We are very confident that we will achieve this by the end of 2015. The same actually is true for the net working capital reduction program, where we have promised to improve this consumption of net working capital or extract that cash from being trapped in net working capital by EUR 400 million. We have even overachieved after the first quarter, but of course, we can expect that there is some volatility over the course of this year.
Still, we are confident to reach the EUR 400 million also by the end of the year 2015. Then there is the third program, which comes on top, this EMEA restructuring, delivering EUR 100 million. Olli-Matti has very much elaborated on this as well. But it is important to say that this program has kicked in now from the very beginning of 2015 and will start to have already a positive impact on the cost structure in the second half of 2015. Mainly by the closure of our Bochum mill, which will have the last melt still in June this year. Looking at the individual developments, you can see that on the blue bars, the synergy programs as well as the 250 programs, will be more or less finalized in 2015 and be kept at a sustainable savings level as of that point of time.
We are expecting from the EMEA restructuring some EUR 20 million of improvements still this year, going up to EUR 80 million in 2016 and delivering more than EUR 100 million then in 2017 and after. It's always important also to look at the one-time costs and one-time efforts that these kind of improvement programs mean for us. We have anticipated from the beginning that there would be an about EUR 220 million of extra costs for this. Out of which we have taken already almost EUR 190 million as provisions in the year 2013 and 2014. So for our profitability, there will be only a very small counterbalancing amount of some EUR 20 million- EUR 30 million still to come in that respect.
However, on the cash side, of course, there will be the factual delivery of these accruals that we have taken in cash out, and we have seen that in 2015, there will be a major part of that. We have already digested EUR 56 million of that in Q1, and we are expecting about another EUR 40 million of cash out still in 2015. Then an amount of EUR 50 million in 2016 and the small rest in 2017 or after. If we are looking at the general situation about our net working capital development, I have already mentioned that in 2015 first quarter, we have already overachieved the target. That was certainly also with the achievements that we have taken from looking very closely on our inventory development, but also on the abilities to have a good balance between accounts payables and accounts receivables here.
You can see that we have improved the inventory days in terms of the sheer amount from 102 to 97 days of inventory. This is not a satisfactory level, by the way, for us. Our target for this year is clearly lower and overall, we are targeting to bring that down to a level of 86 days of inventory in the course of this year. If we are then taking it from just the net working capital development to the overall development of cash, we are seeing that compared to 2015, where we had overall a negative cash development of EUR 126 million. Also Q1 has been negative with an amount of EUR 62 million negative cash flow.
However, we have to say that this was very much anticipated, and this has come to us, and I have already commented that in the last time when we spoke after Q1, rather a positive development. Because let's not forget that within this number, there are cash outs from redundancy provisions of EUR 61 million, as well as cash outs from the change in derivatives of more than EUR 80 million. So that means that in total, together with this EUR 75 million of net working capital release, the loss of cash was limited to this amount of EUR 62 million, which we thought was a quite remarkable performance. We are trying to give you all a little bit of some information regarding specific question that are coming up on the discussions with you. There were some about the amount of raw materials and the impact of raw materials.
There were some questions about the impact of currencies. I would like to comment on that briefly in this presentation. First of all, you see here the latest update of the breakdown of our cost structure. Regarding the cost structure, we can see that 60% is coming from raw material, 13% is coming from energy and consumables, and we have a personnel, so overall manpower cost of only 11% in the whole cost structure here. If we look specifically at the raw material spend, we can say that almost three quarters are related to stainless steel scrap and nickel primary. So this means stainless steel scrap providing for multiple alloys, of course, that are contained in there. Almost half of our spend goes into scrap. Then there is some nickel primary of about a quarter of the total raw material cost.
You also can see that the chrome costs for us is about 11%, and the rest for additional alloy materials as well as iron, which means unalloyed scrap in that sense. A little bit of comments regarding the currency exposure that we have. We are showing to you here a little bit of a breakdown how the currency throughout our groups are distributed in the different relevant categories. If you take the two middle bars, those are the ones that are more or less relevant for our direct exposure to the currencies. Which means the revenues, including the alloy surcharge, compared to the costs, including the raw materials. There you can see that it's a quite balanced picture with a slight advantage with a weaker euro, that we are enjoying its benefit in the group.
But then also to see a little bit how this works in the total ratio, the left-hand bar shows the revenue excluding the alloy surcharge, where you can see that there is quite a significant part of our revenues coming in there with the U.S. dollar. If we take it just for the costs, excluding raw materials, and the difference between the very left-hand and the very right-hand bar is that, of course, in the alloy surcharge, there's only the alloys taken out, but still the raw materials for the basic materials like iron is in there. If we take out the excluding the raw materials, then also the iron is taken out. There you can see that we are mainly Europe-based, and that the U.S. dollar plays a relatively minor role, whereas the portion of the Swedish krona is having a little bit more of weight.
The key message here is that in terms of an exposure and a risk profile regarding the currencies, this risk profile is relatively low. This means also that if there are major deviations, we will only be marginally hit. But if the euro goes to the weaker side, it's to the benefit of us in general. In terms of our cash out that we have for CapEx, what we can see is that the development regarding CapEx has taken a path to clearly lower levels. We have come from very large investments in the past. Of course, the biggest investment that the pre-owner of the Calvert plant has taken in there, and then the investments in the ferrochrome, where we doubled our capacity in the ferrochrome production, as well as the expansion of the Quarto Plate.
Currently, we are foreseeing that the levels of investment will stay at a level lower than EUR 160 million. You can see here also the key areas of investment. The biggest we have heard already from Olli-Matti here is the project that we are having here in Germany regarding the optimization of the cold rolling facilities in Krefeld, the closure of Benrath, and the innovation and research center here with an amount of EUR 108 million. We are also still working on the debottlenecking, the further exploration of our chrome mine in Kemi, in Northern Finland. We are also taking care of our abilities for further well-priced energy resources. So we are participating in this Fennovoima nuclear energy project in Finland, which will take some EUR 10 million- EUR 20 million annually.
Then we have a maintenance and mandatory part, which is EUR 70 million- EUR 80 million a year for the total group. You have heard quite some details about EMEA and BA Americas. I will give you a quick run-through through all our business areas and their specific financial performance and the key elements here. What you can see here in the development of the underlying EBIT for Coil EMEA is that this is really a very good run-up. It is on track regarding the targets that we have set here. While the deliveries as such did not improve over the time or were kept quite stable, we are seeing a significant improvement of the profitability.
This is also with its market leader position in Europe, a path that is still to be continued with the closure of Bochum, with the return from the investments that we will have also in the German investment program. Specifically, the drivers, of course, are also the better loading, the utilization improvement that we will have in the Tornio mill in Finland as well as in Avesta in Sweden. If we are looking at Coil Americas, we are seeing that there is, at the moment, an issue. The issue is that there is a little bit of a stagnation of the positive impact of the ramp-up that we have foreseen. If we are looking at the beginning of those two graphs, with Q1, Q2 2014, we see that both the ramp-up of the volumes as well as the improvement of the results were on track.
In the third quarter, we saw the volumes going down due to the cold rolling issues, and that has continued until now into Q1 2015. That has also led to a continued loss situation. I have explained at the year-end that our Q4 positive result is, of course, impacted by some non-recurring items that we have taken out of the underlying EBIT, so that there is a situation that we have been able to show the negative impact as a non-recurring item regarding these failures of the cold rolling mills. However, as we can see, the underlying EBIT is continuously negative if we are at a level of these kind of deliveries. Very much the loading of Calvert plant, the further ramp-up is one of the key priorities.
The improvement of the cost situation, and José Ramón has very much taken us through the levers that are currently there with yield improvement, with right first time improvement. Those are the levers that we have here to improve this situation, bring that back to a break even and bring it back to a clear profitability with all the structural advantages that this mill has over the coming quarters and years. In APAC, we have heard from Markus Moll about the turbulences that we are having in the Asian markets at the moment. We are quite proud to say we are keeping this business area at a break-even level. Of course, it is fluctuating around that, but we are seeing that, of course, some of the negative impacts can be mitigated by it being a joint venture between Baosteel, our Chinese partner, and us.
But then, of course, also through our quality position that we have with our direct customers in APAC. However, we have to see it will stay a difficult environment, and we are not having many expectations that this will have a dynamic explosion of profitability. We are keeping the expectation around break even here. In Quarto Plate, this is really an area where we have invested, where we are expecting also a step change in profitability. The first step clearly bringing it from a loss-making situation to a breakeven situation. We are looking into Q1 and seeing that this is already a promising first step. We are further going to utilize the capacities, the bottleneck where we still have difficulties to get all the new equipment to run properly and bring down the cost position. Overall, we are seeing Quarto Plate as a global leader in that respect.
We are seeing it as a very valuable part of our portfolio. But this is something where the turnaround is still going on, and we are looking to see profitability in the future quarters. Long products actually has taken a very positive development. The turnaround has already happened in 2013. 2014 has delivered positive results here. We are seeing that, of course, in some areas, we are operating in a difficult environment regarding the growth rates. We have also heard from Markus Moll that there are some obstacles and some challenges. However, we are proving that with this field, we are also being able to be profitable and still growing in this kind of difficult environment. And we have also a very strong position in the U.S. market with our U.S. bar, as well as with our Wildwood operation here.
It should be mentioned that the Sheffield operation, of course, is not only producing long product, but it is also supplying the pre-material for our Quarto Plate and to some extent, also some flat products here. So it is a very valuable part of our overall chain in the production setup. Now, some specific details about the financial development. Three major directions that a CFO, of course, is specifically interested in. First of all, debt reduction. Debt reduction relying on all the elements of positive cash flow. Positive cash flow coming from profitability, positive cash flow coming from working in the networking capital environment, positive cash flow coming from reducing specific cost elements like the financing cost, and then also, of course, divestiture of some smaller non-core assets wherever applicable in our group.
Regarding the refinancing, this is certainly one of our key focus points, taking into account that we still have some sizable maturities in 2017. The maturities in 2015 and 2016 have been mainly taken care of by successful refinancing with a high-yield bond issued in fall 2014, as well as a convertible bond issued in first quarter 2015. We have also added some new loans on the pension loan side, as well as a specific Finnish commercial paper program that we have set up and increased these opportunities that we are finding in the market. But there will be steps following here. There is a clear program also set up how to bring the refinancing efforts further through 2015 as well as 2016. Then reducing financing cost. We have already anticipated that the financing costs during 2013, 2014 have been clearly on the high side.
We have been bringing down the costs from 2013- 2014 already, specifically the interest cost to a level of EUR 140 million. We are anticipating that for 2015, the interest cost will be at a level at around EUR 220 million. Our target is to bring that by the end of 2017 to a level of lower than EUR 100 million. This is also an important lever for the overall profitability of the company. Regarding the maturity profile, we can see that the maturities in 2015, which are the short- term, that is mainly areas that are being taken care of. There is all the leasing in there. There is all the commercial paper programs in there. There are no major areas of repayments in here. There is a small part of a bond still to be repaid, and the same in 2016.
In both years, this is only an amount of about EUR 150 million. In 2017, we are seeing that there is a big bulk of the maturities, so there will be efforts to refinance these maturities during the year 2016, maybe even starting in 2015. You can see that the maturities have been, in general, already extended to the years 2019 and 2020, where the bonds that we have taken up in last year and this year are maturing. On the other hand, you can also see the deleveraging target. Mika has already mentioned it in the entrance presentation that our target is to bring our net debt down to a level of below EUR 1.5 billion by the end of 2017.
This is, of course, also ambitious for our group, but we think with the ramp up, with the ability to bring all the MAI programs into fruition, we see that as a feasible target. Some details about the debt distribution. Some questions also are always about that. We have diversified this portfolio recently quite a lot, which means that the level of the loans from financial institutions has now reduced to about 33%, while we have already about the same amount in bonds, both bonds and convertible bonds at about 32% together. You can see that there are some pension loans, some leasing, some commercial paper, and some direct loans from financial institutions. Regarding the total debt to liquidity, we can also say that we have stabilized and improved this situation clearly from the level of 2013.
We are having a quite stable liquidity of EUR 1.4 billion , respectively EUR 1.3 billion in last year and this year, while the net debt situation there has been kept stable, and the net debt overall is at a level now of about EUR 2 billion. I would like to close this with the reiteration of our guidance that we have given for Q2. In two aspects, we have given the guidance on the market outlook for the stainless steel and have said that it varies by region. In Europe, order intake improving and underlying demand remaining relatively healthy, I think very much also underlined by the presentation from Olli-Matti . In the Americas, pressure from Asian imports continues, and low nickel price puts constraints on distributor sector. Also, I think, very well commented by José Ramón . Markets in APAC under pressure, as we have also heard from Markus Moll.
Outokumpu estimates flat delivery volumes quarter-on-quarter. Delivery is expected to increase somewhat in Europe and decrease in Americas. We are expecting slightly negative underlying EBIT in Q2 for the group, driven by weaker profitability in Coil Americas. With the current prices in the net impact of raw material-related inventory and metal hedging gains or losses on the profitability is expected to be marginal, if any. This brings me to the outlook. The outlook in terms of what are the building blocks that will move Outokumpu forward from a financial perspective. Of course, it is, first of all, overcoming the setbacks and the delays that we have in Calvert, and to turn Coil Americas profitable.
The second is build on all the positive developments in EMEA, continue the good progress, achieve the target utilization and efficiency rates, and then the step change in Quarto Plate, bringing it clearly from a loss-making unit to a break-even, then to a profit situation. Regarding the savings, we think they are on time as targeted, and we will, as Mika already indicated, continue with cost savings initiatives, and we will communicate them at the right time. We will maintain the focus on the net working capital, and we will maintain also the moderate CapEx levels. Our deleveraging target, as mentioned, stays intact, and Outokumpu confirms that this is the target for 2017. With that, I would like to close my presentation and I think invite for some questions together with-
Thank you, Reinhard. I believe that we are now ready to start the final Q&A. I do not know if we can get more tables to the stage so we have everyone from Outokumpu team to join. So prepare your questions. We start in a minute. I will share my mic with you. Excellent. I believe we are ready. Again, it is the same drill, so if you do have a question, please raise your hand, and we have entire management team who has presented today here to answer any remaining questions that you may have. So, who would like to start? Bastian.
Thank you. Mr. Florey, one question on the Long Products business, which I feel has done actually pretty well given that you had a volume shortfall of more than 10% versus the first quarter last year, while the EBIT was better. You said that volumes will be improving. Is this referring to just this quarter, or is this referring to the entire volume in 2014?
This is referring to this quarter. We have seen that both internal and external deliveries have been on a lower level, and we are expecting that this will also have a positive development.
You are not yet confident enough that also the full-year volumes will be better than last year?
No, we have not commented on this.
Okay. My next question is again on cash flow and also capital management. If I look at your first quarter EBITDA EUR 77 million, if I annualize that is probably just enough to really cover your cash needs in terms of EUR 150 million, EUR 160 million CapEx, and also the money you need to basically pay your interest bills. If I basically consider that this is still including the EUR 28 million loss from the Americas, and obviously, you still also take into account the cost savings which you target. I can imagine you will be a company which, at least before any market improvement, will generate between EUR 200 million to EUR 300 million cash flow on a net basis. So once everything is achieved, how committed are you to really keep CapEx disciplined and not go above the current spending levels?
Or do you have any larger projects in mind which you might enter afterwards?
Yeah. Thanks for this question. It is extremely important for us because as deleveraging stays a key target of this company, we will have a very strong discipline on the CapEx levels in the group. There are no major projects, no major unexpected investments that we are foreseeing here. So we are keeping that level of about EUR 160 million.
Thank you.
Then let's take the middle.
Hi, this is Seth Rosenfeld from Jefferies again. Just a follow-up question on the outlook for deleveraging and the cost of debt that you've targeted. You walk through a pretty significant fall in the cost of debt you expect to achieve in the next couple of years. In your own internal expectation, how much of that's coming from just an absolute reduction in net debt, and how much of that is from refinancing and taking advantage of lower interest rates? Also, if you can just comment a little bit on the timeline, how you think about when the right time is for refinancing. Obviously, you did quite a bit in the last nine months or so. It was a good time for the market looking at high yield, not the best time for Outokumpu still. How do you think about the right time to move forward with more refinancing?
Yeah. Thank you very much. Regarding the overall cost development, we are seeing both levers that you have been addressing. Of course, with the total level of net debt going down, we are expecting also that our financing cost would go down. That would be both the direct and the indirect financing cost. So the interest payments, as well as the other financing cost for just setting up new or additional financing instruments that have been necessary specifically throughout 2013, 2014. Regarding the interest as such, of course, with a higher variety of financial instruments that we would have at our hands, including bonds, including renewed financial agreements with our banks. We are expecting that this would come to our benefit. The better we get, the better the financial situation of the company is, the better the financial stability is. So it would come, yes, both from these levers.
Thank you. If I can ask one separate question on Coil EMEA. Looking at the performance of Avesta as you complete the restructuring at Bochum, and then also kind of thinking about your positioning in the European market relative to peers, it seems like there's a lot of opportunity for another leg of cost cutting looking forward. How comfortable are you with your competitive positioning in EMEA after this current set of restructuring is done, that completes in the next 18 months or so? Then when do you think would be the right time to take a closer look at these operations to drag a little bit better operating performance out?
Yeah. So, thank you for the question, first of all, very much. I think very relevant. The trouble is that our competition does not publish information on a European basis. They tend to aggregate the results. Therefore, the direct comparison to competition is not that straightforward and easy, actually. That would be fantastic to have that source of information because indeed, the benchmark is the European competition for us. We believe that those actions that we've taken and now presented will bring us pretty far. But I would not expect that all their potentials would be fully exploited after the program. Therefore, we definitely keep on looking at opportunities for further improvements so that we really become also in efficiency and cost, number one in Europe.
Just to clarify, from your judgment, where will you be on the cost curve after this current set of restructuring is complete?
Yeah. There I cannot comment exactly because I do not have that data.
Okay. Thank you.
More questions. I believe we have one here in the front. Let us take the next one. Yep.
Hi, it's Steve from Goldman Sachs again. I had a question for Mika. It was more on the market outlook, and maybe it was for Markus Moll, if he was still around as well. Do you ever see the stainless steel market getting back into some sort of globally balanced demand supply?
It seems like his forecasts are for slowing growth in Asia. The Chinese companies, 18 of the top 25 are out there. Are they slowing down and adding capacity? You've got trade cases coming up in Europe. If one happens in the U.S., where are those imports going to go after that? It doesn't really feel like it's terribly sustainable at the moment and still quite delicately balanced. I just wondered if you give us some thoughts on what Outokumpu thinks about the overall global market reaching some normality, and when that might happen.
Thanks, Stephen, for the question. Our view is quite clear that it's really going to take some time before demand and supply meet each other in stainless in China. There were many reasons for that, but I think that the basic issue there is really that what we know, most of them are not profitable in manufacturing. Many of them are as well state-owned companies. With all the privatization programs, all the programs that are stating actually now that they are not any longer strategic ownerships for the Chinese government, which is public information as well, because now they have disclosed that Western companies can have majorities in those entities if somebody would want to have. All this means that the change process is going to take some time. I think that there still will be growth, just again, taking Markus' numbers of the growth.
Before they are adjusted to this lower growth, before they have adjusted to the fact, which I believe is right, what Markus is saying, that the best days of nickel pig iron are over. It's going to take a long time. Whether Europe is protected, whether U.S. is protected, it's a good question. Let us see now what happens in September when it comes to Europe, and let us see what happens with the cases we are now currently having in U.S. The clue is really that I think they need to turn themselves to a profitable operation instead of only striving after volume. They need to take into account what is the demand. This has not yet happened, so it's not going to be a fast process.
I think we have questions in the middle.
It is [Sergo] from Swedbank again. A brief question on Terni. What would be the best or the worst outcome from Outokumpu's viewpoint, whoever happens to be the buyer? Or would that be a non-event in the end of the day?
Did I understand correctly, Terni was your question?
Yes.
We know a lot about Terni, but of course we are not commenting Terni separately now because it is not in our ownership. We can only refer on that knowledge you have, what thyssenkrupp has officially announced on Terni, and we do not have any more knowledge. It is one of the competitors here, and it has been there already, and probably behaving today much better than when it was under the commission.
Okay, thanks.
I think we have one here in the second table in the front.
Yes, it is Johannes from Nordea. I think, well, a couple of questions. One goes to Olli-Matti, and I am just touching back the ferrochrome maintenance break. Maybe if you can just confirm about that break. Has that been now solved completely? I suppose it is a correct assumption to expect that the output of ferrochrome will be quite clearly up in the third quarter versus the second quarter, or is this-
Yeah.
Right.
Yeah, I can truly confirm that the maintenance break is over successfully, and the numbers that I showed you today, that 470 kilotons for the year, is absolutely fresh and valid.
Right. Very good. The second and final question, I am not sure if this goes to Mika or possibly Pekka, but the special grade automotive stainless steel that you discussed quite a lot. If that market really picks up, have you any kind of estimate in tons how big of a demand that could be in the future?
Pekka.
Yeah. Thank you. That is a really excellent question. Of course, we do not have any numbers available, but if we just think. In the world, there are about 70 million passenger cars produced annually. If we have H500 in, say, 10 million cars, 10 kg per car, it is 100 million kilos, 100,000 tons to start with. I heard a very nice comment before my presentation, that when in the passenger car, there is a small sticker, H500 inside. Then we have made it.
All right. More questions. This is a great opportunity to ask the questions from everyone being here. All right. Okay. If not, I would like to thank everyone. I would like to thank our management team today for good presentations. Thank you for all participants. It has been a pleasure having you here today. The program will continue now. We will hopefully soon get some drinks, and we have the opportunity, of course, to speak with management over a glass of sparkling, I believe. Then we have the dinner downstairs together with the rest of the customer group today. At around 5:45 P.M. today, we will be going downstairs and having three tables in there.
What I would also like to remind you that we will be doing a survey about this event, so you will be soon getting an email from us, and hopefully you have the time to fill in the survey. It will tremendously help us to improve our Capital Markets Day and our communication with the investor community. So thank you for everyone, and let us enjoy the rest of the day. Thank you.