Okay, ladies and gentlemen, good morning, good morning. Welcome to the Capital Markets Day 2019 SSAB, and welcome to Oxelösund. First of all, safety is important in SSAB, so I will start with a few words on safety. In case, on the unlikely event of a fire alarm or anything, we have three emergency exits, one in the back behind you, and then we have two in the front on each side of the stage. They are promised they have to move the table quickly if anything should happen, so we can get out. There are also defibrillators outside in the lobby. If we need to evacuate, we will gather at the parking lot where you came in with the bus. So that's the safety part.
We have quite an extensive agenda, so I think. Yeah, I should introduce myself as well. I'm Per Hillström of Investor Relations at SSAB. We have quite an extensive agenda here, so we start with Martin Lindqvist here, President and CEO, and then we end with Håkan Folin here at the end with some financial outlook. Before the coffee break, we will listen to Martin and also Martin Pei, Chief Technical Officer, and also Johnny Sjöström, who is Head of Special Steels. So by that, please, I would like to invite the President and CEO, Martin Lindqvist, to start.
Thank you, and good morning. Welcome to Oxelösund. This is a fantastic site in many aspects. This is the only site in the world fully focused on quenched and tempered steel production. But it's also the first integrated site in the world that will be completely fossil-free first of January 2026, and we will talk a lot about that today. You will hear my colleagues discussing all the divisions, and I will just give you a brief overview where we stand as a company today, and what we focus on short term, midterm, and long term. We met on a Capital Markets Day back in June 2026, and since then, I would claim that SSAB has become a much stronger company.
If we look at our growth in high-strength steels, we were at that time at 1.4 million tons. End of last year, we ended up at 1.9 million tons, and I will come back to the targets for the coming years. We have since then had decent cash flow generation, and the effect of that is, of course, a much stronger balance sheet. We have also been able to start to pay dividend again. We have also looked over the portfolio. We have done some changes. We have sold assets that we felt were not necessary for the future of SSAB. We have sold Ruukki Construction in Russia. We have Building Systems. We have sold our business in Romania. We have closed down sites.
We have sold parts of assets, but we have also recently, or this year, started to acquire complementary businesses, especially channels to the market. We bought Sanistål, the second biggest distributor in Denmark, which is very important for us to keep and expand the Nordic market share. We bought a small company called Piristeel within roof safety. I think Sami will come back to that, but that gives us a possibility to be a more complete supplier of roofing systems to the Nordic and Polish market. And last but not least, we have bought Abraservice , and I think Grégoire will come back to that under Services.
It is a company with 11 factories within abrasion-resistant components, and they today consume 45,000 tons of Q&T and advanced high-strength steels, where we have not been delivering one single kilo. So what we have been doing is to focus more on channels to the markets and channels to the small and fragmented market, and I will come back to that as well. This is what we will discuss today, the different business areas or divisions or business units, and we will discuss how they work for themselves, but also how it is connected within SSAB. We will also discuss, both me and Martin Pei, about the foundation, the vision of a fossil-free steel making and the vision of supplying our customers with a fossil-free value chain.
Each division will present their division, but also how it connects to the other divisions, and this is just a snapshot how I see or how we see the synergies we have between the different divisions. So if you take Special Steels as an example, they have production today within SSAB Europe. They supply SSAB Services with products, and SSAB Services gives them the possibility to serve the small and fragmented market. So this will be covered more in depth during this day. I would like to start to describe how we run the company, and the programs, and the thinking behind us running the company. We try to have divisions or a decentralized operating model, with divisions, with own P&Ls, and balance sheets, and full accountability, and mandate. Within divisions, we follow up with business units, with own P&Ls and balance sheets.
So that's how we try to measure and run the business. We run on a group level, a program called SSAB One, and it is about continuous improvements. And we have an idea of having a productivity increase or a cost efficiency of 1%-2% on a yearly basis of the total cost. We set the target on group level, we break it down to each division, and then they break it down, all the way down to shift teams. So if you would ask the people today at the rolling mill here in Oxelösund, they know exactly what their target is. And in the rolling mill in Oxelösund, we measure rolling hours. So they know that they should reach 120 rolling hours every week.
If we reach 120 rolling hours every week, and we break that down to shift teams and daily shifts, then we are quite well off. So that's how we try to drive continuous improvement and productivity. We do a lot of benchmarking. We do benchmarking internally, but the idea is also to benchmark externally. So each division or each part of SSAB should be profitable or better than peers. We do that when it comes to productivity, cost efficiency, volumes, EBITDA margins, and so on, and so on. And we do that also internally, and try to learn from each other. We are also trying, and that is helpful right now, to set up a flexible system. We talk a lot about having a base manning, a manning that we can have over the business cycle.
Then when the business cycle is good, we fill up with temporary employees and contractors, and then when we experience headwind, we reduce the temporary employees, the contractors, and go back to the base manning. And then we use flexibility measures, like the TUF system in Sweden or Flexicurity, and then we can be slightly more flexible than we usually are. Because, as you know, this industry is built to run 24/7 for 15 years. Then you do a relining of a blast furnace, and then you run another 15 years. So very, very limited flexibility. A top priority, as Per mentioned in the beginning, is safety, and we have the ambition to become the safest steel company in the world. We are not there yet.
We are not even close, I would say, but we have seen a very positive development the last number of years. In parts of the organization and parts of the sites, we are really world-class, and I think maybe Jacques will come back to that because he's definitely, or his division is definitely doing quite well. But overall, we are now trending towards that goal. We are not there yet, and I can't promise that we will be there the coming year, but we are definitely trending there. And my experience is that if you have a good safety performance, you are typically also a well-run company. I think what is also important for a company that at least has the ambitions to, to be a leading company, an ambition to be, well-run, is to focus both short term, midterm, and long term.
And in order to do that, you need to have your house in order, and you need to have also, as shown in the previous picture, a fairly decent balance sheet. So I was just going to spend some time talking about short term, midterm, and long term. And if we start with short term, we are in the industry today experiencing some headwind. And when you experience headwind in our industry, we are pretty used to what we should do, and we know what we should do. And this time, we started off quite early to do the things we plan to do in order to mitigate the effects of that headwind. We have cost-saving actions in place in each division, and we are working to deliver on the internal target. We have adjusted our production in line with the European demand or the European apparent demand.
We took down one of the blast furnaces here in Oxelösund already in September. We are right now having one of the blast furnaces in Raahe, one of two blast furnaces, idle, and that blast furnace will stay idle for 4-6 weeks and will start it up beginning of January. We have fairly quickly this time used this flexibility in the mannings. We have reduced contractors, we have reduced temporary employees. Coming back to benchmarking, when we see divisions or we see parts of the organization not living up to the target of profitability or efficiency compared to peers, we run restructuring programs. Right now, and I will come back to that when I describe Tibnor, running in a fairly extensive restructuring program within Tibnor.
We did that a number of years ago in Ruukki Construction, and the outcome of that was very, very positive, but I will come back to that. But we also continue to invest. So we continue to invest in capability and capacity of high-strength steels. And even though the balance sheet is stronger than it used to be, and the expectation is that it will continue to be stronger, we also focus a lot on working capital optimization. I think Håkan will come back to that during his presentation. Midterm, it is about the strategic targets. We have increased ambitions, and the reason why we have increased ambitions, and growth ambitions within specialty steels and, and, and premium products, is because that we are on our way or have already met the targets we set up for 2020.... But the strategy as such has not changed.
We still focus on our Nordic home market for flat carbon and tubes, our North American home market for plate. That is a given. We still focus on a global leadership within advanced high-strength steels, and I would say especially with, for quench-and-temper steel. We still focus on having a leading value-added Services, and we will cover that during the day. I will give you one example, though, how we work with the, with, upgrading the market. This is a tray produced in a fully owned company of SSAB in Australia called G&G. What they do, they produce, they are not a big tray or a bucket producer, but they produce prototypes. So they produce, in this case, a prototype of a tray using our design, our steel.
Then we go to the mining company and tell them: "If you use this tray, you can increase productivity, you can increase payload, you can reduce weight, you can double your life length." Then, typically, the mining company said: "Sounds interesting. Let's try one." We build the prototype, we try it. They are very often very satisfied with that prototype. Then they order another prototype or 4 prototypes, and then we have created a demand from the miner. So the miner goes out with a quote and said, "I need 20 or 40 or 50 of these trays or these buckets." Then they go to different producers of trays and buckets, and they then use our knowledge, our steel, our design, typically paying a small license fee for it, and we get volumes then in the capital market.
So G&G is one of a couple of examples how we try to upgrade the market and create a customer or, or a customer pool for, for our steels and our designs. The ambition for the coming years and until 2022 is to have 50% of our total volumes being premium and high-strength steels. And the main reason for that is, of course, that, this is an example of Hardox 450 and hot-rolled strip. The margins are very stable over time. Competition are less, or is less over time, and volatility in volumes are less over time. So the more we move into these kind of products, the better profitability and the lower volatility and less competition. So that's the product part in how we try to work and upgrade products and reach the target of 50% being, premium and high-strength steels.
The other dimension is how we serve the market, and we are in all these areas. A typical steel company, especially the big ones, they'll sell via steel service centers or directly to big OEMs. We do that as well, but we know that competition is full, profitability is over time lower because of the competition, and the volatility is very, very high. The more we can move into the small and fragmented market, if it is via stock sales or processing, if it is via our distribution channels, Tibnor or Ruukki Construction, or even within SSAB Services, less competition, less volatility, and better margins over time. If we can have 50% of the volumes being niche products or premium products and advanced high-strength steels, and especially moving into these channels, the better it will be for SSAB long term.
I think Johnny will come back and in more detail describe the sales model within specialty steels. What we have done then is to set new strategic targets for 2022. We will grow specialty steels from 1.3 million tons, 2018, up to 1.6 million tons, and that is a growth rate slightly lower than what we have seen the last couple of years. In Services, we will go from SEK 2.4 billion in turnover up to SEK 4.5 billion. In SSAB Americas, we will increase the premium part from currently 29% up to 39%, and in Europe, we will go from 36% to 46%, 46%, and that will consist of growing automotive and continue to grow premium products.
And we will be even more focused on our Nordic home market, and we are currently at the market share of 40%, but we are aiming for a market share of between 40% and 45%. So that's the strategic targets that we feel are not easy to reach, but definitely within reach if we continue to run this business in a proper way. Long term, then, we have the ambition to become the first producer of fossil-free steel, and we have the ambition to be the first steel company with a complete fossil-free value chain to the market. Martin Pei will come back to that after my presentation, and more in detail, cover exactly what we are doing. But this is our vision.
So what we want to supply the market with is a fossil-free steel product that is fossil-free all the way from the iron ore in the mine all the way until we can have shipped a finished steel product to a big OEM or a consumer. The way we are going to do that is to change our production methods. We will, instead of having blast furnaces and coke oven batteries, here in Oxelösund have electric arc furnace, and we will feed those electric arc furnaces that we will gradually change into in the company with sponge iron. The sponge iron will be produced by using hydrogen instead of coal to reduce the iron oxide or the iron ore.
And we will get instead of carbon dioxide as a by-product, we will get water as a by-product. This will require a lot of electricity, and we are right now in the phase of, together with Vattenfall, to have a 130-kilovolt cable here to Oxelösund in order to power the electric arc furnace, and this will be done then first of January 2026. So from first of January 2026, we will have a system looking like this. We will have no blast furnaces and coke oven batteries here in Oxelösund. We will have electric arc furnaces, and we will fuel them with fossil-free HYBRIT sponge iron and fossil-free electricity. We will have fossil-free rolling in Oxelösund, so we can produce Hardox and Strenx fossil-free.
We will produce slabs here in Oxelösund that we will ship by train up to Borlänge and roll it there, so we can produce fossil-free local for the automotive market. But we will also ship sponge iron from Sweden to Mobile, so we can, in a fossil-free way, produce Hardox and Strenx also for the American market. When we started this project, it was mainly about three things. It was about cost efficiency and a strong belief that emitting carbon dioxide will only become more and more expensive over time. It was about flexibility, and excuse me now, Jacques, because he typically doesn't like when I say like this, but if you have an electric arc furnace and the business cycle is good, you press the green button, and if the business cycle is a bit tougher, you press the red button.
If you have a coke oven battery, you run it 24/7 for at least 30-50 years. If you have a blast furnace, you run it 24/7 for at least 15 years, and then you do a relining. So it was about flexibility and find a more flexible system. And then, of course, it was about CapEx avoidance. We couldn't afford to continue to invest in old technique, and we have invested a lot. We are today the most carbon dioxide efficient steel producer with the blast furnace techniques. We are really in the forefront of known technology. But we felt that building another coke oven battery that will stand for 30-50 years, that's not the way we want to choose.
But over time, when we have been running this project, we have been more and more convinced that it will work, and it is still valid to talk about flexibility, cost efficiency, CapEx avoidance. But what we now see when we discuss with our customers, we see that we will actually be producing a premium product, a fossil-free premium product, or fossil-free steel will be a premium product. We had a capital... not a capital markets day, but we had Swedish Steel Prize a couple of weeks ago. We had 500-600 customers from all over the world here in Stockholm discussing, among other things, this, and the interest was really, really huge.
And I said to them that already from next year, when we start to run the pilot plant, we have the possibility to start to do prototypes, start to discuss with customers, how should we use this fossil-free steel? What type of applications, what type of customer segments, what kind of geographies? And the interest is really, really big. So we have now decided to speed up the process, and we will have, as said, a fossil-free production system in place, 2026. So to sum it up, I think we are on our way to build a decent platform for the company. We have the businesses that fits together, and we have ambitions for each, of the businesses. We have also ambitions that each of the businesses should be profitable or more profitable than their peers.
If that's the case, we will also, as a company, be more profitable than our peers. We have a balance sheet that is not strong, but stronger than it used to be, and it will continue to become stronger. That will also give us the ability to continue to develop the company long term. I think I said in the beginning, it is important to focus on short-term actions, of course, when you experience headwinds or regardless of business cycle, but you also need to concentrate on midterm targets, the strategies and the targets we have set up, but also long term on the fossil-free steelmaking. I think we are at least in a position where we can allow ourselves not only focusing short term.
Of course, I'm not saying that we should not focus short term, but we can allow ourselves to also lift our heads a bit and, and focus midterm and, and long term. With that, Per, do we have any questions, or do we take that later?
Yes, we have time now if we have some questions from the audience. There are microphones here, and please state your name and company before you ask your question. We also have web calls, yes, we can inform the whole audience, so to say. So please, we have a couple of questions here already.
Thank you. Anssi Kiviniemi from SEB. One question perhaps relating to the strategic targets. They are quite ambitious. You are going towards growth in premium products. So what kind of investments you need to make in the next, let's say, three years to achieve these targets? And the other question is, okay, these products will provide some stability in the result, but there's also profitability improvement potential. So could you elaborate a little bit on that one, how you see it continuing?
Well, can we come back to the investments, but to put it very brief? Yes, we have some maybe debottleneck investments, but we have, to a large extent, the installed capacity, and that we need to continue this growth. There will be some debottlenecking, yes, but not any magnificent figures. So that is within reach. You can say that the targets are ambitious, and I felt when we had the previous targets, that they were also ambitious, but I think targets should be ambitious. They should not be out of reach, but they should be ambitious. We are not aiming to increase the total volumes. This is about changing the product mix, exactly into what you say, less volatility and better profitability.
We can do that because these segments are typically very, very small, and we are a small steel company, so we can, for us, they are big, but for the big ones, they are extremely small. So they are niches that we have carved out in the market.
The profitability potential?
Is, of course, better than selling black coils outside the Nordic region.
Yeah, next question, please.
Hi, this is Alain Gabriel from Morgan Stanley. My question is on the EAF. So if I understand correctly, it's highly linked and dependent on the success of your HYBRIT pilot program. How comfortable are you with that risk that you're taking by betting on one technology to support your transformation at Oxelösund?
We are not taking any risk at all, because if we would fail, and I'm convinced that we will not fail with the HYBRIT project, we will do this exactly in Oxelösund as we do in Mobile and Montpelier. The backup plan and the fallback plan is to use scrap. So we are not taking any risk. If we would fail, we can still run Oxelösund. So we have taken that decision, and we will do it. I know that we will not fail. We need some help. We need that 130-kilovolt cable. We can't do that ourselves. We also need an environmental permit. But I'm convinced, and Martin will walk you through it, that we will succeed with HYBRIT. But if I'm wrong, if I'm completely wrong, then we fuel it with scrap.
We have been training now to produce Strenx and Hardox in Mobile for a number of years. We know that we can do that with scrap. In that aspect, we are not taking a risk.
Thanks.
Yes, one more question here.
Seth Rosenfeld with Exane BNP. Just to follow up, and I understand that you'll come back to this later in the presentation, but there are numbers for CapEx guidance for the next several years, going to SEK 3 billion. Can you just walk us through what's included in that? Does it include the cost of building the EAF Oxelösund?
Yes.
Does it include the M&A targeted for Tibnor expansion, the full extent of the premium products mix shift? Ultimately, what's included, what's not? And then when we think about the HYBRIT expansion, what sort of capital could the company be ultimately on the hook for to fund what could be potentially a very positive shift for the company?
Mm-hmm.
But one that the investment community is a bit at a loss for the, the cost?
It requires all the CapEx we need as a company. We will not, as a company, invest in shafts for producing sponge iron. We are now, as one third of the consortium, investing in the demonstration plant and in the pilot plant, and we are doing that in the with the pilot plant, together with the Swedish government. So we are paying maybe, not even a third, much lower, less than that. But we will not be a sponge iron producer. We will buy sponge iron from HYBRIT or someone else that wants to use this technique. So the CapEx what I will talk about includes the whole what do you call it? The change of Oxelösund, including new EAFs, electric arc furnaces, everything, and then maintenance CapEx and all CapEx.
So that's what we see right now for the coming years. I mean, I talked about CapEx avoidance. We are now. I mean, we reline the blast furnaces every fifteenth year. We are now also in the phase of thinking about the coke oven battery. So when we did the calculation, this is a much cheaper way to go than keeping old technology. So that those CapEx figures that includes what we see for SSAB, but we are not going to build 10 or whatever it is sponge iron shafts. That's not included, but that will not be done by SSAB.
Can you give some color on what scale of capital SSAB would need? Can you give some color on what scale of capital SSAB will need to contribute to build the JV level, that sponge iron capacity?
What we have decided now, what, and what we are building in this is the pilot plant. The pilot plant for producing sponge iron. I think Martin has some interesting pictures of that. I think the cost of that is SEK 1.5 billion, roughly. The Swedish Energy Agency stands for 40%-45%, and the rest is split between the three companies. So it is, of course, a lot of money, but not huge, not huge sums. And then we are also building a pilot plant for hydrogen storage, and that will cost something. It's a couple of, I don't know, a handful of SEK 20-30 million. So it's not huge investments.
Thank you.
We'll come back to the details some more, a bit more there.
You need to be somewhat patient.
We have a question from Bastian as well.
Hi, yeah, it's Bastian from Deutsche. Martin, could you please talk about the cost efficiency of switching to hydrogen? As what I understand, the energy efficiency at this stage, which you need in terms of, like, producing hydrogen, is relatively low. So is that... Is there scope to improve it over time? And if you would switch today, what is the like-for-like cost?... in the new production route, and then, probably more prospectively, but, I guess we're just sort of like 1-2 years out of a crisis for graphite electrode supply. I think there's very, very little supply left, particularly in Europe, I think as well as in the Western world. I think a lot of this is now controlled out of China.
And how far have you been able to secure strategic relationships on that front, or are you planning to do so? Obviously, it's, it's a very little amount of capacity which you're adding on the EF front. So it's not like you're really moving the market, but as the whole industry is probably moving that way, there will probably be something to think about.
And we are already in that industry. I mean, we have two electric arc furnaces in the U.S. today, and we have the graphite electrodes as supply for that. So yes, on the margin, that will of course be an issue or a challenge or something we need to deal with, but we are already in that market today, and Jacques is running two big electric arc furnaces. We have the knowledge, and we know how to do that. Then the first question was about costs.
Exactly. So, if you would switch today to hydrogen-
Mm-hmm.
What would be—what... How would it move your costs relative to the current production method in the—
I think we said when we started this project, 2015, 2016, that the cost difference was somewhere between 20%-30%. As always, it was—we had an internal calculation more around the 20% or so. At that time, if I remember correctly, Martin, the cost of emitting carbon dioxide was a couple of EUR or something, and today it is between 25-30 EUR. So part of that gap is already closed. I mean, today, it would be more costly, yes, but we believe that the cost of emitting carbon dioxide must and will increase. That's the first part.
The second part is that we believe that this will be—we are first out on the market, this will be a premium product, and it will have a premium pricing like other premium products. So I'm not so worried about the cost difference. I'm more worried about not doing this, because then we will be exposed to big emissions of carbon dioxide. Even though we are the in Luleå and Raahe today, we are the most carbon dioxide-efficient steel producer globally with blast furnaces, we are still emitting 10% of the carbon dioxide in Sweden. I'm convinced that this is the right way to go, and when I listen now to customers and travel around and meet customers, they seem to be that as well. And I think it will be us, as consumers, that is driving this.
If you take the big, big companies, without mentioning anyone, they are now putting internal prices on their environmental footprint, and they are also starting to look into material-related emissions. They will put eventually prices on that as well.
I think you sort of jumped over to my next question already. So your plan is actually to put a separate price tag on this steel, exactly like we've seen it in other industries, like aluminum, where I think there are some producers-
Yeah
-which already have, like, 100-
Well, we are not there yet, but the only thing I'm saying is that I'm getting more and more convinced that this will actually be a premium product. And typically, premium products have some premium because that's why they are premium products. So yes, so I'm not so worried about the cost difference. And Martin will come back to that as well, I guess, but we have the possibility to do this in Sweden, and you can always, of course, debate how efficient is it to produce hydrogen and so on. But how efficient is it to run blast furnaces and coke oven batteries and emit a lot of carbon dioxide? I don't think that that's a sustainable business model for the future.
Yes, let's move on to that part, I think so. And then we'll probably have time for some more questions after Martin as well. So please, we invite Martin here to talk about the fossil-free steel.
So good morning, everyone. I will now tell the something more about the initiative that we are running since a few years back. Starting by describing our current situation. Probably, you all are quite familiar with the SSAB's production system. We are running three iron ore-based production sites in SSAB, here in Oxelösund, in Luleå, and then in Raahe, in northern Finland. This blast furnace process has been developing since long time back. And in Sweden, Finland, we are really very, very good at this, and these are proven by our fuel rate figures. So on top of this graph, you see the actual development of a fuel rate from the blast furnace in Luleå.
This blast furnace in Luleå right now, and since the beginning of the European Union ETS system has been setting the benchmark for the whole industry. One significant step of development was done in the beginning of the 1980s. That's when SSAB, together with LKAB, changed the production technology. LKAB developed the blast furnace pellets that we have been using since then, and we shut down the sinter plant. So we did that, and we reached a significant lower fuel rate. Now we have also gradually improved the production process. So right now we are running at a fuel rate of around 450 kilo per ton of hot metal, and this is really very, very good if you compare with the rest of the world industry.
Bottom of this slide, you see an analysis done by a German institute. This figure refers to the 2012 figure. Today, its situation is roughly the same. So our blast furnaces are much better than the rest of the industry. So this is a significant development. As Martin already mentioned, we have pushed the blast furnace technology to a point where there is very little left to make incremental development. I will now show what can be done further, what is possible, keeping the current production technology based on blast furnaces. The blast furnace process is built on coke. Without coke, the process can't work, so it's almost impossible to replace the coke that is needed to have the furnace working.
What can be done is to replace partly the PCI coal. Probably, you all know that we are injecting pulverized coal in the two years to provide energy to the process, and that can be replaced partly by replacing fossil coal with biocoal. We made a successful trial this summer in Raahe, tested a couple of weeks, the technology works to replace partly fossil coal with the biocoal. We're now looking at sourcing this material, which we can, if it's possible, we can do this on a regular basis, but this is a small improvement we can do. There are also companies injecting recycled plastics, which can be a fuel that is used in some plants.
There is another possibility is to recycle the top gas from the blast furnace process. You know that today, the blast furnace gas is cleaned and then used as a fuel in the whole plant. The excess of blast furnace gas, which is not used in the process itself, is used in the power plant for producing heat and electricity. To only improve the blast furnace process itself, there is the possibility to take the blast gas, clean it, and then inject back. That will reduce somewhat the total fuel consumption of the blast furnace process. We have tested this also in the past, and there is another possibility to inject coke oven gas back into the blast furnace, or in some cases, already some people are testing to inject hydrogen. It's also possible.
Introducing electricity in terms of in the form of a plasma heating, heating the blast, that's another possibility. Enriching oxygen, you inject more oxygen, which comes from electricity, is also possible. All these different type of technologies can be applied to improve somewhat what can be done with our current figures. And then, there are a lot of studies related to carbon capture and storage, and also carbon capture utilization. Probably, you have heard about the term CCS and CCU. And these were also started many years ago in the ULCOS project, the European Joint Project, that we also made experiments at the LKAB's experimental blast furnace in Luleå. So we are quite clear that with current technology, there are some small improvements possible, but not really solve the big problem.
That comes to the background of why we started the HYBRIT initiative. So back in 2015, we started to discuss what should be the next step then for SSAB to take. As Martin described, that even we are running the best blast furnace process in the world, we are still the largest CO₂ emitting company in both Sweden and Finland. And looking at the Swedish situation, we have a superb opportunity to do something different. And we have already today a very good electricity mix, and there is a surplus of fossil-free electricity in the country. There is also a lot of potential to further build more renewable electricity. We are very good also, technology-wise. We have a long tradition of developing the process.
So in Sweden, Finland, this is really a place that we could try the, the technology development. So we created the HYBRIT initiative, partnered with LKAB and Vattenfall, and we, made a pre-feasibility study, which we finished, in the beginning of, in the end of 2017. This is, this chart shows the, energy balance from, the comparison. If we continue to run the blast furnace process shown to the left with the emission figures of 1.6 ton per CO₂ per ton, steel that we produce, is our figure. If you look at the comparison with the rest of the world, is around 2. So, so that is a, a reference case.
Look at the current SSAB figures, and to the right, you see the study showed what we can do with a HYBRIT process route. And we, in principle, came to a conclusion that technology-wise, using hydrogen, reducing iron ore in this way, it will work. We believe this will work. And we made also an economic evaluation, as Martin already referred earlier, answering the question. We came with a conclusion that at that moment, the cost of the HYBRIT route would be 20%-30% higher than the traditional route. But if you compare with the future assumption of the CO₂ emission rights, we believe that this is becoming attractive.
Another component that we see also potentially could improve the cost position of the HYBRIT process route is energy storage. In the HYBRIT project, we are also now exploring technology to store hydrogen of large quantity. I will come back what we are doing that later on. But providing that possibility, we could create balancing for the electricity grid. So with the increasing percentage of intermittent generated electricity, like solar or wind, then with the hydrogen storage and also the sponge iron production process, the flexible production system, that Martin also mentioned earlier, that we can create a benefit for the energy system. That will give us opportunity to get the energy cost lowered in average.
With this conclusion that we decided to move into the next phase of this project, that's to build the pilot plant that we'll show in just a few minutes. We made also a quite systematic evaluation. Probably you have heard a lot about different process routes. Here in this chart, you see to the left is our assessment of hydrogen direct reduction technology, compared with continued use of the blast furnace technology. In the middle , where you can cooperate with the CCS or CCU. Looking at the comparison, we believe that the hydrogen-based direct reduction technology is the right choice, especially for us in Sweden and Finland, but also in many other places this can be attractive. Flexibility is definitely one important aspect.
In the HYBRIT process route, we can, in principle, eliminate the major part of CO₂ emission, because we are not going to use coal anymore for iron ore reduction. And with the CCU concept, it is questionable where does the CO₂ then move? We are building also on established technologies. The arc furnace technology are proven, as Martin mentioned, that we have very long experience now producing high quality quenched and tempered steel in the U.S. with the arc furnace technology. We have, of course, with the HYBRIT process route, still a step to prove the scaling up of this hydrogen-based direct reduction technology. But technically, this can be done.
So we have, with this analysis, decided to move on. This is the roadmap that we have made. Looking at the beginning, we started the HYBRIT initiative, created a research program that is still currently ongoing. We are working together with the research community here in Sweden, with several universities and research institutes, running a program, creating the foundation for this technology competence build-up. Then we created a joint venture company, HYBRIT Development AB, as Martin mentioned, that we are having this company owned a third each by SSAB, LKAB, Vattenfall, and we have received support from the Swedish Energy Agency for the pilot plant phase that we are right now running.
In the middle, you see, we are entered the pilot plant phase. We started to build a pilot facility. I will show you in the next slide, what where, what are the components are. So we will make the pelletizing step fossil-free, and then we will try the hydrogen-based direct reduction, and also melting of this special HYBRIT sponge iron electric arc furnace, in order to make our high-quality products. We are also starting the process building hydrogen storage pilot facility. For the SSAB conversion, as already shown by Martin, that we will start here in Oxelösund, the conversion of the blast furnace route to an electric arc furnace, 2025.
We are now also starting the planning for constructing the first demonstration facility for HYBRIT sponge iron in northern part of Sweden, somewhere in 2025. So from 2026, the arc furnace here in Oxelösund will get the HYBRIT DRI as part of the raw material, so we can start delivering fossil-free steel on the market from 2026. Then we have also made a plan for transforming Raahe in Finland and Luleå between 2030 and 2040. So reaching our target of converting all of our production sites to a fossil-free production system in 2045. That is our goal. So just a few words on what we are right now building in northern part of Sweden.
To the upper left corner is a project that currently are under construction. We are rebuilding one of LKAB's pelletizing plants in Malmberget. It's a big, big pellet plant that we are going to test using bio-oil instead of fossil oil, as they use today. So that we will also sinter the iron ore pellets without using fossil fuel. And then in Luleå, we are constructing the direct reduction shaft furnace together with an electrolyzer, so we will have a hydrogen-based direct reduction with a HYBRIT technology in Luleå. This will be ready for test starting from next summer. And in a nearby institute, there is already existing a pilot plant for electric arc furnace facility, 10-ton heat size.
So we're going to test the melting of this HYBRIT DRI from the pilot plant in this electric arc furnace to study the process, how we can make high-quality steel. And then nearby, there is a place close to the pilot plant for HYBRIT. We are planning to construct a hydrogen storage. We are going to test the underground Lined Rock Cavern technology to store hydrogen at high pressure. This is a technology that is currently used for storing natural gas on the west coast of Sweden. So here we want to test this technical solution to store hydrogen at a high pressure.
So with all of this, we will have a possibility to study the complete value chain to make a fossil-free steel, starting from iron ore to then the steel product. So this is the photo of the pilot plant currently under construction. This was taken just a few days ago when it was sunny in the morning. So we are right now constructing this, installing equipment. Next summer, this pilot plant will be ready for a test, and we plan to run test campaigns in this facility for testing this HYBRIT technology at a scale of 1 ton per hour. And then we are in parallel starting the process of planning for the first production facility, the demonstration plant, that will be ready in 2025.
That is my part of the presentation.
Yes, thank you, Martin. And we have time now if there is any questions for Martin Pei here, also, please. Yes, we have in the back.
Thanks. Anssi Kiviniemi from SEB. On the hydrogen part, how do you aim to produce it or ship it, or how are you going to build the logistic networks around it?
In the pilot plant, we are building one electrolyzer on site, so we will have hydrogen production at the pilot plant. So we will feed the hydrogen from the electrolyzer, in principle, immediately into the shaft. We will have a very small buffer in the system, but our plan for future production facilities for a HYBRIT DRI, we will build the hydrogen production, in principle, close by, for the sponge iron production.
Yes, we have another question.
Thanks. Alan Spence from Jefferies. The number you gave, kind of the 20%-30% range of being a little bit more costly, if ultimately this hydrogen storage is something that can be beneficial, how much do you think of that gap it could narrow?
We have made studies in the HYBRIT project, because we are working together with LKAB and Vattenfall. And Vattenfall has extensive knowledge of electrical grid, how balancing will work, and so on. That is a quite interesting potential we have found from simulations. The benefit of large-scale hydrogen storage as a buffer in the electrical grid, that will depend on the grid itself, how the situation look like. At the moment, in Sweden, we have a huge advantage. We have hydropower that is actually doing the balancing today. But in the future, with increasing percentage of, for example, wind power, the need for balancing will increase. So how big in reality... And this balancing with the hydrogen storage will depend on at that time, the grid situation itself.
But in our simulation, it shows quite interesting potential. So this will give us a lowered cost of electricity, that's what we are quite sure.
Could you give us a very rough sense of what that lower cost might be on a percentage basis?
We don't want to give a figure right now because these are only simulations. We don't know exactly when we build, how the situation will look like. This will depend on also where we build this, say, storage facility. But it provides very interesting advantages, I can assure.
Yes, we have further questions here, please, from Seth.
Hi, Seth Rosenfeld from Exane again. Your technology seems quite progressed. You seem very confident in it. You have competition from various other European steelmakers who are going on a very similar route. How do you think about the opportunity to work with peers like Mittal and Salzgitter that are doing similar projects, versus going alone with these JV partners? Is there any conversation across the steel industry to have a broader development, given the scale of R&D investment and future CapEx needed? Or is it something that you think is better to go alone in competition with domestic peers or regional peers?
In terms of the scaling up of the hydrogen-based direct reduction technology itself, we are the only one currently that making this investment to build a pilot plant. There are, say, other peers that claim that this technology doesn't need to go through the pilot phase and just switch. But in our assessment, we feel that the build up of knowledge is important. That's why we decided to make this pilot investment. This will need to be proven for the first, but also there will be significant opportunities to optimize a new production system. As I introduced in the beginning, that with a blast furnace process, there were quite a lot of improvements that we managed together with the LKAB in the beginning of the 1980s.
We believe that switching over to the DRI production technology with hydrogen, there will be similar potential that we can improve. So this we can do together with our partners in HYBRIT. We don't feel that at this moment, say, a collaboration between different players will bring additional benefits. Once we have shown that this technology works, I think there will be possibility in the future to work with different type of collaborations.
Yeah, I think we can take another question before we move on. Christian, yes.
Thank you very much. It's Christian Kopfer from Nordea. Just, I mean, this HYBRIT technology is obviously based on that you have access to green electricity.
Yes.
But in the wintertime, Sweden is importing quite a lot of electricity, which, I mean, could be coal-based in Germany, for example. How is your thinking surrounding the balance of the electricity market in a few years? Because this technology will need a lot of electricity, right?
Yes. Sweden has, in general, already a quite significant surplus of electricity production. Of course, in peak hours, sometimes the electricity grid are connected with the continent. So that is something technically all managed by the grid itself. But in overall, this the excess of fossil-free electricity will be a key for shifting away from coal. So in many, many situations, we discuss energy consumption. What we want to do is actually to replace imported coal by local produced electricity. So it will need access to electricity. And Sweden has, also Finland, has a very good condition, especially in northern part of the country. Huge area, very good wind conditions, especially in wintertime. So we believe that this is the right place to test this technology.
If this proves works, then others might have similar conditions that we can use.
Okay, let's move on then with the program. We will re-invite Johnny here to talk about SSAB Special Steels. Please, Johnny.
Thank you. Good morning, everyone. My name is Johnny Sjöström. I'm the head of Special Steel. I just want to make a comment regarding the HYBRIT project, and maybe that wasn't clear from Martin's presentation, but if this hydrogen storage works out, it will become sort of a battery, a storage possibility for electricity or energy rather. And that's the benefit, which means that there is a shortage of power in some peak hours, but we have the possibility to produce hydrogen when it's not peak hours, and then store it, and then use it when there is a peak. And that's a huge benefit. I'm not... I wanted to ensure if you understand this, but this is a huge benefit of using hydrogen storage. It becomes like a gigantic battery, where you can store energy and then use it when the time is right.
So there are a lot of benefits into this. I just want to comment on that. These are some puzzles. So here in the center, you see the Special Steel puzzle. I think it's the right location for Special Steel. And the reason why I want to emphasize this is because, when SSAB acquired IPSCO in 2007, at that time, the facility was not mature enough to produce premium steel. But with the technology and the know-how we had in Oxelösund, for example, we have developed together, where of course, the American unit, the technology in Mobile, for example, to produce more premium steel. So today, we are on a level where we can actually produce premium steel in the United States using electric arc furnace, and that will pay back.
Just like Martin said in his presentation, then when we convert to electric arc furnace, we already have the knowledge and the know-how. So it is, it's a combined effort, but the starting point was that when we acquired IPSCO, we started investing and developing the technology in Mobile in order to produce premium steel. We've done that very successfully. Similar things are done in Raahe, where some of the quenching tempering technology have been improved and upgraded. So we are capitalizing on the know-how we have in the core of the business, and this is what I think is making SSAB quite unique. This is the agenda of my presentation. So I will go through special steel in brief, our value proposition, track record and short-term actions, strategic direction, objectives, and I will end up talking a little bit about the fossil-free steel.
So SSAB Special Steels, in short, we have had a good development. Starting point was 2016. We were at 1 million tons, roughly, and we've had a significant growth in the Special Steels sales. We've done that quite successfully. We have a pretty good market share. We also grown the revenues, and we have a sufficient profitability. So in general, I think we are doing a decent job. So what is it that we do then? I think this is a good example of our value proposition. This is showing a tipper body. This tipper body was upgraded from the S355 first, reducing the weight from 4.5 tons down to 2.7 tons, which is a significant improvement.
But we managed also to upgrade it once more using the Strenx 960 instead of the Strenx 700 in the chassis. By doing that, not only were we able to decrease the production lead time of the chassis, because we're not doing any welding, we're only doing it by a bending process. And here, I have to say that where our material is unique, because if you use a 960 material from some other competitors, it will be very difficult to bend it like this without having cracks. And here is what I would say, where SSAB is quite unique. And if you avoid the welding, the fatigue life also improves. It's not only have we improved the service life, but also decreased the weight of this tipper.
In this case, only with 510 kilos, but it's quite significant because it reduces the fuel consumption and then consequently, also the carbon dioxide emitted. And in this case, you can also carry more load during all the transportations. This is another case. What it's showing is sort of a harvesting equipment. And the way they were harvesting in the past was that they were damaging 3% of the soybeans. 3% of the soybeans, in this case, could feed Sweden for a whole year. So it's quite important that we upgrade this to reduce the non-usable soybeans. So the solution in this case, they had a very sort of a bent, really strong Hardox 500.
So what's so unique about that? Well, first of all, the hardness, 500, is very, very unique. It's extremely hard, and to bend that into this shape is quite difficult. Not many other steel grades you can do that with. So it's a part of the design, but also the material properties that gave this solution. And it's a very, very unique solution. And this is exactly what we do. This is what our business is all about, to help our customers become more successful using the properties of our material, but also helping out with the design solutions. We talk a lot about upgrading, environment, and eco upgrading, and sometimes it can be hard to understand what that really means.
But we have a clear objective, try to help our customers to upgrade to a new, more advanced design. So I'm giving you one example here that this is a typical tipper body that you can see in some of the countries, with all these stiffeners and all these parts. So what we try to do, and we quite often also do the design drawings for them, so they understand how to convert into this. So you can reduce the weight. Here is 4.5 tons, down to 3 tons. So it's a significant reduction of weight of the tipper body. And then, of course, when during transportation, you will also reduce the amount of carbon dioxide emissions because of the lower weight of the vehicle.
Our objective is, of course, to try to reduce the carbon dioxide emissions by 8 million tons by 2020, which I think we can do, because a lot of these solutions are on the streets today. The good side about this is that when you use a very hard material and bend it like this, there are only a very few solutions on the market. I would say that if you reach up to a hardness of 500, there's maybe one or maximum two suppliers in the world that you can bend this material with like this. So our products are unique in many ways. We have some really strong brand names on the market. Strenx is one of them. Hardox is probably one of our strongest brand names on the market. We also have Toolox for tooling applications.
Then finally, we have Armox for protection. We have a really wide product portfolio, and we are niche and premium in what we do. We try to cover a lot of segments, and in this case, we sort of cluster them into larger segments. Just to give you an idea of who we're selling to and what our market looks like. But heavy transport, dumpers, and trailers, and tippers, et cetera, is the biggest one. Construction equipment, where we have lifting, raw material handling, mines, particularly industrial applications and others. So this is roughly what our market looks like. And primarily, this is a lot of Hardox, this is a lot of Strenx, this is a lot of Hardox, a lot of Strenx. So what's our go-to market model?
Primarily, we want to work with the branded products, with the Hardox. Here is where we have the highest profitability. It's not so sensitive to market changes if we work with these branded products. We also try to prefer to sell it through our own stocks or our own channels to the market. We have been quite successful improving this year through the years, which means that the amount being sold direct from the mill are decreasing year by year. I have a slide further on showing why this is beneficial. We have some distributor brands, and we also have non-branded grades within our portfolio, but the majority lays within the branded products.
The reason why this is a little bit shaded, because we have one stock location, so that's why it's shaded here, but it's only one stock location. I will also say that we have a unique offering to the market. A lot of our competitors are selling through distributors and so on, but since we are selling our premium steel, which is really advanced, we also need to have people with skills of the product in order to convince the customers of why it's beneficial to use our material. Our sales people, called regional sales managers, are trained in service life calculation, lightweight guidance, design recommendations, logistic solution, and these kind of trainings we do with them more or less on a yearly basis.
So we're not doing particular only sales training, we're doing advanced training, so they can sell on our properties and not sell on price. And if they need more technical support, we have something called technical director, and these people are excellent or skilled in technology and material science. They can show to the customers advanced solutions offers, a new design, application knowledge, sometimes even deeper than the customers that we have, service life calculations, et cetera. They also can help the customer in live training, in welding and cutting and so on, how to process our material. And then finally, if it comes to a point where the customer says, "I need even deeper, drawings or design work," we Knowledge Service Center that can support him with this.
And we all, we need this solution in order to convert to market using more premium steel, more high-strength steel, so it's a part of our offer. And if the customer wants more, and quite often they do, we have this value-added service offer or called Services , where we can do construction drawings for the customers. Not only design drawings, but also construction drawings, which is quite important if, if you want to help the customer to convert. But we can also cut to pieces, and we can also bend, et cetera, and Grégoire is gonna talk more about that in his presentation after the coffee break. So I would say we have a very unique solution to the market, and I haven't seen any competitor that has the same solution offer as we do to the market.
I think we have a pretty good, strong record. What I'd like to emphasize that if you go back 30, 40 years in SSAB's history, we are not producing a single ton of the products that we produced 40 years ago. Not a single ton. All the tons that we're producing today are new material or new products. The development that we've had is really, really unique. Going from the year 2000, we started off with the premium, more high-strength steel, selling roughly 300,000 tons. There was a market need, and we understood early what the future was gonna be like when it comes to the demand for lightweight, more sustainable solutions, and hence, we were able to develop the market. This is something that was developed by SSAB. We developed this market, and we did it very successfully.
I think the good thing about this is since we developed also the premium products in Mobile and also in Raahe, and Borlänge is also a premium producer, we can have production capacity coming from all the production mills, which just gives us a lot of flexibility, if there are import tariffs or if there is a breakdown. Short-term actions, everyone knows that the market has been rather rough during the autumn. From our perspective, of course, we have been impacted by this as well. So our total sales volume has gone down 7% compared to 2018. But if we look at the stock sales, it's pretty much remained the same. The stock sales have not decreased at all, from our perspective.
We have seen some of our customers destocking because they're a little bit concerned, but we believe that the market is gonna come down, come back again, and we've seen that the downturn has been in the heavy transport, while other segments, like the lifting industry, are going really, really well right now. So we are not panicking. We've seen a decrease, but we're not panicking at this point. And if you look at our market share or our market position, since we, SSAB early understood the uniqueness of our market position and also developing this market, we were able to grab a pretty good market share of the market that we called quenched and tempered . So today, we have a very good market share.
It's 25%, but if you look at the second place, number 2, it's only 8%. So compared to the second-biggest quenched and tempered supplier on the market, we have a very, very good market position. And this technology, we are developing all the time, developing Mobile, also developing Raahe and improving the situation in Oxelösund as well. So it's a very good market position, and I think that we are a very strong player on the market. So what is it that makes SSAB or Special Steel unique? Since I have a research background, this is something I am very much interested in. Maybe for some of you guys, it doesn't say anything, but typically, when you compare the mechanical properties of grades, you look at this case at the hardness here, and then impact toughness.
The impact toughness is quite important if you drop a big rock on a steel plate, you don't want the plate to crack. You want it to be able to absorb that energy, and that's why you measure the impact toughness. In this case, it's done at minus 40 degrees, so it's at the very cold conditions. To produce a hard plate, anyone can do that. It's extremely simple. I know that there are a lot of competitors, especially from developing countries, saying, "We can also produce a 500 grade." Well, I believe they can. It's not difficult. Anyone can do it. The problem is, how do you make a 500 grade more tough? 'Cause if you fail to produce it tough, it would be like glass, super brittle. That means it will crack immediately if you do something to it.
So you really need the toughness in order to use it. We can take a 500 grade and bend it very easily. If we take a competitor grade and bend it, it will crack. And I'm saying, and this is my personal opinion, 'cause I've been a part of doing this assessment, we are superior to all other competitors on the market when it comes to mechanical properties, the combination between toughness and hardness. Now, and what's the reason for this? It's the super clean material that we have. If you measure the oxide content in the material, our oxide contents are extremely low, extremely low. One of the cleanest material you can find in the market, and that's the reason why we have a good combination between toughness and hardness.
I think we should try to emphasize or pinpoint these competitive advantages a little bit more because we are unique on the market. So quality is something I highlight. I'm really proud of this, and I tell all the workers, especially in Oxelösund, how proud they should be of the products that they're producing, 'cause it's really unique. Of course, we have other competitive advantages, like our unique business model. We have a sales and distribution network, which is global. We are very close to the customers. We can offer not only a cut to size plate, but also using the Services operation, we can also offer a part or a kit or whatever the customer wants. And here, I see that we are very unique compared to our competitors.
So here you can see some of the locations that we have, our stocked locations. I personally spent one week in Uzbekistan, I guess, somewhere here, last week, setting up a new stock. Countries like Kazakhstan, Uzbekistan, I see a great potential here. This is where you have the biggest gold deposits in the world. You have the biggest copper deposits in the world. These countries are gonna grow, and we are an early entry company. We are there, we're present, we're already working with these companies. So I believe we're gonna have a strong growth there. Also, if you look at the global trends, how will this affect Special Steel? These are just some of the global trends that we have summarized. Urbanization, I think, is gonna have a good effect on us.
That's hence the green color. The urbanization means more construction work, more houses. That's good for us. Sustainability mindset, climate changes, that means they wanna decrease the weight of the vehicles, et cetera, have more lighter cars, lighter, trucks, et cetera. That's beneficial for us. Decarbonization, that's a journey we already started. Talk about that more at the end of my presentation. More infrastructure projects, we're already a part of that, involved with that. So the more infrastructure projects... 'Cause when we talk about, you know, market research, which is, what's the future gonna bring for us? We look at infrastructure projects, and all the infrastructure projects are good for our business. And quite often, when the market goes down, the country will start investing in road construction, bridges, et cetera, and that will be very beneficial for us.
Then also, since we have production in United States, Finland, et cetera, we have a pretty good geopolitical landscape as well. What I wanna emphasize with this picture is that this is our market penetration in Europe. This is our market penetration in North America. This is our market penetration in APAC. Right now, our market penetration in APAC is rather low. On the other hand, the market size or the potential market size is maybe 10 times bigger in APAC compared to Europe. But there is a great potential for APAC, and so we're looking into opportunities to grow our business there all the time, and we already have a pretty good facility in Kunshan, but we're looking at expanding to other possibilities in APAC area as we speak.
Yes, so the target for us is to increase our sales to 1.6 million tons. I believe we can do this. We have a really good product portfolio, we have good grades, and the trends on the market with a more lightweight concept, more sustainable concept, is beneficial for us. We have a good chance to do this. And, like I mentioned before, all the grades that we are producing today, today did not exist 40 years ago. So there are things happening in the steel business all the time. And that's why also I took the liberty to add this slide. So if I take 2019 as a reference year with the grades that we are launching sort of this year, how much steel sales will that generate for us for the next four years?
This is quite significant amounts. So we are all the time developing new grades, launching them into the market, very unique grades where we have a very unique market position. So this is what we're forecasting for the next four years, what our new grades will generate. We talked about production capacity before, and of course, it's easy to look back to the year 2000 and say, "Well, how come you're not producing as much as you did back then?" But I would say, if you compare the product portfolio, the year 2000 compared to where we are today, we have changed 50% of that portfolio. So 50% of the products that were produced in the year 2000, we're not producing today.
Today, the products are a lot more complicated than they were in the year 2000, and they require a more tempering treatment, more diffusion annealing. They require vacuum degassing. It's a lot more extent than it used to be in the past. So we are, you know, as we are growing, of course, there are some debottlenecking that we need to do, and we could see it in the year 2018, and also the beginning of 2019, we had some bottlenecks in low temperature tempering furnaces, as well as in the diffusion annealing. But we have done some investments here, and we're also looking into upgrade some furnaces to make sure we have sufficient capacity to grow this business.
And it looks pretty good as it is right now, and we don't see that there are any big capital expenditures needed to be done in order to grow according to our needs. But also, we have a major investment in Mobile that can support our sales. We have done some upgrading in Raahe as well, that gives us that flexibility. And I took this liberty to show a little bit about the thickness ranges that we are producing. And from the very beginning, it was Oxelösund who had the premium or superior quality, but and I had actually quality here in the beginning, but now I realize that Mobile are pretty much on the same level as in Oxelösund when it comes to quality, because of the upgrading that we have done.
But also Raahe has also upgraded their technology and also have a very good quality. That gives us very good flexibility. So of course, we wanna improve the production volume in Oxelösund, because if we do that, that will generate a lot of profitability for the, our division. With the plans we have now for converting, some of the furnaces we have, we will now no longer have a bottleneck. So we have the possibility to grow our volumes, and this is our clear objective. We have also implemented or upgraded our SSAB One, our continuous improvement model. We are now working together with, very, very good experts. We have sort of a pillar system. This is a cross-functional, project group working to identify where we have the waste, and then planning, project teams to decrease this waste.
We have started off in a really good way this year, and I see a huge potential here to decrease our waste. Thus, this will also give us a better opportunity to improve yield, decrease our quality costs, but also improve productivity. We are also focusing a lot on digitalization. Digitalization is very dear to me. I am very much involved in this personally. I have been involved in setting up the digitalization project group in Oxelösund. I'm participating in all these meetings. I have experience in my previous position from working with digitalization, and we have a really good roadmap ahead of us on things that we want to do.
So not only are we gonna do big data analytics, which we have already done, we have had some grades which have been cracking in production. Some of these extreme grades have been cracking, and we've done big data analytics to understand why are these grades cracking. And we have discovered the reason for this already running this data system. After only two weeks, we could see the links and taking these measures back and then upgrading the production technology. But that's just one means of improving the digitalization. We are using sensors, we're using smart automation, and we have a roadmap for this. And this will, of course, improve the productivity, but our vision is to limit the interference of human beings and that will also improve our safety.
So today, there are a lot of manual interference in production. Even in the rolling mill, there's a person running the rolling mill. This will not be needed in the future when we do this fully automatic with smart automation. And if you do that, you will have 100% repetition. You will do the same thing every time. So we have a very clear roadmap for this. I'm really looking forward to see where we're gonna end up already next year with all this investment we have in plan. And then finally, we already talked about the fossil-free steel. I'm really proud to be part of this journey. Really interesting.
And what I want to emphasize that, just like Martin said in his presentation, Martin Lindqvist, is that, we need to do a change in the melt production, on the steel production in Oxelösund either way. And should we invest in an old technology like the blast furnace, or should we invest in a new electric arc furnace? And we need to take the next step in this steel production, and that will be electric arc furnace. The electric arc furnace will give us the flexibility that we need, for our product, products, and also, we have 2,500 articles being produced in Oxelösund, and the electric arc furnace will give us a much bigger flexibility. Also, when the market goes up and down, we will have bigger flexibility. So there are a lot of benefits in this.
We have the clear objective to make this electric arc furnace be the best in the world, improving all the parameters of alloying and quality, et cetera. That's our clear objective. So we're already working on this as we speak. But also we have now the chance to learn more from Mobile and their electric arc furnace. So we're not taking a risk in this. We know what we're getting into, and I think that's really important for us. But also, at the same time, if we're not able to reach the sponge iron production, we can still run the plant on scrap, and we already have 400,000 tons internal scrap from Borlänge and Raahe that we can utilize.
So we can just take that scrap and use it here in Oxelösund as soon as we have this electric arc furnace. So that's also very beneficial for us. So there are a lot of upsides of doing this conversion in Oxelösund. And I really hope that we will fulfill the timeline of 2025, which is our main objective, but it's all dependent on the power line, like Martin mentioned earlier. And of course, the HYBRIT project, I think what's really interesting for me is a lot of customers are asking for this. Here is just some examples of customers who are asking, already now coming to us and talking about when can you supply a fossil-free steel? We really need it.
And, I know Christina, our sustainability manager, she talks to me quite often and said, "Yesterday, this company called me, and yesterday, this company called me." And these are not typical customers that you would think of. You probably have to ask her about the company names afterwards, but these are customers that I would never imagine would talk to us about this fossil-free steel. These are not customers coming from any of these segments. These are completely different customers. So there is a market need for this kind of steel grids. And I think if we can, just like Martin said, be the first on the market, we have a new, a very unique, customer value that we can offer to the market, and that will be a super premium product. I think that was pretty much it.
I think I covered more or less the important areas of our division, and like I said during the presentation, it's the uniqueness of our products, our super clean material, the technology that we have that offers the unique value to the customers. I strongly believe that we have a better possibility now than we've had in the past to grow this business just because of the market changes with the sustainability and the environmental thinking. Everything needs to be lighter. If you went to China or India ten years ago, there was no way you can introduce a more lightweight concept. But today, everyone is talking about a more lightweight concept, and there's very few suppliers on that market. So we have a very good potential, a very good possibility. So thank you very much.
Thank you, Johnny.
We have time for maybe one or two questions before the coffee break, so please.
Thanks. Alan Spence from Jefferies. Going, your target going from 1.3 to 1.6 million tons, how much of that is broader market growth versus things that you're doing more specifically? I see kind of the volume projections you have for new products being about 125,000. Should we assume it's roughly one third, kind of, let's call it self-help, two-thirds kind of market growth or market adoption?
I would say that's pretty much the ratio we're looking into, 'cause where we see the growth potential is in the developing countries. I mentioned, you know, countries like Uzbekistan and Kazakhstan, but also Africa as a continent that we're looking into a lot.
So I'm not expecting, you know, geographies like Europe to grow that much. I do think that the Americas are gonna grow significantly, because there's a lot of upgrading potential there. But I think other regional or geographic areas like China, India, Africa, Uzbekistan, Kazakhstan; I see a huge potential here. And we're gonna drive this development. So we're gonna go to the customer, show them how to do it and why they should do it, and then supply them with the solution. And the best thing about it is that quite often, this is also a cheaper solution for them, because they can reduce the weight from 4.5 tons down to 3 tons, and the processing cost will be decreased by 50%-60% sometimes. So it's a cost-efficient solution for them. So there's a lot of upsides to this.
... Thank you. And one out of one, coming back to something you said earlier in your presentation about SSAB, SSAB being able to develop the combination of, kind of, flexibility and strength of steel because of lower oxide content.
Mm-hmm.
What is that the raw materials that's initially going in, or is that something, is that a benefit coming from your production process?
Well, it depends on what raw material you're having, but quite often in the production of steel, if you use an electric arc furnace, you use scrap, and in the scrap, of course, you have iron oxide called rust, and oxide, you need to get rid of. And if you have pure oxide in a solid-state solution, it will be detrimental to the material. It will crack immediately. So quite often you alloy it with aluminum or calcium or something to tie up with the oxygen, and then you will have what we call oxides. And these oxides will make the material brittle.
But what we do is a sort of a degassing process that we reduce the number of oxides or oxygen, the amount of oxygen in the material, but also we do a second step of a degassing, where we also get rid of nitrides and all type of inclusions. So if you measure sort of the amount of impurities are in our materials, we are superior. And in my background, I was a president of a company called Uddeholm in the past, and we produced tool steel, and we had a process called electroslag remelting . And that process was done to get the cleanness down to a very, very low level. But if I compare to our material with that material, it's pretty much the same.
I was very, very surprised when I did this research myself, that the cleanness of the SSAB material is on that level. It's very unique. You can use this in ball bearings or in a lot of applications that we haven't really looked into. I think we have underestimated the cleanness of this material.
We have one final question here from Oscar, from-
Hi, thank you. Oskar Lindström from Danske Bank. A little bit following up on that last question about the quality of the product once you make the switch to EAF. I mean, how certain are you about being able to... That there won't be any impact on the quality of the product-
Mm.
when you change both the raw material
Yeah.
And the process? I mean, seems to me that that would be quite a risky move, and yet you seem quite confident that-
Yeah.
-it's not.
If you would've asked me five years ago, I would have said, "There's no way we convert." That was my belief at that time. I would say that there's no way we can get a just as good quality in a blast furnace as we get... I'm sorry, in an electric arc furnace, as we get in a blast furnace. But since we have done these trials in Mobile, I was proven wrong, because I said, "There's no way." Today, I say, I strongly believe in it, because we've proven it. We already today are producing Hardox, Hardox 500 even, in Mobile. So we've proven it, it works. And we have the same mechanical properties when it comes to toughness and hardness as we have here in Oxelösund.
But it took some time, it took some development, it took a lot of effort to get there. But it made, I think, Mobile extremely unique, because there's no other producer in the world using electric arc furnace that has this quality like they do in Mobile right now. So my... The answer is yes, I don't see any risk.
All right. And a second question, I mean, you mentioned, and I think Martin Lindqvist mentioned as well before, about customers being willing to pay a price premium for fossil-free steel. I mean, have they made any commitments? You know, what kind of premiums are we talking about?
Mm.
Um.
Well, I mean, this is only coming from discussions we have with some of the customers on the market. And some of the customers I showed on the previous slide have reached out to us, and saying that, "This is of huge interest for us. When can I place the order? When can I get this material?" And for them, the value of having sort of, if it's a Scania truck or if it's a Volvo truck, which is completely fossil-free, that's a lot of value for them to be first in the market. Because electrifying is one thing, but it's not completely fossil-free. But if you can make the whole vehicle and then electrify it, you can offer a completely fossil-free solution. And that's where they see the big benefit.
Following up on that, I mean, do you foresee selling this steel in a different manner than how you sell steel typically today, i.e., you would have a very long-term supply contract or, yeah?
I think I don't think we need to change our model that much. This will be, you know, another product portfolio to the portfolio we already have. So what we can offer then is, you know, grades which are completely fossil-free, but I don't think we need to change our business model or market position. But of course, we will charge a premium for it, because we will be the first one on the market, and then there's a need for this grade. But I don't think we need to change our approach to the market that much, no.
All right. Thank you.
Okay, thank you. Thank you, Johnny. We will take a coffee break now for around 20 minutes. Good to know if you're listening on the webcast as well, and meet back here at 11:00 A.M. Then we will listen to Gregoire talk about Services. So please enjoy the coffee break. Please take a seat now, we will continue. We have some more presentations here before lunch. We start with Grégoire Parenty talk about SSAB Services. So please, Gregoire, start your presentation here.
Thank you very much. Thank you to have come in Oxelösund. So I'm gonna talk to you about SSAB Services. SSAB Services is taking care of the processing center we fully own in SSAB, and also expanding this network of our own processings, and also taking care of the Hardox Wearparts network, which is the most well-known brand program in the world, with many members that I will introduce to you. But it's not only about taking care of what we have and expanding about what we have, it's also about developing new ways to do business, new ways to engage customer with us. It's about building loyalty.
So we are totally part of the SSAB Taking the Lead strategy, and we are also executing the vision of SSAB, because for a stronger, lighter, and more sustainable world only happens when you have the equipment on the road. How do we make from having a brand-new product developed by SSAB to a real equipment adopted in the middle of India or in the west of Australia? I will demonstrate that to you. We contribute in SSAB in many ways. First, we drive the sales of premium steel. We are driving the sales of premium steel through the Hardox Wearparts network. We are driving the sales of premium steel through our own processing center that we have around the world.
We are driving the sales of premium steel by having the rest of the market trying to copy us and adopt the same kind of product that we have proposed to their competitors. The second point is that we are also supporting SSAB to mitigate the cyclability of the steel business. Today, it's very clear that we are facing headwinds, as Martin has mentioned, but this is not the experience we have in SSAB Services. The Hardox Wearparts network is relatively stable, while I must say, even developing in this tough time. Our processing centers are relatively stable while developing in this tough time. Why is it more stable? Because we are targeting smaller and more fragmented market than usual.
We are avoiding steel service center, we are avoiding stockholder, and we are not so much engaged in big OEMs, which are the one in those day that are reducing their order intake. The second thing is that we try to stay as much as possible close to the OpEx kind of spending from company, meaning maintenance and repair. When people do not invest, they invest in maintenance, they continue to invest in maintenance. If we are able to be close to them with our stock or capacity to process just in time, we will get this business. And this business is more stable, more profitable. The third thing is to support our customer. I mean, support our customer and proposing them a lot of solution about how to develop their business.
It's about how to support them in increasing their revenue by using a more expensive steel. That's the trick. And if we do that by small and fragmented customer, then you build a loyalty for life with this customer. So I will demonstrate to you how we do that, and how also we build partnership with the customers to develop with them the whole concept, meaning we don't only supply steel, but from the conceptual development to the functional development and to the aftermarket, we are able to accompany them in their development. And last but not least, is the innovation speed. It's about having. I mean, we develop constantly new product. I mean, Johnny has talked about that, and it's hard for a customer to adopt this kind of product. Why?
Because it's harder to bend, it's harder to cut, and we can supply them a lot of support in terms of engineering, in terms of complementary product, to help them to develop their business. Last Capital Market Days, I have shown a slide with the ambition to have 500 Hardox member by the end of 2020. We have overshoot that. Today, there are 548 Hardox Wearparts member in the network in 100 country around the world. These wear part members are super strong support for us, for our brand. They all have Hardox in stock. This is the most reactive network of company in the world to supply Hardox wherever you need it, wherever you want it, in the quantity you want, in the form you wish.
This has helped us to build this strongest brand in the world, as you know. This is helping us to stay in the OpEx market, maintenance and repair. This is helping us to approach the fragmented market. Those people don't face the downturn. Those people are exclusive Hardox. Those people do the marketing. Those people are the best reactive network in the world. We will develop them, we will continue to appoint people, and we will help them to grow with a target of 700 members by 2022. But then, this is only a stable channel for selling Hardox. We believe we can help these people further and generate an additional revenue on the top of the steel, by supporting them in their business. How? Today, it's a very reactive, pool of company.
You call, you get your parts supplied the day after or during the week. Can we be proactive? Of course, we do. You buy on Amazon, your... On the phone, you do everything. We are working to put on parts that they will have sold, some sensors, some calculators, where they will receive on their phone when it's time to change the part that they have changed. Meaning the wear part, the good thing in the wear business is that the part comes over, over, and over, all the time. Can we be reactive with that? Yes. So we will develop these people, we will push them into the new world, and we will help them with our SSAB knowledge. The second thing that will mitigate cyclability is the acquisition we've made.
As I say, Hardox Wearparts is a stable channel to sell Hardox, but we don't grab their profitability. We don't grab this additional margin they make by servicing in an excellent way the customer. We have made, the first of November, an acquisition of 10 processing centers around Europe in 11 countries. Eleven processing centers, sorry, in 10 countries. That is purely in this value-added service business, that is purely in the fragmented market, that is purely in the maintenance and repair. This company has 5,500 customers. There is no single overlap with the customers of SSAB. They are in a totally different world. This company is 100%, 100% engaged in wear steel and advanced high-strength steel. There is not a single kilo of mild steel in this company.
This company is totally involved in maintenance and repair. They don't have any OEMs, and they have an order intake vision of 3 weeks max. The average is 2 weeks, so beyond 2 weeks, they don't know what they will have to do. And this is the kind of acquisition we would like to repeat on and on and on, because the more we will do that, the more we will bring stability in the cycle of the steel industry. So it's 45,000 ton with a revenue of SEK 800 million, and we are already looking for other acquisition, especially in North America. When it comes to customer solution, we believe that we can supply them parts, but not only parts. You know, everyone can have a press brake , everyone can have a plasma cutting.
It's how you use it and how you propose that to the customer. We know the challenge of the customer. We know that the customer, they don't want to tie capital into the steel. We know that they want to be deliver just in time. We know that they have processing capacity that are limited. And for that, we propose to them our 450 machines for processing steel, which are the most advanced machine you can imagine on the steel business, and we are proposing them some kits, already made solution. I will not comment this slide because it can be a bit long, but here you see from the kind of the first IKEA solution for the customer coming from steel.
So we are making the full kit from the customer, that he just has to assemble, and he can receive just in time, the box, the wooden box that you see, with the whole equipment that he needs to assemble. This is done with the customer, this is done ourselves, with standardized product that we put on the market. So we are engineering the product, we are developing the product, we are reducing the cost for the customer, and at the end, we are facilitating the customer, the adoption rate of the premium steel, and at the end, we integrate into the customer supply chain. And you can imagine, if customer starts to buy this kind of kitting, can they go back afterwards to the old way of doing it?
To try to source this part from one supplier, this part from another one, this part from another one, and this part from another one. No. But that's the concept of the Hole-in-One SSAB when we supply them. This does not only apply to small customer. This is a, an example of Scania, who came to us with a problem, and they say: "Okay, SSAB, we would like to find a solution in India. We want to expand in India. We have a, a problem with the tipper suppliers, because the, the-- they just destroy the tipper, and the tipper are not strong enough." So here, with SSAB's, SSAB Services, with our engineer, we have worked two years, we have sent two expats in India, and we have developed, with the most advanced steel, the strongest tipper you can imagine on the Indian market.
And now we have sold, even though SSAB is not a tipper maker, we have sold 500 tipper to Scania at the end of this year, and now Scania wants to expand the same tipper in South Africa and in South America. And now Volvo is knocking at our door, interested to get this tipper. So it's something that goes beyond the steel. It's something where we are able to advise the customer, to make the engineering, to make this, the conceptual design, and go with him up to the end of the functional design, using the most advanced high-strength steel. And this is the whole concept. I mean, we have developed an engineering team. I mean, Johnny explained to Knowledge Service Center people that are supporting, for free, the customer as far as they can into the conceptual design.
But a lot of customers are spending a lot of money beyond that to go to the functional design, meaning you make generation 1, generation 2, generation 3, and you make the test. And we have an engineering department where the customer pay for. Now it's you. The customer are paying us for making this development, and we help them to develop their product, we help them to prototype, we help them to supply them the kits, and we even help them to supply them the matching product. So since July, SSAB now commercialize the welding wires, which are the product that are helping the customer to weld the Hardox. So it's a wire that we have developed after 15 years of research with our suppliers, that match integrally with Hardox. And of course, profitability, I will not tell you, is good. Very good.
But this is where we go, and it's about solutionize for the customer, the problem of adopting the new high-strength steel. Another example of the innovation speed is when you issue a new product, for example, in that specific case, is a 500 Tuf. So what do you do? We develop a 500 Tuf. Do we light a candle, and we pray that someone will adopt it? No. The best way is to go to see the end user. The best way is to go to see the end user and say: You will have the benefit, you will have the productivity. In that specific case that Martin showed to you, it's Rio Tinto. We went to Rio Tinto, and we say: "Okay, today, it's a Caterpillar truck that is below.
Today, if you want to change this tray, Caterpillar will supply you a tray that will weigh 31 tons, plus 10 tons of liner. We have developed our own tray for 22 tons, made in 500 Tuf. It's the first tray ever made in 500 Tuf, under the brand XMOR, which is a brand that we expand now for the high-productivity equipment. "Could you test it? Would you test it?" They test, they see the productivity, and they don't want to go back to the old trays. They pay more for this tray. They pay much more for this tray. They don't want to share the productivity, unfortunately, I've not been successful so far. But they pay more for this tray, and they use it... And once they have used it, of course, G&G is not Caterpillar. We don't want to become Caterpillar.
As Martin said, it's a sort of a test lab. This tray, 22 tons, has generated 8,000 tons of demand for the 500 tons in Western Australia, and this is the whole concept. One tray, 22 tons, 8,000 tons of demand. So by having this way of approaching the market, we are able to generate the end user pool on the full chain for our highest product. And of course, we facilitate, meaning that now I cannot tell you much more, but they want, Rio Tinto wants to expand this tray outside Western Australia, and we are looking for a company that will become a franchisee and that will design under our design. So today, we have the capacity to serve the customer all around the world.
We directly own and operate 25 processing centers. On top of which, I was a bit lazy to put all the dots, sorry for that. The 548 Hardox member, meaning we want to make sure that the customer will meet the same SSAB around the world. That what we say here in Sweden, a customer in Argentina or a customer in Chile, will have the same service, the same support, the same full chain of support, meaning from the concept to the function, and also the aftermarket. Because one of the good things of having the Hardox wear parts, is that we can reconnect with the aftermarket. I forgot to tell you that, for this product, some... During the last Capital Market Day, I introduced you the lightweight, disposable bucket.
I don't know if some of you remember, but since this Capital Markets Day, we have become the indisputable leader of the lightweight, disposable bucket in Western Australia. And this bucket becomes the generic. It becomes the reference in the industry, and it becomes asked by Rio Tinto, FMG, BHP, to all the other supplier who come back to SSAB and say, "I would like to have the same bucket." So my last slide, because I have no more time, is about our ambition. We will grow. We will grow in maintenance and repair. We will grow to support small and medium OEMs.
We are looking to purchase other Abraservice s as much as we will find on the market, and we are committed to develop this business downstream because it provide to SSAB business stability, profitability, and also a bunch of revenue. I mean, very profitable revenue on top of the steel we sell. Thank you very much. If you have any question, otherwise, I... Yes?
Thank you. Yeah, we can take a question here before we move into Europe. In the front, second row here we have.
Thank you. Thanks. Just one question on the XMOR. When has the product been launched, and how, how large do you see the market outside Australia for that particular product?
The market is huge. I mean, we can say that there are more or less 600, more than 600 trays sold per year, in Australia, just in Western Australia, so you can imagine outside Australia. I don't really know the world market on the trays, but what we know is that already this picture that you have seen is already shared in South Africa, in China. So we are entering into a franchisee and a licensing in China and in South Africa today, and a lot of North American company have contacted us to have the same design.
When has the product been launched?
This product has been launched, I mean, it has been approved by FMG. It has been tested in FMG six months ago. And now, FMG is coming with a tender of a 100 tray for us, which make a problem. I don't have the capacity for 100 tray.
Thanks. Dominic, JP Morgan. I was just wondering, with regards to the trays, to what extent do you also foresee that you're cannibalizing your profits by going into these niche markets? For example, like basically competing with Caterpillar, who, I think, before I saw on the map as one of your existing clients.
We are not competing with Caterpillar. I say, we don't have the ambition to become Caterpillar. We have the ambition to speed up the adoption by the market, by the best solutions. It's not easy for an OEM to adopt a new product. If you are a purchaser from an OEM, you don't want to be linked with a sole supplier coming with the most advanced product. You wait that the product will be adopted. We have this experience on the automotive market. From the moment you issue on the automotive market a new grade, and the moment you get the real industrial orders, it's between five and 10 years. Because they wait to have several suppliers. Here we have no time for that.
This has been done in one year and a half, from the moment we started, the moment it has been adopted. So we are not cannibalizing Caterpillar. We will, we will be glad to give to anyone the design of this product. We will be glad. The only thing we are looking for is to generalize and make the 500 Tuf the reference in the industry of the trays. As said, 8,000 tons of demand, 422 tons, it's amazing. And we are glad to supply this customer, as soon as we will have the capacity, Johnny.
Okay, very, very good. Thank you, Gregoire. Let's move on now to Olavi Huhtala, and we'll talk about SSAB Europe, the next, next presentation.
Thank you, Per. Good afternoon, everybody, good morning, everybody, still have to say. My name is, as you can see, Olavi Huhtala. I'm Head of SSAB Europe. Sorry to bounce you back from Western Australia to Nordic countries, but they're also quite interesting. So I'm going to go through what are we today and short-term actions, a little bit about the strategy, and then how to do that, and then summarize. When we look about SSAB Europe, I'm not going to go through, but I would like to say a few words about these pies, that if you look about the left side of the pie, so we can say that it's quite good balance with different product groups.
Still, the hot-rolled strip is the biggest one, and we have a clear aim with our strategy to reduce that part because it is, as you saw today morning, in Martin's one graph, that that is the product which is going to react first, always in the market. And then on other side of the pie, you see that how we are divided with different segments. So automotive, 20% construction. What we still have the biggest one is the service centers, and that's also something what we are planning to change and look about when we go further with the premium products and automotive. Then we basically squeeze these two biggest ones, and then the pie is going to be, in the future, even more balanced, if I look about that from, from that point of view.
little bit rough time at the market, as you know, and automotive a little bit downwards, heavy transportation downwards, construction stable. Service centers are, as usual, in the end of the year, balancing the stocks and placing less orders. What we do then, of course, we make the actions and measures, and we have been doing that. What you saw today morning in Martin's slide is that we have this Flexicurity, which is some type of layoff or flexibility to reduce SG&As. We have layoffs in Finland. We have all kind of programs from fixed cost and also from SG&As. And then, of course, the last, last, last bullet here is that we were closing down the blast furnace in Raahe.
I would little bit go back on January 2014, when it was announced that SSAB and Ruukki is going to go together and really look about that. Some of you maybe remember the picture of five blast furnaces and how to react in different market circumstances, and we are here exactly according to that picture today. So if it would be the same two companies, it would be impossible to close down the blast furnace in Raahe. Believe me, I was in Ruukki site early, and I have calculated that a couple of million times. No, not that many, but nevertheless, it's just an example that now we were able to do it. And then, of course, we are speeding up the Swedish site to produce, and just good to remember on that.
Then, of course, we look about net working capital, normal thing to lower the stocks, make new safety, safety or minimum, minimum targets for raw material, but also all the working process, finished goods and sales stocks. But then at the same time, we have a little bit, I would say, luxury problem, that we still have some lines where we have bottlenecks, like our continuous annealing line , which we are now investing at the moment. When I'm speaking, we have the next step of the big investment project to increase the capacity. And also, we would like to say here that automotive, as you all know, it has been quite low demand in...
or let's say, lowering in Europe, but we are still able to keep the trend according to 2018, which I see that in a lowering market condition, it's a quite good achievement. And this is, of course, something that we look about further. If you need, need next measures, then we have to do it, but this is what we have been doing, doing today. SSAB Europe, market leader Nordics. I come back on all of these, grow automotive and then all other premium products. Come back to the industry-leading profitability, what we have been doing quite good the last couple of years. And then we have to be best in basic things like safety, delivery accuracy, quality, et cetera.
If you look about our little geographical thinking, what we have is that, of course, the Nordic home markets, where we have the target to be 40%-45%, as you saw today morning. Then we expand the circle a little bit, and then we talk about our premium products, which are mainly based on customer demand. So we talk about weathering steel, which is for really tough conditions. We talk about laser, we talk about this type of products. The important thing is that, as you can see, that the products are tailored for customer needs. And this I would underline that it's very important that we listen to customers. I'm coming back a little bit later on, but we have good customer, like Ruukki Construction in our own group, where we can together look about the innovation, the premium products.
So it's very important that we are not developing the products, and we think that they are nice ones, but we need the customers, and we really need to be customer-driven. Then automotive, that's the business what we have in Europe Global, including Asia and US, and that's really a niche products, really high-strength steels. I come back on that, too. But really important also that we are close to our customers, we have a long term, and I say that the product portfolio in Nordic, we are presented with the older products, then we go further in Europe, it's a little bit less products, and then, of course, from the global perspective, it's really the niche and high-end, high-end products.
If you look about the four basic things, what was already in the earlier page, but I would still a little bit discuss about that. Safety, I believe myself, and I think we believe all that if safety is in a good level, then we know that it's a lot of good systematic working ongoing in our factories. Nordic is our home market. If we aren't, we really have to be strong in our home market, and we are strong in our home market. Improving is that how do we improve our things more or less every day? Martin was mentioning SSAB One, the philosophy, how to, how to do it every day, a little bit better. They are big ones, and they are small ones that we have to do every day. Big ones are maybe yield improvement in Luleå.
It can be a train, for example, between Raahe and Hämeenlinna. It was two trains earlier, now it's one mega train, which is about 608 meters long. So it's an improvement. It's both for environmental thing, it's only, only one train a day, and then, of course, it's an efficiency matter for us. And then, of course, it can be something that what people in our mills are doing every day in the shifts to do things a little bit, little bit better. And then the premium is, I said earlier, we divide that in two categories: automotive, high-strength steels, and then premium products.
This is the one, if you remember, still the slide with the pie, so that we need to change it so that less hot-rolled coils and then more other products and maybe less service centers and more direct end users. Targets, home market, as discussed earlier, 40%-45%. Come back on that, how to do it. Then premium share, which is basically calculated the two areas together, automotive and other premium, from 36%-46%, which is a quite tough target, but achievable. And then you see these two other areas with the tons and volumes. How to do it? 2016, 2017, premium, it was little bit still learning, a lot of new products. Now it's going up. I think we can reach 900,000 tons, and then automotive was in good trend.
Now, of course, from 2018 until today, or end of 2018 until today, it has been quite rough market in automotive, but we have a lot of good new approvals. We have a lot of, a lot of good business, so believe that we can get back to on that, growth trend. Nordic, we have basically, we are close to the customers. We have a, a wide product range offering. I would say that unbeatable logistics is not only logistics, it's, it's the service, delivery, accuracy, quality, how our technical customer service is working, how, how our sales are responding, all that type of basic things. And then, of course, the one and important thing is that we are not there to just pick up and go, or go and go out.
We have to have a long term, and we, we want to have long-term relationships with our customers. This is really important that we, together with our customers, as I said earlier, develop the cooperation and, and find the best possible win-win between us and our, our customers, and of course, the end user. Then the right side is, Tibnor and Ruukki Construction, which are really important partners for, for SSAB Europe. Tibno r, how do we take care of the, how do we look about the market share in Nordic countries? How do we, together create more premium business? How do we do things more effective? If I look about Europe sites, 2,000 people, it cannot be a place to send 5 tons. It, it is, it is Tibnor and that group who's taking care of that.
So how do we combine that together, and how do we work more effective together and develop the business? And then Ruukki Construction, which is our biggest customer, and it's also- good partner when we think about premium products. We talk about innovation, we talk about, for example, color-coated, how to, how to develop that business further. Some is coming back later on with the, with that presentation, but it is really important, and we have a good cooperation there. So these two channels are very important for Europe, and it's really important that we, we together make the cooperation even better, and we can develop the market, especially in the Nordic countries, in a higher level. If I then look about the premium, we have divided that in two. So first of all, if you look about automotive high-strength steels, I say that is a global business.
The segments what we have been picking up, there are five segments. We talk about side impact beam, beams, we talk about bumpers, seat and tracks, chassis steels, and then some body structure. So we are not looking about automotive as a total. We are looking about maybe 5%-7% of the automotive business, and we are looking from 5%-7%, we look about 3%-5% market share. So we are really in a niche area, and that's still believe that there's enough market for that, and that's where we aim. So we are not even trying to take bigger part of the segments and, applications on that part. And then we have the brand local in automotive. Then the other part, which is this 900,000 tons, we talk about the premium steel.
As said earlier, it is more a Europe-based business, and it's, for example, segments like construction, we talk about GreenCoat, we talk about energy and offshore, we talk about acid-etched weathering. But really look about and say, based on customer needs to build the products, the characteristic, the mechanical properties, and also the sales and marketing, and not forget the technical customer service, which we have. So this is really important that we create the business together with our customer. It has already mentioned couple of Knowledge Service Centers, but this is one big part of, for example, automotive.
We can say that there's a university-level knowledge Knowledge Service Centers, and of course, it's very important that especially in automotive, we are early enough in the project to help the customers how to bend, how to use the material, what is possible, what is not possible, how the design is helping on that. So basically, we can, we do the same here as Johnny was explaining in special steel and Gregoire in Knowledge Service Center is a common task force what we have. Then, of course, we have the local technical customer service personnel who is taking care of the everyday working towards our customers. And then joint development, especially in automotive.
But it can be tiny things that we can help our customers to weld a little bit better, make the manufacturing role a little bit easier, which is then, as we say, save money also, not from the end user, but also from the, from the engineering company between ourselves and, and the end, end user. Then we have some processing Services. We have service centers in Ghedi, we have in Gothenburg, we have some color-coated service centers in, in, UK and the Netherlands. Why we look about this premium and this area? So we are not looking in Europe to grow. We look about the mix change. And in the chart, you see 2016, we look about the green, which is more or like the rest of the volume.
Until 2018, it was 400,000 tons less. We are still aiming to reduce that. So it is quite simple: we don't want to grow, we want to change the mix, and still coming back on the first slide, that we really have to lower the hot-rolled, hot-rolled coil sales because that's the first one which is going down. And why premium? You see the 2018 figures, that how much is premium representing about the volumes, and how much is premium representing for the gross margin. So I think this picture tells quite easily that why we want to do it. It's more profitable, so simple. A lot of discussion, of course, to automotive, what's happening for the high-strength steels, is it going to be there?
We have been looking about the risk and what are the positive drivers. We can say that overall, it is still the most cost-effective when we talk about lightweight, lightweight and automotive. A lot of discussion about electrical vehicles, EVs. We see there are a lot of opportunity because the lightweight is, it could be even more important from the EVs, but also there are new application possibilities like battery protection, et cetera, et cetera, the body structure. It's still a lot of discussion about, and there's not probably common understanding or common agreement that how is the chassis or how is the car structure in the EV is going to be. And that's, of course, very important that we are there early enough to look about what our steels can do.
That is something what I believe myself, that we get more possibilities there. And then, of course, we see that the CO2 emission in the production phase for our steel is better than the competitors or other materials. But also the last one, what you see as, is that the growing rate for high-strength steels are higher than steel as a total. It has been that many years, and it looks that it's going to continue the same way. Of course, there are at the moment some negative things or risks so that in automotive, everybody knows when reading the news that what is the situation in Germany and especially UK automotive at the moment. Car sharing, is it going to affect negatively cars?
Probably yes, but other way around, we can say that the car is used more, so maybe, maybe the shared car is changed more often than, than non-shared cars. I don't know. It's just a thing that I don't believe so much on that, that it's going to lower it that much. US duty through Section 232, of course, it's causing some, some challenges, and then also that, especially Chinese OEMs, they are localizing. That's why we are looking about more and more niche products in, in those areas and don't even try to compete with the, I would say, standard high-strength steel, 600, 690. So we look about more higher grades. And then, of course, new materials, they are coming. We have to be awake all the time, what's happening there.
Today, it's not yet that many which are cost-effective. I was saying the same, that, okay, there are a lot of new materials, but in Formula One, they are, there are a lot of lightweight material, but the price of that is maybe 100 times higher. So when we look about the normal passenger cars, and let's say, everybody's cars, then the high-strength steels are still the one which are really, really on top. Our strengths, I say we are not trying to take too much. We look about 5 niche areas or segments, as I said earlier. We are industry-leading when we talk about martensitic steels, 1700, 1900. Capacity, what we have, best-in-class. I say we have now, at the moment, our investment ongoing in our continuous annealing line in Borlänge exactly now, and it's...
Then we also have some investments ongoing in our galvanizing line number 3 in Hämeenlinna, where we make the high-strength steel. So we are putting money on and investing on these automotive lines. Product portfolio of what we have is good, it's flexible, and then, as I say, we Knowledge Service Centers. we are collaborating with our customers early enough to make the design better. This is example of these other premium products. The characteristic is that they are less service centers. They are more end users. Of course, we have to operate all the time, that how do we, how do we develop our premium product portfolio? I'll take a couple of examples. So GreenCoat, what Sami is using, too, is this partly bio paint, really for tough conditions.
Or we talk about SSAB Weathering, which is specially designed for offshore industry. When you go about Norway in the offshore, the weather is quite harsh. We need more and more corrosion protectiveness in our materials, et cetera, et cetera. But the important part is that these are designed based on our customer needs. Summary at the moment, we are improving the safety, which is good. Automotive and premium is okay, I would say. They are growing. We have, of course, now the current market condition, which is weak. We have the measures ongoing, and then what we are doing is, of course, continue the basic things like safety, quality, deliveries, et cetera, and then strengthening still the whole market, and then look about the growth in automotive and other premium products. I got three minutes, so it's amazing.
Yeah, very good, Olavi.
Yeah.
Thank you. Well, then we can open up for some questions here again. Seth is on the front row here, please.
Thank you. As you're trying to take more market share in automotive steel with advanced high-strength products, can you talk a little about the margin profile for these products versus your base load capacity? What scale of uplift can we expect from a long-term contract for high-strength steel versus commodity products? And can you put that in some historical context? Because you're going into this increasingly, so are most of your European peers in a declining autos market. What's the risk that you have increased competition in a weakening market, and ultimately, the margin uplift we might have expected five or 10 years ago actually disappoints going forward?
About the margins, if I compare this one and I, then I put the automotive there, it's even higher. But I'm not saying exact, exact number. But the. If the premium product... Let's, let's put it this way, that the pre, the best premium products are the automotive products. So it gives you some kind of,
I guess the question is: How does that margin outlook— What, what's that margin, the relative margin performance expected in coming years versus what it's been in past years? With more companies competing for the high-strength product, are you seeing a dilution of the margin uplift?
... Okay, sorry, understood a little bit different. If we stay on the level where we are today, then probably the margin is going to squeeze. It's. Of course, it's because everybody's coming to the level of 600, 690. That's why we are looking about Martensitic 1700, 1900. We haven't even the. We have the first tries for 2000. So we have, we have to go all the time a little bit upwards because the market is moving there. And so, if we cannot develop, then of course we have the challenge. But as long as we see, see today with the new products and how we can expand that, then, then I believe that we can, we can keep the margin there.
Just to clarify one more. The higher quality products you're launching today, are they higher margin than the high quality products you had a year ago? Or are you just defending the same margin with new R&D?
How shall I say it? We are not defending it because we get new products in the markets all the time. As I said, about 1700 Martensitic, with, for example, with the Shape Corporation, is using, which was winning the Swedish Steel Prize. There are no other producers who can do that. Then, of course, now we have the 1900 Martensitic. So but then how do you look about the margin is, of course, always the game that what is happening in the market. But yes, with product development, we are trying to even increase the margin.
Thank you.
Okay, we have time for... Yes, we have one question more from Alain there, please.
Hi, this is Alain Gabriel at Morgan Stanley. Quick question. You mentioned earlier, in your presentation about the flexibility you have in your production facilities in the Nordic region. Fast-forward five years from now, how does your production footprint look like in light of the EAF? And what's the future of the other facilities in that region?
Sorry, I missed a little bit. EA?
You mentioned the flexibility you have in your production profile in the Nordic region. You can shut down some smelters, some blast furnaces, and so on. Five years from now, when you have the EAF at Oxelösund, how will the other—what is the future of the other facilities in the region that you have? More specifically, the blast furnaces.
About the blast furnaces, as Martin was explaining, that we are going to change in Raahe and Oxelösund, in Luleå between 2030 and 2040. But if you look about the rolling mills and that area, I don't see there any change.
Okay, thank you.
Yes, we have another question from Alan, please.
Hey, Alan Spence from Jefferies. Back to the volume growth assumptions around advanced high-strength steel for the automotive market. I appreciate its niche, but what are the underlying assumptions that the broader automotive market grows? Or if we were in an environment where that kind of broader automotive market is flat, do you think your volume targets are achievable?
The volume targets are achievable because I believe that the high-strength steels, and even if you talk about lightweight in automotive, that is going to grow. And then the automotive as a total is going to grow. Of course, now when we see that it's going a little bit downwards, but still the basic consumptions, what we have there is that it's going to grow.
It assumes a higher automotive demand market-
Yes.
-in 2022 relative to 2018.
Let's say more high-strength steels in automotive as it is today. As I said, about, for example, EVs, then it's definitely one key is that how you make the car even more lighter than it is today, because the battery is still the heavy part in the automotive. So we believe that the share of the high-strength steels are growing in automotive. If automotive is steady, we still believe that the high-strength steels grow is going to be there.
Okay, thank you.
Yes, one final question here on Europe.
Thank you. Tom Zhang from Credit Suisse. Maybe a bit of an unfair question, but in the previous presentation, we got some very interesting specific examples about weight saving, within the Services, within the heavy truck industry. With some of the new products that you're looking at, could you give us an idea of quantitatively, how much lighter or what kind of improvements, you'd see in the cars that they're going into?
It's not only when we talk about high strength, it of course not only the lightness of the car, it's also what we talk about passive safety. So we talk about side impact beams, beams. It's also that what is important. But with some of the bumpers, when we calculate all together that we can use high-strength steels in the chassis part, in the structure, in the bumpers, then we talk about on that area, maybe 10%-15%. But as I said, it's also the passive safety part, which is very important for the high-strength steels, not only the lightness.
Okay, thank you. And then, Olavi, you mentioned two partners, Tibnor and Ruukki Construction, and now we start with Tibnor, and that will be our President and CEO, Martin Lindqvist, present. So please, Martin, take the stage.
Thank you. I will briefly go through Tibnor and use a couple of slides to describe where we are at Tibnor. I think Olavi mentioned why we have Tibnor. For us, Tibnor is a channel to serve the small and fragmented market and keep the market share in the Nordics, and that's why Tibnor is an integrated part of SSAB. If we take a look at Tibnor, what is unique with Tibnor is not only the size of the batches the customer buys, I mean, it's also the number of customers. In Tibnor, we have roughly 10,000 customers, and we offer very short lead times, 24 hours. We have these trucks going around delivering to the smaller fragmented market, and we also have very high delivery accuracy. So it's about stocking, processing, and so on.
We have facilities now in Norway, Sweden, Finland, Denmark, and in the Baltics. They don't only supply SSAB material. Roughly 50% of the volumes they sell is SSAB, or 50% of the sales comes from SSAB products, but they are a one-stop shop for these type of materials. So they sell long carbon steels, stainless, and non-ferrous metals. And that is for them to be relevant on the market as a one-stop shop. But what we focus on is the 50% strip plate and tubes for the Nordic market. When we look at Tibnor, and after the acquisition of Sanistål, we have a fairly decent position among distributors in the Nordic regions. We still have some things to do in Norway and Denmark, where we are number two.
We are closing the gap, and then in the Baltics, there are also some opportunities. From an SSAB perspective, we talk about the multi-channel strategies. We don't only work with Tibnor. We work with other distributors as well to serve the markets and to keep the market share in the Nordic region. And this is about market shares, volumes, and as said in the beginning, smaller and fragmented markets or customers have typically less volatility and less competition. So if we can meet competition in the Nordic market with spot deals, big batches to big OEMs, but when we have control, if I'm allowed to use that word, or influence over the distribution chain to the smaller fragmented market, we typically meet much less competition there.
I talked this morning about how we run SSAB with divisions, business units within divisions, and so on, and I also talked a bit about benchmarking. We have not been, or I have not been happy with the profitability of Tibnor. If you measure the long margin, it is a very important and profitable business. But as I said this morning, we measure long margins, and we measure short margins. And the idea is that the long margins for the steel business should, of course, be very profitable. But we also have the requirement on the divisions to be best in class or best among peers, when it comes to their own profitability.
Tibnor are not getting any rebate whatsoever from Olavi, and Ruukki Construction is not getting any rebate or anything that other customers in the same segments do. So they should buy at market price, they should sell at market price, and they should be profitable enough compared to other peers, and they were not. So we decided to run a restructuring program. We decided to reduce the cost with roughly SEK 200 million on a yearly basis, and with a full run rate from end of first half, 2020. And this will also mean that we will reduce the number of employees with 250 people.
It is, to some extent, or, or to 50% or so, a bit more than 50%, maybe restructuring, closing sites, moving sites, getting economies of scale, but it's also about productivity and efficiency. And, this will cost us, this full program will cost us 50 million SEK, and that will be taken in Q4 2019, but from 2020, then we will see the effects of it. And the target we have set, and what is-- what should be reached, is that execute on the cost-saving program until fully executed on, half of, during first half next year. Then, focus on market penetration and market share. And then when that is done, they should be in shape, and in shape, according to our benchmark, is an EBITDA margin above 5% and return on capital employed, above 15%. And they are...
That's why I'm standing here today, because I typically, when we have things like this to do, I call my go-to guy, Kimmo, and he's now running this project as an interim managing director for Tibnor, and then we'll see how we sort it out in the future. But this is his task: to run the restructuring program, set the basis, set the platform, prepare for market share growth, and then prepare for or set the company in order to reach the requirements we have when it comes to return on capital employed and EBITDA margins. So in summary, an important part of the SSAB portfolio, and you heard Olavi talk about it, and for him, this is an important customers, buying big volumes at market price, helping him to protect the Nordic market share.
After the restructuring, that has already started and is going well, I expect also to see leading profitability and return on capital employed from Tibnor. We're also, at the same time now, integrating fully the acquisition of Sanistål, and that will give us a very good market share and a position on the Danish market. That was extremely quick.
... Okay, thank you, Martin. Any, any questions now for, for Martin? No. We continue then with inviting Sami Eronen to talk about Ruukki Construction.
Thank you, Per, and good afternoon to everybody. Sami Eronen is my name. I have been heading Ruukki Construction now for three years, and when we take a look on the different businesses of SSAB, I would say that most probably Ruukki Construction has been the business area that has undergone biggest changes during coming or during past years. We look a little bit different company than couple of years ago, but I would say that we are in good fit at the moment, and we are ready to grow in a profitable way for coming years. Our strategic priority is outgrow the market. The first one, and I would say that in our core businesses, that is what we have been doing during the past three years and been pretty successful in that one already.
Then industry-leading profitability, what it means in our terminology, that if we compare Ruukki Construction to main peers, best competitors on the market, it's it means EBITDA margin, which is more than 10%. And then as a third one, superior customer experience, that when we ask Ruukki Construction customers that what do you think about Ruukki as a supplier? Very often they say that very high quality products, reliable, good partner. What I want to see in this company in coming years is that we build on existing strengths, but we focus even more to market and customers, be more customer-centric, and, and in that sense, improve our competitiveness in the market. This is how we look today. We are about 1,500 experts in 10 countries with local strong presence.
We have 10 production units in five countries, and I would say that the setup is very good and competitive for the current market situation. It is also good for improving positive market situation. It is also something that we can survive in a good one when market is not that good. Then we have gone through quite a lot of changes in our geography, that last year we sold our Russian operation, a bit more than 600 persons in Russia. We also made an exit in Romania, entire southern part of Eastern Europe, and also we had some local operations in Western Europe. And at the moment, geography looks like this, that we fully concentrate on 10 countries that you can see on the map. It is in the Nordics: Sweden, Finland, Norway.
It is three Baltic countries: Estonia, Latvia, and Lithuania, plus then our core in the Central Eastern Europe, Poland, Czechoslovakia, plus Ukrainian operation that is fully concentrating on our roofing products. This is making our focus, strategic focus much more sharp. We still see that we have plenty of growth opportunities in these geographies and in specific product areas where we are operating. And what I'm going to do, tell you today, it's only focusing in our product businesses, which is about SEK 4.8 billion in net sales in 2018. On top of this, we have also our Building Systems that is under divestment program at the moment.
In turning this company more from the products to customers, it is very important that we follow all the time that what our customers are thinking about us, and this Net Promoter Score is one of our most important KPIs, and during the last years, that has absolutely been developing into right direction. Then our businesses shortly. Core businesses, as we call, product businesses, roofing and building envelopes. This means that in these businesses, we have very strong market position in existing countries. We have very strong brands, product names, with good reputation in the market and, serving different customer segments at the same time. There are also differences if you take a look on, on roofing business, roofing sheets, rainwater systems, roof safety, flashing products, everything that is needed to make a complete roof package out of steel.
We are serving different customer segments, and we have very different channels also to the market. Main customer segments there, we have still plenty of dealers in our customer portfolio, housing factories. More and more, we are working tighter together with installation companies and tinsmiths that are really the users of the products and, biggest influencers in making purchase decisions. Roofing is including plenty of products that are made to stock, and they are rotating quickly in our customers, but building envelope business is more on the bigger projects, where we are serving directly product customers like installation companies, construction companies, and even more important is that we are more active in pre-sales phase with architects and, structural designers when the decisions of products and Services are done.
Altogether, in these businesses, we have a bit more than 10,000 active customers in 10 countries where we are operating. Then our Building Systems operation, we signed the contract to divest this business in July, and the main argument for the divestment is that Building Systems is like a contracting business. It's not a product business as we are focusing. It's a contracting business that is next step in the value chain, requiring also very different kind of competencies like design, installation at site, design of tailor-made product, and so on. We saw that we are not the one who is going to consolidate this market, but we see much more potential in product businesses to grow further, and that divestment is ongoing.
Trying to describe the change journey, what we have done, so here in the picture, you can see major changes both in M&A side and cost saving sides. When two companies, Rautaruukki and SSAB, were merged 2014, after that, we have run a cost saving program, which Martin already mentioned earlier today, RC 25, meaning that we were making our cost base by EUR 25 million more competitive during that time. Then we have these divestments in Russia, Romania, UK, Building Systems ongoing, plus then acquisition of Piristeel that took place during the first quarter this year.
At the merger in Construction division, we were about 3,300 people working in the company, and when Building Systems is going to be divested, we are about 1,500 in the company, so that is giving the picture that what has happened during the way. At least as important is our profitability improvement that before this restructuring measures, we were delivering EBITDA level of 2-3 percentage points. Running rate at the moment, at the end of Q3, it's about 9% EBITDA. So also, when you take a look on the profitability per head, it is about five times more than what it used to be about four years ago. At the same time, we have been running our net sales around 5 billion SEK-6 billion SEK, not a major change there.
We have been, at the same time, under these figures, we have been strongly growing in core businesses. Non-core businesses and has not been growing, or those have been decreasing at the same time, but the current running rate in product businesses is close to SEK 5 billion. So quite a big, big change in the structure. Then, when we take a look on our role in the corporation, as Martin already said about Tibnor and the subsidiaries as a total, that we have a two-sided role in a way that, we are paying the market price on steel. SSAB is the biggest supplier, but we are also using external suppliers. And at the same time, we have to improve our value at what we are doing on top of the steel products.
We are close to steel business, but our business is building products to construction industry as a total. So we have been able to improve our value add there on top of the steel and build the growth. Then together with SSAB also, it is important that we steer the market in a way that we are flexible channel to the market in terms of internal, external volumes, depending on the market situation. But also from the product quality point of view, that we are heavily focusing on the premium grades, and then we can be more flexible with the standard grades, and in long term, build the position in the core home markets, but also to strengthen our share in premium products from SSAB perspective, but also internally from Ruukki perspective.
Then going to future that how market looks at the moment, I said that we have been able to deliver profitable growth during the past years. I would say that market is still, it is in good shape. We see a little bit slowdown in Finland and Sweden this year from the earlier levels, but, still keeping in mind that the current market activity is still high. It is in good, healthy level. We see good potential to continue to grow in Central Eastern Europe and also in Baltic. Those countries in Central Eastern Europe, where we are active, they have been performing very well throughout the cycles during the last years and see additional growth opportunity in those markets.
When we take a look on main focus areas in our strategy, the circle looks pretty much the same as in steel businesses, but a little bit different formulation here. Leading home market position strongly linked to the map, what I showed at the beginning, and I said that still a good growth opportunity when going forward, both in organic and M&A tools. Leadership and differentiation in premium product portfolio is something that we need to build even more value-add on top of the steel products. We are considered as a high-quality premium supplier. What we are doing at the moment is that we are widening our product portfolio to serve the entire customer base, what we have, and in that sense, to improve also our share of wallet at the individual customers.
What we see also in the construction industry strongly is that the Services, digitalization, all in all, it is very strongly linked to our products more and more on the daily basis. What we want to make sure is that our strategy focus is tight enough also in the future, that we are not starting some things that are nice to have in Services or digitalization, but very tightly focusing that to existing customer segment and linked to our product portfolio. The superior customer experience that was already highlighted, very heavily linked to building services and digitalization, high-performing organization, in our case, main focus areas there, safety improvement, where we have had a good track record. What I see as one of the biggest potentials we have also going forward is to...
Get the entire organization on board, that we have continuously improving results also in our employee engagement, and that we want to continue. Where we have succeeded well is most efficient operations, meaning that after this heavy restructuring measures a couple of years ago, we have been able to keep our fixed cost structure in good shape. Basically, the growth that we have been building, we have been able to make it with same fixed cost structure that we have had in place. I said that our story is a growth story, and building that in two ways, both organic growth and complementary M&A. Market position is strong, so we are able to expand the offering.
Cost competitiveness improvement has been offering us good tools to build further growth that has been taking place, and then we are going to be more active during the strategy period with the implementation and launch of new products and tightly connected Services to our products. We see also good potential on M&A side, and what we are taking a look on M&A side, it is not any mega-size efforts there, but more to complement offering in our core markets. We still have product areas that we are not on the target level in terms of market share and competitiveness. Those we are going to expand, and this Piristeel acquisition this year is a very good example of that kind of cases.
If you take a look on Piristeel shortly, this is the company net sales around SEK 200 million, has been operating mainly in Finnish market, has been the market leader both roof safety and rainwater systems in the Finnish market. And this offers us a very good platform, of course, to continue the Finnish market development, but also to expand these products to our other Ruukki countries. And I would say that this is a good example also in such a way that even if we have been in our roofing business, very strong, basically in all the market areas when we speak about roofing profiles, sheets to cover the roof, but accessory part in terms of roof safety and rainwater systems has not been as strong.
This is fixing our potential pretty much in Finland, and I said that expanding that to our other market areas. Several opportunities to continue similar kind of complementary M&As to speed up the profitable growth and increase both the market share, but also share of wallet as the individual customers. Then going more deeply to our product and offering, a couple of examples on the sustainability side, and we see this in a two way, or actually three ways, that we have very good offering from SSAB side as sustainable steel products, as a raw material to Ruukki Construction. We have a competitive, sustainable offering on the products.
couple of examples shown here, Ruukki Life Panel for walls, Liberta Solar, solar product that is also utilizing solar energy to, to contribute to building heating of buildings and energy consumption of buildings, and then different kind of additional product that as such are competitive and sustainable. But as I said earlier, that we want to be the best in product offering role in the market, which is including then also pretty much engineering skills, optimization skills. And then it is the question that how we use these products to build sustainable solutions, airtight envelopes, envelope meaning here both the wall and roof solutions, and then optimize different kind of technical building solutions into the same package. In the next slide, you will see the example about near zero energy hall that we have been delivering.
This case is based on good product offering, airtight envelope made of our sandwich panels. And what is important here that this is not only about steel, this is also about insulation materials, delivering the entire solution for the wall or roof to be built. Complemented by different sustainable products, like the daylight windows, utilizing solar heat, utilizing solar photovoltaic also in the building, plus different kind of heating applications inside, and even utilizing geothermal heating that is taking from the ground using SSAB Europe excellent steel pile products. So there are many ways to contribute, there are many ways to take a look on the value chain, how far we want to go. I said that we want to focus on good products and related Services there, not going to construction sites as a contractor. Then another example on digital services.
Personally, I see digital services something that we need to connect very tightly to our offering and our processes. It is not some other functional effort that is taking place somewhere else. Couple of examples here that we have. We can put this into three categories that we have: digital customer experience, how we meet our customers in web, in different kind of other tools. It is roof calculation tools that every single customer can utilize, can optimize their roofing solution based on our products and solutions, which is then, at the end of the day, increasing customer value and making customer relationship more easy with us. The other important part that is even more important in our building envelope business is design tools and modeling part, which is becoming more and more popular.
I would say that we have a good track record in the development, but we have still much more opportunities to capture. It is about product information management, building information modeling, different kind of design tools that we are offering to customers, structural designers and architects. And at the end of the day, it is something about prescriptions, what they are drawing in their papers, and trying to guide that decision-making in the right direction. The third is digital business and chain optimization that digitalization already today is heavily inbuilt into our processes, and one target, of course, there is to make our internal processes, also our customer processes, more effective and more simple.
Then to summarize, we are trying to run very decentralized operating model also in Ruukki Construction, that, comparing this to steel businesses, we are operating approximately in, in 10 countries locally. Our units are much smaller. We have more, I would say, tailor-made solutions based on the country needs, local construction regulations, and so on. And therefore, we try to push the responsibility in the countries, and we have also implemented our P&L responsibility very, down in the organization in respective businesses and countries. That we want to continue heavily. But at the same time, we see that there are a couple of things that I want to see in each of Ruukki unit that are visible. It is safety development, where we focus heavily on personal engagement, 5 years implementation, results clearly visible.
Then the other, other important thing is this commercial excellence program, which we have been running 1.5 years after cost savings to focus really on the customer interface, maximize the value from the market. Results also visible, but there's still a lot of potential to be captured. Cost and capital efficiency, where we have succeeded, need to continue that one, and, and then heavy focus on our personnel to get everybody on board and initiatives visible. Then the end result should be that we are going to reach the profitability level that is more than 10% EBITDA. As you saw in the previous slides, we are very close to that already. 1 percentage point is missing from that one. As Martin is teasing me all the time, that, of course, that is not the upper limit.
We need to improve further, but at the same time, we have to capture the growth potential that we see on the market. All in all, our promise is building your tomorrow. It's valid for our customer, it is also valid for our employees, and hopefully to all the other stakeholders. Thank you.
Thank you, Sami. Do we have any questions here before lunch? No, then there will be a break now for the webcast. We will be back at 1:30 P.M. after lunch. And for you all here, we have good indication now that the bus has come to the right address this time, so hopefully it's outside now waiting to take us to the lunch, and then also back again here for the two final presentations, then check with SSAB Americas, and Håkan with the finance. And after that, we have this right. So please, take the opportunity now to talk to the SSAB managers during lunch here to get some more insight into the companies. Thank you. So welcome back to the presentation program. Now we have two final presentations, and then we start with a mill visit and mill introduction.
We start right away, I think, with Jack, that's going to present SSAB Americas. So please, Jack, take the stage.
Thanks, Per. Good afternoon, everyone. Hope you enjoyed a good lunch. We're gonna move across the Atlantic right now. I want to thank Per. It's kind of Per to put the American up in the afternoon. If there's any of any others that traveled over from North America, like Seth, you know, we hit the wall right about now. So it's the strong Swedish coffee helps that. So let me start with some business statistics for the Americas. You've probably seen a number of those. We melt 2.5 million metric tons. And from that, in 2018, we delivered about SEK 17 billion, with an EBITDA margin of just under 15%.
You can see the segments here that we participate, led by energy, service center. We don't necessarily call a segment per se, at least in the Americas, there is a fair amount of service center business, which is direct line into other customers, such as construction equipment, heavy equipment in transportation. And just the statement on number 1 in quality, that's just not a blatant promotion there. That is actually, if you're familiar with it, the Jacobson Survey, a consulting group for probably the last 15 years, doing quarterly customer surveys for quality, customer service, on-time delivery, et cetera.
Since the inception of that survey back some 15 years ago, SSAB has been number one, quarter in and quarter out. Our manufacturing footprint starts with our EAF production. As we've already been talking about, nearly 100% scrap base. It's led by our flagship operation in Mobile, and I refer to that as our flagship. Not only is it our most modern facility, but also it has the biggest product range, has been described here with Johnny and Gregoire. We now make up to a third of our products there for special steels, as well as products in heat treat that go into transportation.
And then, up north, a little older, is our Montpelier operation. And then, the two big mills surrounded by three coil processing lines in Houston, St. Paul, and Toronto. And I would draw your attention to the location, because the geographic location for Americas' facility actually serves as a strong competitive advantage. If you know the manufacturing base, if you're familiar with the manufacturing base in North America, it lines up right with that quarter... That corridor surrounding the Mississippi River. And we have a unique advantage in terms of how we serve and where we serve from, that manufacturing corridor.
And so it is a central hub of manufacturing in North America, which is not in Kentucky, that others may lead you to believe. So, just touching on our short-term focus. I know I've got some questions at lunchtime and this morning about this, but our first priority right now is returning some value back into the plate pricing in North America. You may have caught, we led a price increase just a week and a half ago in North America. Our lead times have started to run well into January.
And so we think the market is overshot the landing from peak pricing, and I'll talk more about that in a little while. But while we are in a bit of that trough right now, we have extremely laser focus on cost efficiency and keeping our cost in line. Likewise, I think there was a question this morning about investments in support of growth in premium products. We have both the investment in special steels going on at Mobile that would grow our Q&T capacity, releasing some bottlenecks by up to 100,000 tons.
And then also, we are, as we speak, ramping up one of the most advanced cooling systems in Mobile specifically for high-strength products, and I'll touch on that in a few slides later. So our strategic priorities and where we fit into the SSAB portfolio, highly linked with special steels, as I've described, also taking some lessons learned from Services as well, is continuing to maintain our industry-leading profitability. And in order to do that, we look to grow our share of premium products, and I'll get into those numbers in just a minute.
We are deploying a new go-to-market model or at least a different version of our go-to-market model, where we look to increase shipments to end users and smaller fabricators. And then lastly, a bit on the longer term, as Martin described, is the collaboration that we are doing now with EAF and anticipated sponge iron coming from Sweden to introduce fossil-free steelmaking in the Americas as well. So let me just touch on the North American plate market for just a bit.
As I described right now, and when you look at the spreads have now come down to a level that I would call is somewhat unacceptable when you look at the demand scenario out there right now is still fairly good, fairly healthy. It certainly, in my estimate, is that with the amount of destocking that took place at service centers and distributors, they overshot the landing. If you follow the statistics in the North American market right now, plate inventories are at their lowest levels since the end of 2016, early 2017, and our demand scenario looks nothing like 2016, 2017 today.
So there certainly is an expectation, all depending on timing and confidence, for some restocking to occur. And then if you look at the longer-term forecast here, provided by CRU, a fairly stable growth pattern, as opposed to despite the pause in 2020. But I would, you know, suggest to you even that pause in 2020, relative to some past years in dips is a healthy demand scenario. And you can see the segments listed there of the makeup of the market.
I would offer you that in most of those segments, we as SSAB Americas has a number one position or a number two position at worst in serving most all of those segments. Our leading position here within the market that we talk about on the right-hand side there, those two benchmark comparisons come right out of the Jacobson study that I was talking to earlier, as you see the quality standard there. But even in customer satisfaction, this tends to be an ongoing argument between Martin and I, as we have always paid attention to how we rank and perform against our two biggest competitors, Nucor and ArcelorMittal.
But Martin likes to remind me that Evraz has been taking over that number one position while they operate in a very small space of North America and just selling from inventory and purchasing is a good way to improve your on-time delivery, but it really doesn't get us to the market share that we want. That's between Martin and I. More telling, I think, is a market position when we also benchmark ourselves against Nucor and its two plate mills.
Its capacity overall is somewhat or very similar to our own, and we have performed well, even as the market has softened a bit in the past couple of quarters. We like to promote ourselves as the first choice from our customers. The utilization figures compared to the rest of the industry somewhat supports that we have managed to operate our mills at full capacity or near full capacity, despite some softening in demand. So I'm gonna change the discussion a little bit into what we're describing as our value plus strategy.
Building upon the fundamentals of what we've described in our previous strategy, you know, maintaining our low-cost model, the flexibility of our operations that Martin described, that, you know, we can move pretty quick with two EAF mills in either adjusting capacity or adjusting to different production levels. Our safety leadership in the industry that I'll touch on a bit later, and then the superior customer experience. And what we expect to do, you know, beginning in 2020 now, is build upon a go-to-market strategy where we will be focusing on another set of customers that we've probably been either lagging or poor to service, smaller end users, smaller fabricators.
These could be some of the, and are some of the very customers in North America being serviced by Special Steels and even Services today that we have not been effective in supplying. And these customers also are buying or want to buy premium products. And so we would look to expand both our product portfolio in a way that could capture a smaller segment of the customer that we have somewhat ignored in the past.
And a bit more details on that, you know, again seeing our geographic location and our advantage in the manufacturing heartland of North America, you know, we have smaller customers, end users, fabricators within our neighboring areas that we would look to utilize both our mills in maximizing that flexibility and really expanding the work we do at our coil processing lines. These lines today have primarily been used as downstream coil eaters as we see demand ebb and flow and sometimes operating them with third-party material as well.
But we've advanced these more recently now, and we have put in burning lines at all three of these locations, is one example, in an effort to support some of the work by Special Steels and Services when they have tight demands that we could provide either stocking Services or some of the commercial product. And so we're going to build upon that and get more focus in a new management team that will build that into a business unit, tracking the P&L of those operations as well. And then lastly, is a developing downstream partnerships, particularly around the Iowa facility. We have a great deal of land.
We're a little tighter in Mobile, and we already have some existing partnerships on the Mobile site already. And we would look to review a number of partnership applications today. And you may have seen this in models in a couple of the strip mills around North America have done a little bit of this, but no one's done it in plate. And so, we are picking up those conversations, and we have had a great deal of interest in the last couple of years.
But now in collaboration discussions with Gregoire Parenty and in Johnny's teams, of exactly, you know, how we wanna build this up, that would be most effective for our most important products, you know, namely the Q&T and the premium products. And then, you know, speaking of the premium products, you know, this is the increase that I think Martin introduced at the beginning of our meeting. And we have grown this mix that it actually, we had ambitions years ago. If you'd seen our Americas' presentation, we were at some 22% growing to 28%. And now our ambitions are moving up to almost 40% with this total mix.
In order to do that, we obviously will have to look to some additional customers and a different customer mix. I would also mention that the branding programs have been effective. Some lessons learned on how Special Steels has done well with branding. Likewise, on the commercial side, our products, commercial products out of Mobile and Montpelier, as an example, are the strongly preferred product from laser equipment manufacturers because of its flatness.
It's not only its flatness in delivery form, flatness after it's been born, been burned on a laser, which you can imagine is very intense heat, and a lot of our competitors' products will buckle or warp under that heat. So we've in rolling out our laser quality plate was really driven by the manufacturers themselves recommending SSAB product because of its flatness after burning. Then expanding upon EcoSmart is the environmental play of having 100% scrap and a huge amount of our electricity now being supplied by wind energy. And that's an advantage over almost any other EAF producer in North America.
And then, as you know, to the question on investment to high-strength steels, you can see our ambitions here to grow these volumes, particularly at our Mobile operation. That's been supported and with collaboration on Oxelösund, how to make these products. And then likewise, we return that collaboration with the EAF technology, bringing to Oxelösund and our other operations in Sweden. As I mentioned earlier, you know, we look to add this capacity in a couple of ways, reducing bottlenecks, and then, as I described, the cooling system, this is just being fired up over the past couple of weeks.
I checked, you know, as of this morning, we're up to doing trial commissioning on it, but to 2,000 tons, 1,000 tons of plate and 1,000 tons of coil. We've put through this new coil line here. Not only do we expect to gain some productivity through some high-strength products, per- you know, namely line pipe, that typically runs very slow through the Mobile operation, you know, we will be able to increase that line speed back to a normal or above normal rate.
And likewise, we expect to get a significant savings because we will reduce alloys significantly on some of these high-strength products, where we needed to use alloys before, and now we'll be using the cooling system. I won't spend a lot of time here, but, you know, if you're wondering, okay, then where are you gonna sell all this premium? The drivers in our business have been and are expected to continue within the energy segment, both offshore and onshore, normalized grades in the transportation industry and also the infrastructure segment.
And then, you know, the last bit of that is maintaining our fundamentals, the foundation of our strategy that we've built upon, our low-cost model, the flexible operations. We continue to use the SSAB One platform in combination with Six Sigma, lean practices. We've had a well-established program there, at all of the facilities for quite some time. Our safety leadership is nonstop. And although we, you know, we are on a decent path this year, approaching almost 1.0 is our ambition for a LTI rate. You know, the ultimate ambition is getting into zero.
If we think that's a bit of a pipe dream, we have departments, by departments, by departments, including in melt shop, you know, very dangerous areas that literally go six months, nine months at a time without a single accident. So we know it's in reach. We just need to get in concert with the, with every department, on site. So we're still ambitious in the safety area.
And then lastly, the customer service experience, coming from a peak demand period in 2018 and 2019, maximizing production, getting everything we can out the door, but we probably could do a bit better in terms of getting on time, getting back to 85%, 90% on time on a consistent basis, and that will be our focus for the upcoming years. And then the longer term has been described here, so I won't spend a lot of time on it, but just to point out here that Americas has a very critical role here, and we also have some unique advantages already in the North America market with the renewable energy sources at both of our steel plants.
So we're anxious to see the first shipments of the fossil-free sponge iron to begin putting into both Mobile and Montpelier, but with a heavy focus on some of the branded products where we see the most attraction right now. So then, just a quick summary, and happy to take questions. We think the market, the plate market right now in North America remains fundamentally sound. You know, there are some stress points, you know, very short term right now, as I've described, with inventories and such, but over the next few years, we still see a very good demand period. And then, our strategic priorities, we're on a very solid foundation.
We like the new model opportunities that we're going to develop. We're seeing a little bit of that already with introductions to some of these customers by Grégoire's team is one example.... and then strong ambitions to continue to grow that share of premium products, and then getting to the ultimate goal for the corporation of first in fossil-free steel.
Okay, thank you, Jacques. Well, let's have a question here before we move on from, from Seth, please. Go ahead.
Given some of the upgrade investments you have ongoing right now with the new quenched and tempered line, and the new cooling capacity, is there a sense you're kind of walking away from some of the historically core commodity grade customers? Is that a problem in a growing market? Is that okay? And with Nucor building significant new capacity coming online in the next two years, how do you view that impacting the plate market? Is it just taking share from imports, or do some encroaching in some of your core markets?
Okay, two good questions. You know, will we walk away from some of our traditional business? We're going to be flexible, right? I mean, we don't know when, you know, the timing of wind tower, as an example, two years from now, three years from now, or rail car dips and so forth. But as much as we can walk away from low-margin business, oh, you bet. Yeah, we, you know, we will. And, and, you know, the intent of making more of it premium, and we haven't been, you know, secret about that as well.
When, you know, when we negotiate contracts and so forth, we come from a standpoint that, you know, from our quality and our branded products and so forth, because we have major customers that buy both, that, you know, we look to use our melt in the most stringent applications possible. And we would expect, not always get it, but we would expect to get a premium for it. The Nucor startup, I guess, in 2023 or, when that comes up, for those of you who didn't get it, my comment, Kentucky is not the center of manufacturing. That's the site of Nucor's mill. Just letting everyone know.
You know, it's expected to consume take a fair amount of import. I mean, clearly, they're targeting import in doing wider and heavier plate. There's only two sources of that product today in North America. That's ArcelorMittal's plants that are quite old, and it's import coming from Europe and in Japan. And so that would seem to be their target. Of course, you know, from a competitive standpoint for us, in the mid-range products in what we make, we've seen the equipment, we've seen some of the design from equipment manufacturers.
You tend to give a lot away, you know, when as you probably know, ingot casting and things like that are tremendous yield losses. So, you know, we certainly don't agree that, you know, they will have a low-cost model on plate necessarily out of that facility in the core range of plate products. They, you know, may be low cost against Mittal or others on the fringes of a very wide or very thick plate. But within our range, we're quite comfortable that we'll compete day to day. But the market share in total, you know, when you add it up of where it's consumed in the market, it is certainly available demand today.
Okay, I think we should move on now with Håkan, and then we have some time also at the end. So, so please, Håkan, if you can take the stage here, we... continue.
Okay, good afternoon, everyone. I know I'm the only thing now that's behind you and the most exciting event of today, to get out and see the reality behind these PowerPoints and see our fantastic mill here in Oxelösund. But, bear with me for around 20 minutes or so, and then we'll let you out. I will talk a little bit about our historical performance, our 2022 target, what do they, what do they mean in terms of profitability and also in terms of CapEx, as we talked about before, and also get back to our financial targets and where we stand there right now. But I will start with a historical perspective and look at our EBITDA and our sales over the last 10 years. And as you can see, and as I'm sure you know before, quite a lot of things have happened.
We can see that we have, in terms of sales, we have gone from roughly SEK 40 billion in sales, and we are now close to SEK 80 billion, so almost a double in terms of sales. Also in EBITDA margin, we had a trough there in 2013. We were down at around 4%, and we are now up at about 10%. What we have seen is clear increase in sales, driven to a large extent by the acquisition of Ruukki, but also that we are selling a lot more of premium products or high-strength product with a higher average price.
The same factors, obviously, it goes up, up and down a bit, depending on the market, but the same factors, the merger with Ruukki, realizing SEK 2 billion in synergies, and at the same time, another SEK 1 billion in cost reductions, but also the growth in our high-strength steel have helped us improve our EBITDA margin, and especially our relative performance versus our peers. If we take a long-term trend again, but we look at cash flow, we have had a very solid cash flow generation, and we have been able to convert the EBITDA that we generated into cash flow. What you see here on this chart is the last 10 years, where we have actually been able to convert roughly half of the EBITDA into cash flow.
This is interesting as such, but it gets even more interesting when we look at this in relationship to our peers. What we did, we took a few of the peers out of our financial peer group that we have defined, which we measure our EBITDA margin against. Then we didn't take a 10-year period, but we took a 3-year period, and we looked at how much, in percentage, have they been able to convert from their EBITDA into cash flow? And of course, you know, this varies over time. You might have large investment programs, et cetera. But we are rather proud that within our peer group, they're ranging from -4 up until 35%, and we are actually, also the last 3 years, almost at 50% in cash flow generation out of EBITDA.
So even a long-term period, like three years, but also relative to our peers the last three years, we have been able to generate very good cash flow out of the EBITDA. Martin showed you the strategic target for 2022 in this morning, with growth in special steel, growth in Services, growth in premium in Americas and in Europe, and in Europe also in absolute volumes, and then also the market share within the Nordics. I understood from the coffee and the lunch breaks, there were a bit of a confusion. We got some questions, are automotive included here in special steel? Because that's also high-strength steel. No, it's not. Automotive is only within SSAB Europe. Yes, it's high-strength. It's even advanced high-strength steel. But the automotive products we only produce in our, in the facility that belongs to SSAB Europe, in Borlänge and in Hämeenlinna.
So we have said that automotive business, although being high-strength, it belongs to SSAB Europe. So up on the 1.6 there, the target for Johnny for special steel, it's only special steel product, the one that Johnny described earlier today. And there was also a question this morning: What investments do you need then to realize these volumes? Well, we have most of the investments already in place, complemented then by what we already now have ongoing. The biggest package is the one in Mobile, SEK 1 billion, that Chuck talked about just recently, which is especially the quenching line number 6 expansion, and also then this cooling line that you saw the picture of when Chuck talked about the commissioning of.
We are also, and we've been doing that for the last years, expanding our capacity of automotive advanced high-strength steel in Borlänge. That's not fully completed, but it will be completed now in this year. So with those investments, we have more or less the base in order to reach, the targets that was shown on the previous page. And why we do this? Well, we talked about that a lot today. We-- Olavi showed you this example with how much of the gross margin that comes from premium versus that comes from standard in relation to sales. And we also looked at how, and how Hardox 450 gross margin have developed the last two years compared to when we sell a standard hot rolled coil. So clearly, when we sell premium or high-strength steel product, we have less volatility, less competition, and better profitability.
One way we have been generating cash flow the last few years, and that we expect to do going forward, is through working capital efficiency. We started a project in 2016. At that time, we were on 26% working capital over sales. We had a good development, 2017 and 2018, and we were down here in the bottom at 20.4% at the end of 2018. Then we've been having some setbacks now in 2019, and you can blame that the market's been a bit slower. We idled the blast furnace earlier than planned in Oxelösund, so we have too high inventory here. But still, we are not happy with the performance we've seen now during 2019.
We have now set new targets, new ambition for the coming three years, and we definitely expect to turn this trend in the right direction again. On a subject we don't discuss very often in this forum, and more of an accounting issue, is the depreciation on surplus values. So after acquiring IPSCO in 2007, and after acquiring Ruukki in 2014, we have surplus values that we depreciate every year. And we have, for the last three years, been between SEK 900 million and 1 billion, roughly, but this will actually go down quite a lot already from next year. So in 2020, it will be around SEK 400 million and continue to go down up until 2024, where we have a bit of a peak again, and then basically from 2025 onwards, they will be gone.
This is naturally does not have any impact on cash flow, but everything else equals, we will see a positive impact on EBIT, and we will see a positive impact on earnings per share out of this already from next year. Then, coming to investments, which there was talk about this morning already, there was a lot of talk about it at my table at lunch. What will you do now in Oxelösund, and how much money will you spend? We will, during this year, do a pre-study, where we will more define exactly how the timeline will look like, exactly what type of equipment we will use, and hence, also exactly what it will cost. But the assumption we're working with right now is that conversion to electric arc furnace-based production here in Oxelösund is gonna be around SEK 4.2 billion.
We will start spending some money already next year, especially related to infrastructure. A little bit more, 2021, basically peak in 2022, 2023, and then a little bit more downwards the last few years. On average, roughly SEK 700 million here in Oxelösund, up until the conversion is completed. SEK 4.2 billion is obviously a lot of money for doing such a thing. On the other hand, when we look at the alternative, if we don't do this conversion, what other amounts do we need to spend here in Oxelösund? And the conclusion is, well, that's even higher. It's actually around 30% higher. It's around SEK 5.5 billion. And why is that? Well, the main reason is the coking plant. We have in here in Oxelösund the world's oldest coking battery that's being run.
I've been in the company 13 years, and ever since I've started, people have said that it's, it's about to fall apart, we need to build a new one. Now we are kind of giving it a lot of medicine and boost so that it can last and run up until 2025, but it is definitely time to do something with it. And if we would have to build a new coking battery, well, that's going to cost a lot of money. On top of that, we would have relining of the blast furnaces, some other investment. So all in all, continuing as is, investing in old technology would be around SEK 5.5 billion, and hence, actually 30% more expensive than going the new route.
What we know also is onwards, from 2026 onwards, we know that based on experience from the operations Ruukki is running in the US, that it is more capital efficient to run electric arc furnace-based production than to run blast furnace-based. Then if we add all CapEx up, and we look both on history and what we see going forward, we had quite a lot of CapEx being spent from 2008 until 2011. There were relinings. We were doing quite a big expansion program for quench and temper material. Slightly lower there for a few years. In 2015, we had the relining in Luleå, a bit lower again, and then we were SEK 2.3 billion last year. We're going to end up around SEK 2.5 billion this year.
Going forward, we will be, for the coming few years, around SEK 3 billion on average in CapEx. That's include then what you saw on the previous picture, that transition here in Oxelösund, which is obviously going to be a large portion, some of these years in terms of the CapEx we will spend. And what will this give us then? Well, in Oxelösund, we are very certain we will get an improved operational position, and we'll also get a better product mix. We will reduce CO₂ emissions substantially on a yearly basis here. We will also have volume flexibility. Martin talked about the red and the green button , so easier to adapt our production here in Oxelösund compared to the market situation. We will get a higher share of variable costs, less maintenance, and also lower CapEx need going forward.
And not the least, on top of what we do in production, we will get the product, which we definitely are certain will be a premium product, where there will be less competition because we are aiming to be first in fossil free. It will strengthen the Hardox brand that you see around here as well, and we are sure we will be able to get a higher real price for this product. We have three financial targets. You have seen them before. They are unchanged. It's profitability, it's capital structure, and it's dividend. In terms of profitability, we measure it versus a peer group where we want to have the highest EBITDA margin. We were number three last year. We are so far number two this year after three quarters.
We are obviously aiming to be number one, and we are not really there yet, but that's definitely still our target. On capital structure, the ambition is to have a net gearing or net debt over equity, normally not exceeding 35%. We were at 15 in Q-- after Q3. There we are definitely within the range. And then finally, to pay out dividend 30%-50% of net profit. And for the result of 2018, we paid out close to 50%, SEK 1.5. Before I summarize more the mid-term and the long-term, ambitions, short-term, we have a market situation with headwinds that we need to manage. Martin talked about it already this morning, what actions we are taking now in, in this situation.
When we released the Q3 report, we showed this picture of a car queue, where when all cars are braking at the same time, you get the long queue. And I would say that picture is still valid. We have seen, as we were guiding for in Q3, that we would see weaker demand in Q4. And we see distributors, we see end users, we see suppliers trying to reduce their inventory level and basically, part of the quarter at least, putting their foot on the brake. What we also know now, when we're approaching the end, year-end, is that during Christmas time now, there are a lot of red days.
We -- it's uncertain how much customers will take out now the last few weeks of Q4 or last few weeks of December, or will they take longer stop over Christmas, given that there is a bit of uncertainty in the market situation. So I would say Q4 has developed roughly as we said, in terms of the market situation, and then volumes will very much depend on what happens now in December. Then more midterm and long term, well, we think we have the platform in place to improve our profitability. We have been able to generate really good cash flow, as I've shown previously. We have a net debt situation, which is significantly lower than it's been historically for SSAB....
We've been paying dividend to our shareholders, and we have the capacity to make the investments we need, and if we find the right target, also to make some bolt-on acquisitions. So what we are looking then for 2020 onwards, is to get the improved product mix, to run continuous improvement through the SSAB One program, to sell more volumes through, our own channels, own stocks, distribution, and also service businesses. To turn the trend again on the working capital curve and become more efficient in how we use working capital, and to make sure that we have production stability. We know that very well, that when we have stable, good production, it just everything runs smoother, and we see it immediately in our result.
Onward from 2025 onwards, then, then we will have another improved product mix through the premium fossil-free type of products. We will have a structurally improved position here in Oxelösund, and we will also see a lower CapEx need then going forward.
Hi, Håkan, do we have any? Yes, we have from a couple of questions here. We start with Alexander in the middle.
Hi, Håkan. A couple of questions from my end. Firstly, is on the, the Oxelösund shutdown, or the phasing out. Have you taken sufficient provisions? How comfortable are you with the provisions you've booked on the balance sheet for the closure? That's one, and two is on the surplus value, which is coming off sharply the next three years for IPSCO and, and Ruukki. This will lead to an increase in EPS and a mechanical increase in your dividends. How will you prioritize dividends versus debt reduction in the next three years?
If we start with the second question, yes, you're right, mechanically, it will have an impact. Definitely, it will strengthen the EPS somewhat. We do have a range: we have 30%-50%. As I said, last year, we paid out almost 50%, so I would say that you have that, and then you have in combination with the net gearing target. Now, we are on a fairly solid base. That's why we paid up in the upper range of the 30%-50%. So I think that will depend on where we are in net debt. We have-- We'd like to have a strong balance sheet, especially now, if we are facing a tougher market. So we want to continue to reduce the net debt, but at the same time, for sure, we also want to pay out dividend to our shareholders.
But we will definitely balance that, but keep ourselves within the range. And then on the first question, provision-wise, well, we haven't taken any provision as of yet. I mean, the big cost is when... if you have to clean up a whole site, but we will obviously continue to run operations here in Oxelösund. What we might or what we will need to do if we, when we continue down this route, we will have some value left in the operations that we will eventually close down. So in terms, there will be some depreciation write-off, yes, or, or we will increase depreciation the last few years, up until 2025. But it's not. That is. We are timing this also in Oxelösund.
I told you about the coke oven battery is basically falling apart, and then, we would do the relinings of the blast furnace anyway in the coming years. So therefore, it's not huge amount of money we will need to make any provisions or faster depreciation of.
Thank you.
Yeah, we had a question from Bastian also in the, in the front there.
Håkan, sorry to come back, but, into the SEK 4.2 billion budget for the new EAF, what is the capacity layout which you have been backing in there? Is this for the two full 1.5 million tons, which you have here, in terms of crude steel capacity? And then also, if we look at the CapEx profile, which you have been showing for exactly that project, it seems like it's very much skewed into mostly, I think, 2021, 2022, 2023. So is it fair to assume that next year will be, SEK 2.5 billion, and the years after, maybe closer to SEK 3.5 billion?
If we start with the second point, now, what we have, it's less in Oxelösund next year, yes, but the main part of the QL6 investment is coming next year. So no, also next year would be more in line with the SEK 3 billion than than 2.5, 3.5. And then the first question was on capacity. That's part of the pre-study we are doing now this year, and that's also why I said that this CapEx, you should take it with a grain of salt, because it also depends on on the size of the EAF that we will build, and that's not fully decided yet.
Okay. Then just one follow-up question, actually, on working capital. You say your working capital performance, you've not been happy with it, maybe this year. But actually, relative to competition, you've been actually doing actually quite well overall, I would say, over the last few years. Now, if you look at the projects ahead, particularly with regards to the HYBRIT conversion, does it change the working capital dynamics? Because essentially, more of the work is actually being outsourced, and you basically get a more sort of concentrated pre-product, basically, into your supply chain. So is this actually allowing you to squeeze out even more working capital ahead?
Yes, it is. On the other hand, that is still six years away, but yes, it will, because just like you say, you know, we will not... Now we have all components basically within our own house, we will not need to have that going forward. So yes, or like for like, that's true.
Thank you.
Yes, okay. Then we can conclude the webcast, and we thank you, the audience on the web, for the attention and wish you a pleasant day.