Eregli Demir ve Celik Fabrikalari TAS

IST:EREGL.E

Earnings Call Transcript 2020-Q2

[Operator]

Ladies and gentlemen, thank you for standing by. I am Myrtle, your Chorus Call operator. Welcome, and thank you for joining the Erdemir conference call and live webcast to present and discuss the second quarter 2020 financial results. [Operator Instructions]

The conference is being recorded. [Operator Instructions]

Please note Eregli Demir ve Çelik Fabrikalari T.A.S., Erdemir, may when necessary make written or verbal announcements about forward-looking information, expectations, estimates, targets, assessments and opinions. Erdemir has made the necessary arrangements about the amounts and results of such information through its disclosure policy and has shared such policy with the public through the Erdemir website in accordance with the Capital Markets Board regulations. As stated in the related policy, information contained in forward-looking statements, whether verbal or written, should not include unrealistic assumptions or forecasts.

It should be noted that actual results could materially differ from estimates, taking into account the fact that they are not based on historical facts but are driven from expectations, beliefs, plans, targets and other factors which are beyond the control of our company. As a result, forward-looking statements should not be fully trusted or taken as granted.

Forward-looking statements should be considered valid only considering the conditions prevailing at the time of the announcement. In cases where it is understood that forward-looking statements are no longer achievable, such matter will be announced to the public and the statements will be revised. However, the decision to make a revision is a result of a subjective evaluation.

Therefore, it should be noted that when a party is coming to a judgment based on estimates and forward-looking statements, our company may not have made a revision at that particular time. Our company makes no commitment to make regular revisions which would fully cover changes in every parameter. New factors may arise in the future which may not be possible to foresee at this moment in time.

At this time, I would like to turn the conference over to Mr. Avni Sönmezyildiz. You may now proceed.

[Avni Sönmezyildiz, executive]

Thank you. Ladies and gentlemen, welcome to the investor webcast of Eregli Demir ve Çelik Fabrikalari and its subsidiaries for the period ended June 30, 2020.

Today, our CEO, Toker Ozcan; our Sales and Marketing Officer, Mr. Fatih Çitak; and also our Investor Relations Manager, Mrs. Idil Ergin, are also joining the webcast.

As usual, we will be going through our investor presentation for the financial results of the first half of 2020. Then there's going to be a Q&A session.

Before I start with the presentation, I'll hand over to Mr. Toker Ozcan.

[Toker Ozcan, executive]

Thank you so much, Avni.

[Operator]

Ladies and gentlemen, please hold the line while we reconnect you to the management.

Ladies and gentlemen, we're back connected. Thank you.

[Toker Ozcan, executive]

Hello, everyone, once again. Welcome to our webcast. After 3 months we are very proud to share our first half year results with you all. As you have all witnessed we have been through a very tough time, with unprecedented events happened in the first half of 2020. But despite all of those challenges we have closed a very successful half year. And maybe different this time we will be sharing more information about the second half.

I want to update you with the developments regarding this COVID-19, first of all, the effect and maybe our [ marketing ]. As you have witnessed, the recovery in most of the segments and the end users has been very rapid, and that's also true for Turkey and the markets that we are operating in today. We have not fully recovered back to pre-COVID-19 period, but we are expecting to catch up in the second half. Then as we look into the numbers, automotive production numbers and white goods production levels, those are not back to where they are supposed to be now. But in the second half most likely we will see a rapid recovery. It has started from China, and it's now spreading to our region, as well.

One more thing is happening really. Most of the spending is shifting from services to infrastructure and we believe our industry will benefit in the long run, in the near future, from that.

Avni, our CFO, will be sharing the numbers with you, but I will be here during the Q&A session, as well. So now I want to hand over the mic to Avni. Avni?

[Avni Sönmezyildiz, executive]

Thank you, Mr. Ozcan. So I will be going through our presentation, and it consists of 2 parts, actually. The first part is the market overview, and then the financial results.

So let's start with the market overview. You can also follow through the web page and it's also available in our Investors Relations website.

So in Page 5, you will find the crude steel production figures in the eurozone, CIS region and China. First of all, I would like to remind you that due to the ongoing difficulties of COVID-19 many figures are estimates from the national and regional associations. So it's possible that it may be revised by World Steel Association in the following months.

So world crude steel production was around 873 million tons in the first 6 months of 2020. It means that it's down by 6% when compared to same period of 2019. The European Union produced 68 million tons of crude steel in the first half, down by 19% compared to the first half of 2019.

And China's crude steel production for the first 6 months was not affected by COVID-19 pandemic, according to the preliminary data of World Steel Association. And China produced almost 500 million tons of crude steel, indicating just a little bit more than 1% increase when compared with the same period of 2019.

Finally, it's estimated that CIS region produced around 50 million tons of crude steel during this period. And if the estimates are correct, it indicates around 4% decline.

I will explain the latest figures in Turkish steel market in the following slide. So let's continue with the raw material markets. In Page 6, you will see the prices of steel-related commodities. Let's take a look at coking coal, iron ore and scrap prices, and let's start with the most volatile one, the iron ore.

And iron ore index has increased more than 25% since the beginning of this year, and it tested about $110 level during July. Now actually we see around $120. The main reason for high iron ore prices is the supply problems lost from the effect of COVID-19, especially in the iron ore producing areas like Brazil, and low inventories in Chinese ports due to the increasing infrastructure and construction activity after COVID-19 and the finish of rainy season in the construction zones in China.

So the coking coal prices are since the beginning of COVID-19, since let's say March, the coking coal price is between $110 to $120, which is significantly lower than the $160 level in February. As there is no supply problem in coking coal and due to low global steel demand, there is no significant increase expected in the very short term. However, it's obvious that these prices in the coking coal is not sustainable for most of the coal producers because they will financially suffer from these prices.

Scrap prices are on a bullish stance since March and right now it's higher than $280. Increasing trend in scrap price could be also an early indicator of recovery in steel markets, especially for the prices.

In Pages 7 and 8, you will see the production consumption export and import figures of Turkish steel market. Turkey Steel Producers Association has recently announced June figures, a couple of days ago, and these data indicate that both production and consumption in this half is higher than first half of 2019. While steel production increased only 2.4%, steel consumption increased around 9% and became 13.4 million tons in the first half of 2020.

As you can see in the next slide, increase in consumption has triggered imports of semi-finished steel products, which are slab and billet. While consumption increased around 900,000 tons, production increased only 400,000 tons. The difference between increase in production and consumption is almost equal to the increase in imports of semi-finished steel products, as you can see on the chart.

As you remember, steel consumption in Turkey had declined around 15% in 2019. And although there are some signs of recovery in consumption in the first 6 months, unfortunately, in this slide, Turkey steel producers increased their capacity utilization because of the volume of significant imports, especially from eurozone and CIS region.

In Page 8, exports and imports data are presented. And as I mentioned in the previous slide, imports were more than 600,000 tons higher than same period of previous year. However, exports volume of Turkish producers has declined around 1.2 million tons because of decline in global steel demand as well as anti-dumping measures and the EU investigations of European Union.

So let's take a look at the financial results and the operational metrics. In Page 10, you will see the brief summary of our first half results. In the first half of 2020 we produced 4.3 million tons of liquid steel, which is 5.7%, or 260,000 tons, lower than first half of 2019. During this period, flat production declined around 200,000 tons, while long production declined around only 70,000 tons.

During the period, we sold around 3.9 million tons, which is around 380,000 tons lower than shipments in the first half of previous year.

Our revenue during the first 6 months is just about USD 2.1 billion, which is 18%, or around $0.5 billion, lower than same period of 2019.

Also, we generated USD 381 million EBITDA and $134 million net profit after tax. I will explain the details of P&L later in the following slides.

In Page 11, you will see the comparison of liquids to production volumes, and I'll skip this slide quickly and continue with the next slide, which is about the capacity utilization ratio of our group. During the first 6 months, our capacity utilization was realized at 87%, which is 4% lower than annual capacity utilization of 2019.

One of the main reasons for lower capacity utilization is the planned change of the timing of plant maintenance of 4 blast furnaces and the degassing of the plants. It was originally planned maintenance 2020, but we decided to make it earlier because of the lost demand expectation in the second quarter due to the pandemic. When we consider theoretical capacity of 4 blast furnaces we have almost around 300,000 tons of liquid steel because of early maintenance in the second quarter.

So if you look at the finished goods production, in Slide 13, you will see that the 266,000 tons decline in finished goods production in the first half comes mainly from the hot product segment.

In Pages 14 and 15, you will see the comparison of sales volumes and revenue. Last quarter, our sales volume was around 1,960,000 (sic) [ 1,923,000 ] tons. And this quarter, sales volume has increased around 5%, and we were able to realize more than 2 million tons of sales during the second quarter.

Increase in sales volume on quarterly basis is mainly supported by export activity, as we will see on the following slide, in the second quarter. I will explain more detail in this Slide 17 about the exports.

During this quarter, hot and cold products sales increased, while long sales are 81,000 tons lower than previous quarter.

Also, average sales price of flat products were USD 527 in the second quarter of 2020, while it was realized as USD 533 in the first quarter. Long prices, however, was USD 452, on average, during this quarter, and it was actually USD 469 in the first quarter.

So when we compare the total mixed average price, long and flat products, we see that there's no significant change between last quarter and this quarter, and this quarter's average price is just $5 lower than previous quarter, on average. So we can say that the decrease in revenue mainly comes from decline in sales volume, not from the average prices.

When we compare costs between second quarter and first quarter, we see that cost per ton was around $17 lower than previous quarter. As a result of these variances in production costs, also considering other intra-company transactions, we have realized $8 per ton more EBITDA than previous quarter.

So let's take a look at the segmental breakdown of domestic sales, in Page 16, and export volumes, in Page 17. As you can see from the pie charts, our domestic sales were around 113,000 tons lower than first half of 2019. While sales to automotive industry increased around 155,000 tons, sales to general manufacturing industry declined around 240,000 tons.

Also, we were able to increase our export volume significantly during the second quarter. Total export volume in the first half, unfortunately, is still 290,000 tons lower than the same period of 2019, as you can see in Page 17. This is mainly because of the low demand in Europe and because of the anti-dumping measures applied by the European Union.

In Page 18, you will see the historical figures for EBITDA and net profit. I'm not going to mention full details about that. It's just numerical information.

So you can skip this page, and let's take a look at Page 19. In this page, you will see the EBITDA to net profit bridge. There are 2 unusual items that we have to mention in this slide. The first one is the one of USD 20 million income recognized from the retirement pay obligations to be paid by Privatization Administration. This income is related to the acquisition of Isdemir shares by Erdemir in 2002, and the court case just was now concluded. And Isdemir collected most of the receivable subsequently in July. So we conclude that it is an adjusting substitute, Erdemir recognized all of the receivables as other income at the end of June.

The second important thing is taxation expense. We continued to recognize higher tax expenses this quarter, because of the depreciation of Turkish Lira mainly. So we have recognized USD 132 million corporate tax expense and $18 million deferred tax expense in the first half.

Under stable currency, high corporate tax should have been adjusted by deferred tax income, and we should see 20% effective tax rate. However, due to the depreciation of Turkish Lira we have recognized additional $73 million foreign exchange loss on the deferred taxation. So this amount is the main reason for high effective tax rate, and we may continue to realize high effective tax rates as Turkish Lira depreciates against U.S. dollar.

In Slide 20, you can see EBITDA to change in cash bridge. Although there is no significant change in the working capital from first quarter to second quarter, the decrease in the working capital during the first half is the result of 2 reasons. The first one is around $60 million decrease in trade receivables due to decline of sales volume and the average sales price. And the second one is the positive effect of lower inventories, around $150 million.

Also, we spent around USD 172 million to capital expenditures in the first half. This amount also includes advances paid for the capital expenditures, as well. And that's why it's higher than CapEx numbers in Page 27.

In Page 21, you can see the EBITDA per ton trend. And we have achieved more than $100 again, although low sales volume and volatile market conditions because of COVID-19. And at the end of our presentation, we will be providing you guidance about the EBITDA margin and the sales volume, and we will make a public announcement right after that.

Let's take a look at the balance sheet, on Slide 22. We paid $120 million dividends in July, after the balance sheet date. Other than working capital and increase in net cash, actually there is no significant change in our balance sheet position.

In Slides 23 and 24, you will see historical trend of financial borrowings and net cash. As we generate free cash flow and cash injection from decrease in working capital, our net cash position increased to USD 769 (sic) [ 767 ] million at the end of June, and we paid $120 million dividends from 2019 earnings in July, because of the dividend cap of 25%.

And most probably, there's going to be a question about it, but there's no decision from the management about the additional dividend payment after September 30, because the cap will be applied until September 30 and from our end there's no decision about additional payments yet.

Slide 25 represents the maturity profile of borrowings. As you can see, most of our short-term loans are revolving trade financing facilities, mainly related to the export and import activities.

Slide 26 represents our cost of sales breakdown. As the decrease in costs are mainly related to raw materials and Turkish Lira conversion cost gets lower because of depreciation of Turkish Lira, there is no significant change in our cost breakdown. However, the composition of iron ore and coking coal in raw material cost has changed, and the percentage of iron ore cost increased in the raw material basket, while coking coal has decreased, which is in line with the trends in raw material markets.

The last 2 slides represent the historical CapEx spendings and employee numbers. Total CapEx spending, excluding advanced payments, is $107 million in the first 6 months. Our ongoing projects, such as new blast furnaces, are on progress, and there's no cancellation from the announced investments. However, there will be delays, obviously, from the COVID-19, and some of the projected CapEx could be deferred to the following years.

As the last thing, there is no change in our number of employees.

That's the final thing, and before we go through the Q&A session we would like to share our year-end guidance. So Mr. Ozcan, the line is yours for the guidance.

[Toker Ozcan, executive]

So thank you so much.

With a strong headwind, we are going to realize better volumes and better margins. We are expecting to move 8.5 million tons of products, over all. And the EBITDA margin that is expected will be in the range of between 16% to 18%.

So with this one, I believe we conclude our presentation. And now the floor is yours. If you have any questions we would be delighted to answer them, to help you with our answers.

[Operator]

[Operator Instructions] The first question comes from the line of Demirtas, Cemal with Ata Invest.

[Cemal Demirtas, analyst]

I think maybe my line was not very clear. Did you say 8.1 million or 8.5 million tons for the guidance? I couldn't hear that. That's my first thing.

And the other question is -- go ahead.

[Avni Sönmezyildiz, executive]

Cemal, it was 8.5 million tons, and we will make public announcements soon, and we will be updating our presentation and our website, as well, so you can check the numbers after the presentation. It will be 8.5 million tons.

[Cemal Demirtas, analyst]

My question is related to third quarter. We see the increasing trend in iron ore price and some increase in the steel prices. How do you see the volumes in third quarter and fourth quarter? Do you see any recovery in the margins in the third quarter? And maybe any color with the current trends, maybe any color would be helpful.

And my other question is about your cash position. When I look at your shorter, the FX position, you have dollar functional currency. And I see some figure in the monetary financial assets around TRY 5.3 million, in TL. How does the currency movements are affecting totals in the third quarter? Because you had some, the money for the dividends. You didn't just use it? And related, is it in U.S. dollars? Or what's your strategy on that? Because those numbers are big numbers in your balance sheet. So about the FX position, any indication or color will be helpful.

[Toker Ozcan, executive]

Cemal, this is Toker. Let me help you with your questions. The first one, the recovery amount, that will be 8.5 million tons. That is our provisional shipments for the year range.

The margin improvement for the Quarter 3 and Quarter 4, yes, you are right. From the costs perspective, the iron ore prices are skyrocketing. Thanks to coal prices it is helping us, and thanks to demand we can replace most of the cost increases to our sales prices. So you may expect a little bit improvement to our margins, but it's again a marginal level, very little.

So in terms of the cash position, we have provisionally allocated some of our cash into TL because of the dividend payment. We are trying to hedge that so the overall impact will be minimal.

You know our company we tried a major hedge. At the bottom line, we do not want to expose ourselves to any sort of currency fluctuations. So we do not speculate a lot. We try to be net zero, so no exposure. But because of these additional measures introduced by our government to dividend payments and others that's why you see some TL in our balance sheet.

[Operator]

The next question comes from the line of Sinitsyn, Boris with VTB Capital.

[Boris Sinitsyn, analyst]

2 questions from our side, please. Firstly, could you please update us on your CapEx guidance? If I'm not mistaken, the latest guidance for 2020 was $500 million, whereas your first half spending is quite low.

And the second question, with regards to your expected working capital changes in coming quarter and probably in the second half, what are your expectations given where the prices for raw materials are?

[Toker Ozcan, executive]

Thanks, Boris. So the CapEx spending, actually we have not cut much of our planned spending. We had envisioned $500 million for 2020, but there were a couple of items [indiscernible] cutting CapEx or saving some spending. So we delayed some of those [indiscernible] to next year because we need capacity and we do not want to stop our lines to make those investments. So we are planning to close the year with $400 million, plus or minus $50 million.

And raw material price expectations, we are expecting ? you can notice that scrap prices are going up, and we expect that trend to continue in the second half, maybe [ a bump in ] the last quarter. We are expecting a stabilization of the scrap prices in the fourth quarter.

Iron ore prices, well, it will be quite difficult to comment about it because due to the current level is mainly driven by the demand from China. We are expecting a little bit increase in iron ore prices, but not much.

Coal prices. In the end of third quarter, let me put it this way, we are expecting some increase in the coal prices, as well.

[Boris Sinitsyn, analyst]

And a follow-up, actually, on the working capital changes you might expect in the third and fourth quarter. Do you expect any increase or a release in net working capital?

[Avni Sönmezyildiz, executive]

Actually, it depends on the prices. There's a maturity mismatch in our balance sheet. We sell with [ maturities ] and for raw materials we pay mainly in cash. So when the steel prices and raw materials are an increasing trend, our work will always require additional cash, and our working capital increases. On the reverse side, there's going to be a release from the working capital.

So considering the current price trend, we don't expect significant change in the short term. The fourth quarter is a question mark. It all depends on the raw material and steel prices.

[Operator]

The next question comes from the line of Fedotov, Anton with Bank of America.

[Anton Fedotov, analyst]

I have 2 questions. My first question relates to the increase in the export volumes that you are showing in the second quarter, despite of the strength of the domestic demand. So how should I reconcile increase in the domestic consumption for steel and you exporting more at the same time? What was the main reason for this?

And the second question is about your dividends this year. You said that there is no decision regarding the additional dividend potentially that may come after September. Are you allowed according to the Turkish regulation to pay an additional dividend for 2019? Are you allowed to pay an interim dividend for 2020? Or can you pay more than 100% of the net income for 2020 as your normal dividend early next year? So my dividend question is actually split into 3 parts.

[Avni Sönmezyildiz, executive]

So the export question of yours, Anton, will be asked by [indiscernible], our Sales and Marketing Officer. Then I will answer your question about the dividend.

[Fatih Çitak, executive]

Hello to everybody. As you have seen from the figures, our exports volumes [indiscernible] in the second quarter. We have used exports as a risk management tool in our market planning. And we have seen the demand in our country and our exports a balanced marketing strategy.

[Toker Ozcan, executive]

So it's not actually to mitigate [indiscernible] or potential [indiscernible]. Because Anton, if you recall the early stages of COVID-19, it's not very different. So we came up with a model, estimation of demand trends in our regions. And we thought it would be wise to allocate some of our volumes to export, just to mitigate the risk of low demand, because we wanted to utilize all of our available capacity. And we did really successfully manage it. And thanks to this strategy it helped us a lot, because we have produced every single KG that we could by then.

The second part of your question, Avni will help you with it.

[Avni Sönmezyildiz, executive]

So Anton, the dividend payment in Turkey is capped up to 25% of 2019 profit, distributable profit, until September 30 by the government. And the presidency office has the right to extend this cap term. And in theory, we cannot distribute advanced payments from 2020 because it requires General Assembly decision. But we are able to distribute additional dividend from remaining of 2019 profit and also retained earnings.

So it doesn't mean that we will distribute anything. As I said, there's no decision about it. There is no decision about it. But in theory, we can distribute the rest of it, all distributable retained earnings. And if you check the shareholders' liquidity notes in our financials, you will find the total distributable amount.

So in theory, if we distribute the retained earnings also, considering this 25% that we distributed in June, we are able to distribute more than 100%. But it's all visible from the retained earnings.

[Operator]

[Operator Instructions] The next question comes from the line of Dmitriev, Ilia with Goldman Sachs.

[Ilia Dmitriev, analyst]

So I have 3 questions. So the first one is, could you place elaborate on the different factors that allowed you to increase EBITDA per ton in U.S. dollar terms in the second quarter? So markets and metal spreads were stable in the second quarter, and you also increased share [ OpEx ]. So over all, we did not expect to see such strong performance of unit profitability.

[Avni Sönmezyildiz, executive]

Ilia, thank you so much for the question. Realizing I can't elaborate a lot about it, it was mainly because of [indiscernible].

The one thing we did not do really, we did not cut any capacity. So that was the [indiscernible] first decision. We thought it would be wise to keep all of our blast furnaces up and running and convert all those [indiscernible] into steel and sellable products, and that's what we did really. Otherwise, if you start cutting or idling your assets, then you end up with the leftovers of the fixed costs, and it would be very difficult for us to mitigate those costs.

So we did 2 things at the same time, really. We did manage the physical and psychological health of our employees as well as our customers, and we maintained our assets at the full speed. There was only one exception, but it had nothing to do with COVID-19. It was planned last year, this [indiscernible] blast furnace. We maintain for 30 days. But other than that, it was one-off items. We kept operating. And one, these are very quick, this model with our in-house [indiscernible], estimating the real demand in the marketplace. And we stop our sales, for example, for a couple of weeks to obtain better sales figures.

[Operator]

The next question comes from the line of Jones, Andrew with UBS.

[Andrew Jones, analyst]

Just a few questions from me. First of all, on the new European quotas, I understand the HRC quotas were half, effectively. Could you remind us when that comes into place, what period that's applicable from, and how you expect to mitigate that given you're obviously exporting pretty high volumes right now? What are the alternatives if quotas have been tightened? That's the first question.

And secondly, I just wanted to ask about your [indiscernible].

[Avni Sönmezyildiz, executive]

Andrew, sorry. Andrew, can you repeat the first question? Because it's not clear for us.

[Andrew Jones, analyst]

I'm just asking you about with the new quotas in the EU, which has effectively halved HRC exports in Turkey, what's the timing for that to actually coming in and being effective? And what are your plans at the company to kind of mitigate that? Are you planning to [indiscernible] with respect to your volumes? Will you have to sell more domestically? Will you export to other destinations? Like, what are you planning to do, given those exports are probably going to be pushed out of Europe? That's my first question.

[Toker Ozcan, executive]

The second question, Andrew?

[Andrew Jones, analyst]

The second question is just on your spot profitability. Under current spot prices, what sort of EBITDA per ton are you seeing on your domestic sales and on your export sales?

[Toker Ozcan, executive]

Andrew, the second question, [indiscernible] is our guidance number. We can only talk about the ratios or percentage. We are expecting 16% to 18% of EBITDA. In nominal terms, we don't really have the number. You can simply assume a number greater than $100 per ton. This is the best I could help with that question.

The spot prices. So we do believe the prices will go up. There are 2 reasons for it. One is the raw material prices and a strong demand, and we are expecting this strong demand to stay for long term because, as I said at the opening speech, the spending mainly shifting from consumers to governments. And when we talk about governments, it's mainly infrastructure requiring still spending a lot.

In terms of nominal numbers of the sales prices, we believe we will be able to reflect any raw material increase with our sale prices.

And the quota question, the number one question, [ we are learning ] 2 things. In the short term, [indiscernible] to Turkish exports into Europe, but there will be some conscious decisions from Europeans for the limited quota. And being the best producer of steel in the region, we believe most of the European consumers will use that quota [indiscernible]. This is one of the things.

Then we try to make long-term arrangements with our customers, especially the quality-conscious customers. And when it comes to quality, we are the best, next to none.

In the long run, some of those industries, downstream industries, will migrate from Europe to Turkey. It really will help us in the long run. The Europeans just being very reflective to putting additional measures against Turkish steel products, but it's very clear on every level we are not dumping. We are only being the best productive company around, globally. We can say -- this is a big claim, but I can claim it easily because we are benchmarking our productivity against our competition, global competition, not only to Europeans. They could not still realize that Erdemir is the most productive company globally, one of the most productive companies globally. And we are doing this without having any single cent subsidy from any authority in Turkey. And on the contrary, Turkey is the most open market for the steel products and if there is a dump we can speak only a dump from Europeans to Turkish markets.

And in terms of mitigating the additional risk, even if they stop all of our exports to Europe, as said, in the short term we have other markets that we can ship our products globally. Our cost base is allowing us to do so. We can even, if we choose to do so, we can even ship products to China, still making some profit.

[Avni Sönmezyildiz, executive]

For the second question, actually, we cannot comment on the EBITDA per ton either for the [ immediate ] effect or spot prices, Andrew. Sorry.

[Operator]

The next question comes from Dmitriev, Ilia with Goldman Sachs.

[Ilia Dmitriev, analyst]

I have one more question, on your CapEx plans. So how big is your maintenance CapEx this year? And what is your outlook for CapEx 2021? How much you brought forward from 2020?

[Toker Ozcan, executive]

Our maintenance CapEx. I do not call that maintenance, but sustenance CapEx is in the vicinity of $190 million to $200 million per year. And we do not compromise that number really.

[Ilia Dmitriev, analyst]

And what is your outlook for CapEx 2021 towards your guidance?

[Toker Ozcan, executive]

The total CapEx, I can only comment about the sustenance part. It will be again in the range of $200 million. There will be some additional CapEx spending. I do not have that number with me, but all those expansion projects, as far as I recall. Better, we share this with you afterwards. If you contact our Investor Relations, we will provide you the right number. But our normal budgeting period is October. Those numbers will be fixed by then only. But you can expect a similar additional $200 million to $250 million on top of the sustenance CapEx, just to guide you.

[Operator]

The next question comes from the line of Alagöz, Can with Qatar National Bank.

[Can Alagöz, analyst]

I just had follow-up questions on your investment. The OYAK Group has announced the details of its [indiscernible] investment. Will this project be fully undertaken by OYAK Group and its partners? Or will Erdemir participate in this investment in terms of CapEx spending?

[Toker Ozcan, executive]

[indiscernible] press release. We made a joint venture between OYAK company, which is [indiscernible], and [ JAC ] of Japan. So the CapEx implications to Erdemir Group will be zero.

[Operator]

[Operator Instructions] We have a follow-up question from the line of Fedotov, Anton with Bank of America.

[Anton Fedotov, analyst]

Regarding the current Turkey Lira weaknesses we're seeing, the risk of depreciation, what's your expectation for the Turkish steel demand? Will the current weakness in the Lira impact the steel demand to some extent? As I remember, 2 years ago we had a currency crisis in Turkey, and this resulted in a significant demand fall. Of course the current depreciation is not that steep. But what's the impact on the demand?

[Toker Ozcan, executive]

Good question. The new demand for the steel, for our steel products, it will not be impacted by the devaluation of the Turkish Lira. I'm saying, specifically, new demand because most of our customers convert our products into export material. So if there should be any impact, it will have a better impact. So [ their cost level data will be ] even more competitive. So they can move more products to export markets.

[Anton Fedotov, analyst]

So you are seeing this depreciation as effectively positive for demand for your products?

[Toker Ozcan, executive]

[indiscernible]

[Operator]

[Operator Instructions]

Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you.

[Toker Ozcan, executive]

Everyone, thank you so much for attending. I wish you and your families a healthy state in the next stage. Stay safe, and have a good day. Thanks for joining us.

[Avni Sönmezyildiz, executive]

Thank you.

[Fatih Çitak, executive]

Thank you.

[Operator]

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.