ArcelorMittal SA (MT) 2017 Q3 法說會逐字稿

Daniel, you may go ahead.

Thank you. Good afternoon, everybody. This is Daniel Fairclough from the ArcelorMittal Investor Relations team. I'm joined by Genuíno Christino, who's our Group Head of Finance. And together, we'd like to welcome you to this call to discuss the third quarter 2017 results.

This morning, we published our results alongside a full presentation with speaker notes, and then accompanying Q&A documents. So hopefully, you've had a chance to review these documents and what I hope you take away from those documents is that this is our best third quarter shipment performance since 2008.

It's another quarter with EBITDA around the $2 billion level and with net income in excess of $1 billion. Market conditions continue to improve, and you can see in our presentation that the PMI reading for the ArcelorMittal weighted PMI is above 55. It's the highest reading that we've had since 2010. So this supports a positive outlook for the fourth quarter and then into 2018.

So with that introduction, we're ready to take your questions. (Operator Instructions)

And we'll take the first question, please, from Michael Shillaker from Crédit Suisse.

So a couple of questions if I may. The first on Ilva, can you give us a little bit more color, if possible, on any conversations you have had with the commission? Because -- and can you give us a bit of a thought process in terms of how you guys internally are reconciling the commission which has clearly gone anti-dumping, suggesting that they understand this is a global market on one hand? On the other hand, opening a phase 2 investigation suggesting that steel is a local market, which does seem somewhat contradictory. But from the conversations you've had internally with them, do you think it's a product line issue with Ilva? Or is it something more significant involving the whole consolidation process of the Ilva entity, is the first question. The second question just on graphite electrodes. Obviously, it's been a big talking point across the reporting season. Can you give us a sense of how you are fixed on electrodes both for the arc furnaces but also for the integrated mills? A, have you supplied -- have you secured your supply for 2018? B, could you talk a little bit about your pricing mechanisms? Is this primarily long-term contract that you'll be buying on regarding pricing, and can you give us a bit more color on that? And also within that context, can you give us a little sense of the extent cost per ton of steel that you expect the increase in electrodes for next year to incur for you? And then finally, just on Brazil, obviously, it's been a market that in the past has been a great market for you. There's been a lot of data recently suggesting that maybe Brazil has turned the corner. I guess this is sort of still yet to show through in numbers. But can you give us a little more color in terms of what you're seeing in the Brazilian market would be fantastic?

So I think I'll take the first couple of questions, and then hand over to Genuíno to update you on the Brazil situation. So I think, first of all, talking about Ilva in the news that we received on Wednesday, that the commission, the European Commission is moving to a phase 2 investigation. And I'm certainly not in a position on a public forum like this to discuss the conversations that we've been having with the [K] team so far. I think everybody can read the press release that they made on Wednesday and talk about some of the focus points in their investigation and what they're going to be digging into in more detail during this second phase. And I think you do, in your question, raise some interesting points regarding the way that the trade investigations have looked at the European market, and in fact, the global market when it comes to steel imports and unfair trade. So far, that hasn't been echoed in a way that the investigation of the way that the market has been defined for the commission's investigation of the Ilva deal. Our perspective is that this is a positive deal for all stakeholders. If you look at our market share plus Ilva for hot-rolled coil, our share of the market is less than 30%. If you look at galvanized products, our share of the market is less than 40%. So from our perspective, we're not really moving the needle here in terms of market concentration. What we will be doing is obviously revitalizing a very important steel asset in Europe. We will be making it more competitive, and we will be increasing its production, which from our perspective, is important for all stakeholders. It's important for the employees at Ilva. It's important for the environmental and the surrounding community. And ultimately, it's going to be very important for the European customer base. Moving to the second question on electrodes, how are we fixed? We're very well fixed, Mike. So we've got annual contracts for our electrodes supply. So we've got good security into 2018. Obviously, the price of those electrodes is changing, 2018 versus 2017, and that's been something that we've been renegotiating in recent weeks. So what you can be assured of is that we have security of supply. The second thing that you should be assured of is that we'll be getting the best available price in the market reflecting the strength of our buying power and the scale of our purchases in the market. In terms of the cost per ton impact, I can't really draw in those dots for you. I think yourself and a number of your peers have written on this topic in the last couple of months. I think you understand the intensity of electrodes, both in the EAF route and the integrated route. So I think you've got a good handle on what the potential implication for cost per ton is. Clearly, it's more of an issue for the EAF route than the integrated route. So we're very well positioned, given that 80% of our steel is produced through the integrated route. And looking into the near future, I think this should continue to be an ongoing support for steel pricing. And I'll hand over to Genuíno for the Brazil question.

Okay. Thank you, Daniel. So Mike, yes, I think it's clear. I mean, what I would like to point to you, I mean, we start to see the recovery in Brazil also showing in our numbers right now. I mean, if you look at our shipments this quarter, it's pretty strong. I mean, we have been talking about the recovering flat business in Brazil. And if you see this quarter, year-on-year, you see also now some recovery also in our long business. But we need to be a little bit careful there because construction will continue to be down this year in Brazil. But most likely, we have seen the worst. I think our best case is for a second half, in construction, that will be relatively stable compared to the first half, but in -- and a positive momentum hopefully going into 2018. I think -- I mean, we all know the growth is accelerating vis-à-vis Q4 should be good, and the forecast that we see for 2018 is also looking good. So that's Brazil.

Thanks so much, Mike. So we'll move to the next question please from Alain at Morgan Stanley.

Two questions from my side, if I may. Firstly, on your networking capital items for the year. You clearly lifted your working capital guidance. And so if you look at the price and raw material -- the price of raw materials they have clearly come down. Should we interpret the increased working capital guidance as an upgrade for your outlook for both shipments and volumes versus what you thought was going to be the case in Q2? And the second question is the U.S. appears to be the only region that's out of sync in terms of margins across your portfolio. Now that we're halfway through Q4, how should we think about going into Q4 and Q1 next year? Should we expect the price cost differential to reverse?

Let me take the first question on the working capital. I think we have been clear that our guidance is really based on prices that we see at the time we are preparing our release. And then if you see -- I mean, maybe we're here releasing quarter 2 results in the end of July, since then, we have seen prices -- steel prices rising. So as we all know prices in July, they were relatively soft. And then since then, we have seen prices recover. And it's also clear if you look at our shipments now, so clearly, we're going to be at the top -- in most recent regions, we're going to be at the top of our apparent steel consumption forecast. So it's really a function of the evolution of prices and I would say also our confidence in -- better shipments also higher.

Thanks, Genuíno. So I'll then just take the question on outlook today for our NAFTA business in Q4. I think if you look at our steel business as a whole and the momentum is positive heading into the fourth quarter with the exception of the U.S. So you've seen rising spread environment over the past 3 months, and that will be a support for our business in Europe, it will be a support for our business in Brazil and it will be a support for our business in ACIS, Q4 versus Q3. The exception to that trend has been the U.S., where you've seen actually a little bit of price deterioration in the U.S. market towards the end of September, and overall pricing is a lot more stable Q4 versus Q3 than the other segments. On top of that, you've obviously got the normal seasonal effects in NAFTA, where you've got the 2 holidays, we've got the upcoming Thanksgiving holiday, and then Christmas, which normally means that NAFTA volumes in Q4 are a shade below the Q3 levels. So those 2 factors combined should be something that you're factoring into your Q4 estimates.

Great. Thanks, Alain. So we'll move to the next question from Ioannis at RBC.

Two questions from my side. First on the guidance. You guided to H2 shipments at or above the H1 levels. Looking forward, should we expect Q1 '18 shipments to be up sequentially in line with typical seasonality? And then secondly, on China. You flagged earlier this year some downside risks to Chinese steel spreads, but they have actually been very resilient north of $200 per ton and above your indicated range of 130 to 170. How do you see this developing in the next 3 to 4 months, especially on the back of the winter production curves that China is targeting?

So I'm going to take the first one, Ioannis. I think we're not going to be really getting into 2018 guidance, that is to talk about it in -- as we release our Q4 numbers, Ioannis. So you will have to wait a little bit for 2018.

And just on the China question, I think we are seeing signs of progress in China. That's clear. We can see the evidence of that in the reduced export levels. So domestic activity has been better than anybody had really anticipated earlier in the year. So there are signs of progress. Capacity as you identify has been removed, again probably more than people anticipated earlier in the year. But I think we still need to be watchful that any moderation in demand is matched by further capacity reduction. So that this improved market situation that you talk about, these spread levels which are above the sort of historical range, that any reduction in demand would need to be met by further capacity reductions for that to be sustained. But it is important that we sustain in China high levels of spread in order for the government to achieve its objective of reducing the leverage that these heavy industries currently have.

That's great. And maybe just a quick follow-up on China. You flagged that for most regions you are towards the top end of your demand growth range. Any indications on machinery and construction growth in 2017?

Yes. So I think those have been the 2 strongest areas of the market. So you've seen strong growth in auto. You've seen strong growth in machinery. Because actually, construction was strong in the first half, but it's a little bit weaker in the second half. So for the full year, construction is not significantly up relative to 2016. So the real engine driving the higher overall demand '17 versus '16 is those 2 important segments of autos and machinery.

So we'll move to the next question from Seth at Jefferies.

I have a couple of questions about your NAFTA business, please. In the third quarter, your margins came in quite a bit below our own forecast, I think that is a consensus as well. Can you perhaps give us a better understanding from the headwinds that weighed on your Q3 realized margins and also confirm the contribution of Calvert? The second, going into Q4, you flagged the seasonal headwind on the demand side. But what should we expect in terms of production? I understand that you had perhaps 2 blast furnace outages at Burns Harbor and Indiana Harbor. What impact will that have on volumes or cost? And then last, on price, you did flag earlier that the U.S. steel prices have lagged other regions year-to-date. Why do you think that is? And are there reasons to believe that could inflect in 2018?

So Seth, let me take the first question on NAFTA. So NAFTA, it's really a function of -- I mean, as Daniel has already said. I mean, international -- U.S. prices versus international prices. And then when you look also at the order book and the realized price, when you take into account the lag, you see that our prices came -- they are lower. And then on top of that, you have a cost -- higher costs because -- simply because, in the U.S., the timing is a little bit different. So as you know, the -- for instance certain contracts, they really kicked in at the beginning of the year. This is true for coal. As you also know, during the first quarter, we don't -- the delivery of iron ore doesn't happen because the lake is freezing. So there is a bit of a delay in getting all the cost in the system. So that's why you see this cost increase in NAFTA in quarter 3.

Thanks, Genuíno. And in terms of your concern on outages in Q4, I'm not sure where you got that information from, Seth, but I can confirm that there's no planned downturn -- downtime that we're having on -- in the fourth quarter. In terms of your Calvert question as well, I think we've sort of preempted that you might have some questions about Calvert's performance. And what I can tell you is that it was actually very, very strong in the third quarter. We had 2 months' worth of record production and the hot strip mill was consistently operating at utilization rates in the high 90s percent level. So you shouldn't have any concern about Calvert's performance. The hot strip mill is running very, very well. And then just finally, your question on pricing. The -- it's obviously not something that I can talk specifically about. But I think it's interesting what we observed during Q3, which was a rising global spread environment, but you weren't seeing that in the U.S. market. So you did have some weakness in scrap. And typically, what happens in a weaker scrap environment is you do see the buyers of steel kind of sit in their hands, adopt a wait-and-see approach to see where pricing can settle before starting to place orders. So you've seen U.S. pricing drift in contrast to a rising global environment, so now you see U.S. pricing sort of out of kilter with that global price dynamic. How long that can last? Not something that I could suggest on the call, but it's interesting to see that, today, U.S. pricing does look outline with those global trends that we've observed over the past couple of months.

Just one follow-up on that last point then. You, a few weeks ago announced a price hike, can you comment at all about the reception amongst your customers to that, I think, $40 price hike?

Thanks. All I can just point to is if you look at the CRU print, it does show that last week, the price was above the level that it was a couple of weeks ago. So that would be an indication to you that the price increase has some traction in the market.

Great. Thanks. We'll take the next question, please, from Luc at Exane.

Two questions if I may. First of all, on the NAFTA contribution in Q3, could you be a bit more specific as to what was the contribution of Calvert and if there were any specifics there? That will be my first question. And second question, looking at 2018, would it be possible for you to frame a bit the cash needs for your business, looking at ex-working capital requirement including Ilva? And what you -- what would be your best guess when it comes to working capital requirement next year?

Thanks. I'll let Genuíno come back to the question on Calvert. But looking ahead to 2018, the cash needs of the business. Obviously, in our Q&A document, we did reference that CapEx next year will be going up. We announced the very important project in Mexico last month, so that is something that will be leading to a higher CapEx requirement in 2018. In addition, hopefully, we'll be starting our CapEx at Ilva as well. So those are 2 clear examples of a requirement for higher CapEx 2018 versus 2017. The other cash needs of the business, though, I think they will be quite consistent. So in the aggregate, if you look at interest tax and the other cash needs of the business, they should be quite stable year-on-year. For example, lower interest but hopefully higher taxes. And so that, hopefully, gives you a good idea of the cash needs of the business. That obviously excludes working capital. And that's really something, I think, for you to determine. In a stable environment, there isn't going to be a need for us to further invest in working capital. But if you believe that the fundamentals can improve 2018 versus 2017, then there could be a further investment in working capital. But that's something, obviously, we'll be able to give more clarity on with the full year results in February.

Of our units, what I would just say is that, as Daniel has already said, we were quite pleased with the performance of Calvert in quarter 3. We actually had 2 months of records in our hot strip mill. So it's progressing well. We were running at a high level of utilization, but there's not much more to say about Calvert right now.

Okay. Thanks, Luc. So I think we'll move to the next question from Rochus at Kepler.

Can you talk a little bit about how you assess the residual risk for your working capital guidance? I think it went up 2 times this year already. Is this revision still meaning you're on track to have investment-grade metrics by the end of the year, which was your previous expectation? And can you share with us how ArcelorMittal is defining those investment-grade metrics? In terms of your working capital release, can you get more of specific how -- where this is coming from? Is this more or less the rollover of iron and coal prices, the lower prices on that side? Or is it incrementally better volumes you might anticipate for the first quarter? Can you -- sorry to ask again on Calvert, so it all sounds very good. If I remember what Outokumpu was saying on its call. Apparently it had issues in the U.S. because of the toll rolling agreement with you guys. So was that issue entirely effective only on Outokumpu's side and not disturbing your own performance? And maybe finally on mining. I think you referenced to some issues you have in the Ukraine, anything which is offering a catch-up effect in the first quarter? Because otherwise, your guidance looks a bit high requiring a further increase in your shipment, which is normally unusual based on seasonalities.

Thanks, Rochus. So I'll take the Calvert question, first of all, because I think it's not appropriate for us to talk directly to the comments that Outokumpu made on their call last month. I think the important message that I have for you is what we just said in the past couple of questions, which is the performance of Calvert in Q3 was very strong. There were no issues at the hot strip mill and it performed very, very well. We had 2 months of production records, and for the third quarter as a whole the rolling mill was operating at high 90s utilization rates. So hopefully, that addresses that issue. But I'll let Genuíno talk about the working capital and the impact that, that could have on our pursuit of investment-grade metrics.

Right. Okay. So in terms of the working capital, I think when you look at what we have deployed this year so far, $3.5 billion, most of it, almost the entirety, is really a price function -- is a function of price is higher. Fuel selling price is higher, raw material prices since the end of last year. There is only a very minor increase in metal stock, which is a function of the strong market environment that we are -- we have been enjoying so far. So we are not really concerned about that. Looking to Q4 in our guidance so that our guidance basically implies really $1.5 billion. And that's really a function then of volumes, not so much prices. Price, as I said, is really based on what we see today. So we are not forecasting what's going to happen in terms of prices for the end of the year. But as you know, I mean, in the last few weeks of the year, they are generally weaker if -- when you compare with September. So you can expect that the last few weeks of December, we will be shipping less as a result. So the working capital needs will come down. At the same time, as we typically do, there is also -- it is part of the seasonality in our working capital. Metal stock will also come down a little bit. So it's really a function -- primarily a function of volume for -- yes. And what it does to our investment-grade metrics, I think we should not disconnect the working capital with the higher profitability. As you can see, our EBITDA is also going well in the right direction. Cash needs under control. So we're going to be deleveraging further this year so all pointing in the right direction. I don't believe that we gave guidance in terms of timing to achieve investment-grade metrics, so this will come naturally as we continue to focus on deleveraging.

Thanks, Genuíno. I'll just take the question on mining shipments. We did obviously have a good quarter, actually, for the third quarter in terms of our mining shipments. Overall, we were up 8% year-on-year, but our market price shipments, which is obviously what we guide to, that was up 12% year-on-year. And for the 9 months as a whole, we're running at 7% year-on-year. So there were some unplanned maintenance impacts during Q3 both in Canada and in Ukraine. I think those are largely resolved, and so we should see better shipment performance in the fourth quarter. And obviously, that will help push us on towards that guidance that we gave at the start of the year for a 10% increase in market price shipments, which is still our guidance.

Okay. Very good. Maybe, Daniel, one word on the Mexican CapEx. I think you mentioned that this is clearly one driver to increased CapEx. Can you disclose a rough split how the $1 billion breaks out in the years ahead? Is that possible?

Yes, this is an important project for us. So just to give everybody some perspective, obviously, this is a great opportunity for us to go downstream into value-added products, capitalize on the strength of our primary business and our low-cost slab production in Mexico, take advantage of what is a high-growth market heavily dependent on imports for value-added steel. So it is a high-return project further benefiting from the investment being in the new special economic zone at Lazaro, and the fact that, therefore, we will be enjoying 100% rebate on taxes for the first 10 years and then a 50% rebate for the following 5 years. In terms of the CapEx, I can't, at this stage, be too specific on the detail. So what I would just encourage you to do is see it as a 3-year project and just split it equally across those 3 years, and we might be in a position in February to give you more specifics there.

Great. Thanks. We'll take the next question from Carsten at UBS.

Just 2 questions, one is on Brazil and one is on the tax rate. To -- with regard to Brazil, how much was the performance in Brazil actually impacted from the weaker environment we have seen in the U.S. as you have significant flat steel shipments into North America? And second, could you remind me, in Brazil, about the utilization rate of your long steel businesses? Because it looked like most of the shipment's turnaround was actually in long steels, but I might be wrong here. On the tax rate, we have seen a very low tax rate in the third quarter of only around 6%. I guess that is not sustainable. Can we actually expect that the fourth quarter would see a tax rate of around 15%, so a more normalized one? Or do we expect a similar low tax rate in the fourth quarter?

So Carsten, let me address the tax rate first. You're right. Our effective tax rate was low in quarter 3. This is really primarily the result of some deferred tax assets that we recorded during the quarter, giving some improved profitability in some countries where we operate, and we still have tax losses not fully recognized. So this is true for Luxembourg, true for Brazil, for Mexico. So that's basically why you see lower deferred income tax charge in this quarter. I mean, our guidance has always been and continue to be that our effective tax rate should be in the range of 15% to 20%. So that guidance remains good also for '17. But I would really encourage you -- I mean, the way to think about it really is as part of our cash needs. So the $4.6 billion that we have been guiding, that includes also the taxes, so that is not changing also. In terms of Brazil, you're right. I mean, our exports -- so as we export -- most of our exports are linked to -- slab prices are linked to the international price, the evolution of international price. And if you also look at our 2 months lag, you will see that there is a decline in prices quarter-on-quarter when you apply the lag. And that, of course, impacted the profitability of our Brazilian operations this quarter.

Do you have any more quantitative number just, say, how much roughly? Or do I just have to assume some numbers?

I mean, you know that we export -- roughly 6% of our flat shipments they are exported. And then you have the international prices, so you can do the math.

Great. Thanks, Carsten.

Utilization rates on the long steel business?

Oh, yes. Sorry, Carsten. Yes we don't really talk about utilization rates there. I think they have been slightly up this quarter, I would say. But I don't believe that we are disclosing our utilization rates of our facilities.

Thanks, Carsten. Hopefully, that's good for you. So we'll move to the next question from Novid at Cowen.

The first one is on NAFTA. The sequential increase in shipments, I just wanted to see if you guys could speak more to the demand in Mexico maybe relative to the U.S. and what you guys are seeing there that maybe you're not seeing in the U.S. And the second question just has to do with your cash costs for the mining segment. It looks like they have been kind of rising. I'm not sure if it's related to kind of the unplanned maintenance that you mentioned earlier. But I just wanted to see if you could give some color to that as well as maybe expectations going forward.

So I'll address the cash cost in mining, and let Genuíno come back on Mexico. But the -- I think you're right. So there is obviously a cost impact from unplanned maintenance, so it does impact production and shipments, and therefore fixed cost absorption. You did see a little bit of that effect in Q3. But as we were saying on the earlier question, those maintenance -- unplanned maintenance, that's largely behind us now. So you should see an improved cost performance as well as improved volumes in Q4. Looking forward, obviously, our focus is really on 2 things in mining. It's product quality and making sure that our operating cost remains very competitive. So product quality, I think we'll continue to make good strides. And in terms of cost competitiveness, there is inflation in the system. And what we're working hard to do is the necessary efficiency gains to make sure that we can offset that -- those inflationary cost pressures. So that at the end of the day, that number that we consistently talk about as a $40 breakeven price that's delivered 62% China that we stick to that number, and that's exactly what we're doing.

Then in terms of Mexico, I think the economy is doing well. I mean, we are seeing [differential] consumption and managed costs also growing. And we should also remember that in Q2 we had some maintenance in some of our facilities in Mexico. So as a result, you see some higher shipments also this quarter. But we have also seen a pickup in demand in longs, particularly in longs in Mexico. To some extent linked to domestic markets, but also giving the strength of the international markets for long products that also open up some opportunity for us to export volumes out of Mexico.

So we'll move to the next question from Cedar at Bank of America.

Just one more question from me. Can you talk about the outlook for the CIS business in the fourth quarter? I ask because if you look at the spot price of Black Sea HRC has come down by about $60 per ton from the peak. The annual price has also fallen, but not as much as that fall in steel price. So I'm just wondering if you can talk about how you think margins will shape up for that division in the fourth quarter. Is there maybe a mix advantage, where you're not actually seeing your realized pricing falling as much as that Black Sea price?

Yes, thanks, Cedar. I don't think we want to get too specific on the segment-by-segment guidance. I think I mentioned earlier that the general trends in our CIS business are -- general terms of our steel business are favorable, with the only exception to that being in NAFTA, where things have been a little bit more stable. So by implication, we do see positive trends Q4 -- or Q3 into Q4 in our ACIS business. So hopefully, that gives you the necessary confidence that results there should improve sequentially.

Great. So we'll move to the next question from Phil at KeyBanc.

Daniel, a question on the coal contracts for NAFTA next year. Should we anticipate some upward cost revisions there next year?

It's not something that we can comment on at this stage.

Fair enough. On your auto contracts for 2018 in NAFTA, would you anticipate those to be spread accretive?

Thanks. Yes, again, these -- both these topics are very confidential in nature in terms of those negotiations. So I think our focus on our auto business is just really to continue to develop our product, develop the solutions that we're providing to the auto OEMs and getting appropriately rewarded for the solutions that we're providing.

Okay. And then my last question is just on the Mexico investments and what some of the upgrades you're likely going to make to Lazaro and steelmaking output, maybe improvements to the cash there. Are you planning long-term to renew the slab agreement with CSA? Or was that something that's likely going to lapse now that it's been -- effectively changed hands?

Yes, I wouldn't want to comment on that either. Sorry, Phil. I didn't do -- you asked 3 questions that are kind of topics that we're just not really able to address in this public forum.

So we'll move to the next question from Christian at SocGen.

Just I want to go back on ACIS. Just to get a view of where prices are going in each direction -- in each location. But South Africa, I think we got some benefits from market protection a few months ago. Is that already within your performance there? Or do you think there's more benefit to come perhaps in the fourth quarter and into next year? And also, looking at Ukraine and Kazakhstan, are you seeing some specific developments which are either favorable or a headwind at present?

So let me address the South Africa question. So yes, you're right. So we have, since August, the safeguards in place. That should definitely help. I mean, market conditions so far remain relatively weak. It's probably one of the few places where we have large operations where PMIs are still below the 50 mark. I think the company has put out a release today. They don't disclose the financial results on the quarterly basis, so I cannot talk much more than what they have already disclosed. So market conditions were difficult, but I would point to the safeguards in place, as you rightly said. And then another important factor for South Africa is also -- and we talked about it in our second quarter, the rand. And then we have seen, more recently, the depreciation of the rand from ZAR 13.2 to -- from ZAR 14.2. That is clearly helpful to South Africa. And then we will see how sustainable that is. It should be helpful.

And on Kazakhstan and Ukraine, I mean, is there any specifics there which you may want to highlight as far as conditions are concerned?

Sorry, I cannot hear your second question. Can you repeat that for me?

Yes. I was saying on Ukraine and Kazakhstan, are there any specific conditions out there? I know Kazakhstan was getting more and more open to Iran. I mean, are you getting some support from markets from either of those locations?

What I would say about Kazakhstan is that the entity is doing very well. I think we also have record productions in Kazakhstan and shipments are also rising. So it's also -- so that unit is doing very well. So I'm going to comment exactly on the markets that we are shipping to. But clearly, it's one of our markets. So it's -- we don't have any issues there. Yes, so everything seems to be moving in the right direction.

Thanks, Christian. So we'll move to the last question from Bastian at Deutsche Bank, please.

I just have one quick question left, and that is following up on NAFTA again on a slightly higher level. I understand your comments earlier and what has been the driver in the last quarter. But if we look at price cost spreads over the years, the level we see today is at or above the average of the last 6 quarters. And given that we have such a large timeframe, that's obviously smoothing out a whole lot of raw material entity price volatility. However, if we look at the margin in NAFTA, we obviously now fall back to below $70 per ton EBITDA, where the average for the period is closer to $90. So I'm trying to solve the equation, so could you please clarify, is there any other reason for this disconnect? Was there anything else which we are missing which has been going against you? Because the price cost spreads do not really seem to be the driver looking at this in a longer timeframe.

No, I will just say that there is nothing really specific to comment other than what we have already discussed. We have seen costs continue to rise this quarter as a result of the -- some of our contracts, coal contracts, iron ore. Other than that, there is nothing exceptional to highlight.

Thanks, Bastian. So I don't believe there any more questions. So I'd like to thank everyone for your interest. And as I said at the start of the call, I think market conditions continue to improve. This does support a positive outlook for the fourth quarter and into 2018. So we look forward to updating you on our progress in February and the progress that we've made in 2017, together with a more detailed outlook for the year ahead.