Nucor Corp (NUE) 2005 Q3 法說會逐字稿

Good day everyone, and welcome to the Nucor Corporation third quarter of 2005 earnings release conference call. As a reminder, today's call is being recorded. Later we will conduct a question-and-answer session and instructions will come at that time.

Certain statements made in this conference call are forward-looking statements that involve risks and uncertainties. Although Nucor believes they are based on reasonable assumptions there can be no assurance that future events will not affect their accuracy. Some of the important factors that may cause actual results to differ from our predictions are listed in Nucor's SEC filings. The forward-looking statements made in this conference call speak only as of this date and Nucor does not assume any obligation to update them.

For opening remarks and introductions, I would like to turn the call over to Mr. Dan DiMicco, Vice Chairman, President, and Chief Executive Officer of Nucor Corporation. Please go ahead, sir.

Good afternoon and thank you for joining us for Nucor's third quarter conference call. We appreciate your interest in our company.

We will briefly talk about a number of things. First, a brief review of our results for the third quarter of 2005. Second, we'll provide an update on our progress implementing Nucor's strategic plan for growing long-term shareholder value. And third, we'll take your questions.

Terry Lisenby, Nucor's CFO, and our other EVPs, John Ferriola, Ham Lott, Mike Parrish, and Joe Rutkowski are with me this afternoon and also will be available to answer your questions.

First, and most importantly, I would like to say thank you to all the members of the Nucor team for once again getting the job done over the past quarter. Our third quarter of 2005 earnings of $1.86 per diluted share exceeded our guidance given on our July conference call, that being a range of $1.60 to $1.80. And our results also exceeded the First Call average analyst estimate for the third quarter of 2005 of $1.69.

These results were achieved despite the Nucor team having to manage through a number of significant challenges that included declining flat-rolled spot pricing, rising energy costs, and disruptions in the markets for several key raw materials. The 11,200 men and women of Nucor worked hard and as always worked together to take care of our customers. The Nucor team is moving forward to our goal of being the safest, highest quality, lowest cost, most productive, and most profitable steel producer in the world. Quite simply, the just completed quarter highlighted again that Nucor's most significant competitive advantage remains our employees: The right people working together as a team. I'm going to say it again: Thank you team Nucor.

Nucor's third quarter earnings performance also once again proved the value of our position as the most diversified steel producer in North America. Our product line diversity is a very significant positive, and that Nucor's short term performance is not tied to any one market. Through a number of economic and steel market cycles, relatively better conditions in some markets have cushioned the impact of more severe conditions in other markets. Nucor's diversified product line portfolio and our heavy variable cost structure are key underpinnings to our record of being profitable every year and every quarter since 1966.

It's worthwhile to review the composition of our sales [inaudible] for the first nine months of 2005. Sheet was 39%; bars was 30%; beams 14%; plate, 10%; and downstream steel products, that is, the total of joist, deck, cold finish, bars, building systems, and fasteners, was 7%. And comparing product mixes for this year's first nine months versus the year-ago period, notable changes were sheet dropping from 42% to 39%; bars increasing from 28 to 30%; and plate increasing from 8 to 10%.

2004 was a record earnings year with particularly strong performance from our flat-rolled and plate businesses. And now 2005 is on track to be our second consecutive record earnings year for Nucor, driven by record setting earnings performance of our bar mill group in both the third quarter and first nine months of 2005. Additionally, both 2004 and 2005 have benefited from very attractive profitability at our plate, beam, joist, deck, building systems, fasteners, and rebar fabrication businesses.

While the sheet metal group has faced tougher market conditions in 2005, profits at our flat-rolled businesses have been supported by our team's earlier work to lock in contract volume with attractive margins and by declines in scrap price.

I mentioned earlier that rising energy costs continue to be a significant challenge for our team to work through in the just completed quarter. Our total electricity and natural gas costs for the third quarter of 2005 were up nearly $12 per ton over the year-ago third quarter, and were up approximately $6 per ton over the second quarter of this year. Escalating energy costs are an unavoidable fact of life in today's U.S. manufacturing environment. For that reason, Nucor will continue to aggressively apply our culture's continuing improvement mind-set in practice to reduce our exposure to these cost pressures.

As one example, we began implementing in October 2004 a program using derivative financial instruments to hedge a portion of our price which is related to natural gas purchases. As a result of these transactions, Nucor's hedged a significant portion of our projected natural gas requirements out into 2007. Gains and losses from the use of these instruments are deferred and accumulated to Other comprehensive income or loss on our balance sheet, and are recognized into cost of products sold in the same period as the underlying physical transaction.

At the close of the third quarter of 2005, the accumulated Other comprehensive income account on Nucor's balance sheet includes $71.1 million in unrealized after tax income for the fair value of these derivative instruments.

Moving ahead, our team is focusing on improving our energy productivity and our energy cost competitiveness relative to our competitors. Work either completed or underway in 2005 includes upgrading reheat furnaces to more energy-efficient equipment at our bar steel mills in New York, Utah, and Illinois. Also, Nucor will continue to maintain its diversified portfolio of long-term electricity supply contracts. And I will note that today's energy cost environment serves to increase the value of our energy efficient cash strip sheet steel technology and John Ferriola will talk more about that later.

Having examined the key issues related to our performance over the just completed quarter, I will now update you on what will continue to drive Nucor's long-term performance: Implementation of our strategic plan.

Nucor's strategic plan aims to expand our platform for generating earnings such that we generate higher highs and higher lows in profitability through economic and steel market cycles.

Third quarter of 2005 results highlight the extent to which successful execution of our strategic plan has already expanded Nucor's earning power. Quarterly net income of approximately $292 million almost equals our previous annual earnings record of $311 million that was set in 2000 and then broken by last year's net income of over 1 billion 100 million dollars. And the third quarter of 2005's annualized shipment rate exceeded 21 million tons compared to 2000 shipments of 11 million tons.

The keys to executing the strategy have been and remain: First, Nucor will optimize our existing operations. Second, Nucor will pursue strategic acquisitions. Third, we will continue greenfield growth via the commercialization of new technologies. And fourth, Nucor will grow globally through joint ventures that leverage new technologies. We are moving ahead with a disciplined execution of our growth plan, as the Nucor team's journey is that of climb a mountain that has no top.

Looking at work underway to optimize existing operations, our raw materials strategy developed attractive supplies of high-quality scrap substitutes will allow to us optimize growth opportunities and returns realized from our sheet mill group. Nucor is implementing a raw material strategy to control about one-third of our iron unit's consumption, or between 6 and 7 million tons per year of high quality scrap substitutes at our current consumption rates. This strategy is driven by the ongoing expansion of our sheet, steel mills, product portfolio, with the higher quality grades. Limitations in the supply of low residual industrial grades of scrap demand that Nucor successfully implement our raw materials strategy. The ongoing volatility in the scrap markets highlights the critical importance of this in initiative.

Our team made excellent progress in the third quarter of 2005, implementing three projects that should provide Nucor control over a minimum of 2.5 million metric tons per year of high quality scrap substitutes in the next 12 months. Our HIsmelt joint venture with Rio Tinto and other partners completed construction earlier this year of a facility in western Australia that converts iron ore fines and coal fines to liquid metal. The hismelt process is both a blast furnace replacement technology and a hot metal source for electric arc furnaces, offering attractive environmental and energy efficiency advantages. Initial annual capacity will be 800,000 metric tons, which is expandable to over 1.5 million metric tons at a very attractive capital cost per ton of incremental capacity.

During the third quarter of 2005, HIsmelt continued the start-up of operations. We're very pleased to report that the HIsmelt plant's latest continuous production run at the end of September yielded approximately 2,000 tons of pig iron, at carbon content levels of 4.5%. The smelting process is working very well. The results of the feeding and vessel metallurgy are very encouraging. Our talented team at HIsmelt is successfully navigating through uncharted waters with this exciting new technology and remains focused on resolving the production equipment challenges inherent in commercializing new technology. Current work is directed at resolving difficulties with downstream equipment for handling off-gases.

Our Ferro Gusa Carajas joint venture with CVRD is an environmentally friendly pig iron project in Brazil using cultivated eucalyptus trees as the charcoal source. The first module will utilize two conventional mini blast furnaces to produce 380,000 metric tons of pig iron annually. We are very pleased to report that our team began tapping hot metal from the first mini blast furnace on October 2nd. The furnace is running well and is currently producing at about 50% of capacity while we continue training our team members at Ferro Gusa Carajas. The second furnace is scheduled to start up next month, in November.

With our NuIron project we have relocated to Trinidad from Louisiana, a direct reduced iron, or DRI, plant that we acquired in 2004. The Trinidad site will benefit from a very cost-attractive and long-term supply of natural gas as well as favorable logistics for both receiving iron ore and shipping DRI to our sheet mills in the United States. Our team is making good progress with the construction in Trinidad, with approximately 25% of the project already completed. We continue to expect NuIron to begin operations in the second half of 2006, with an annual capacity of 1.8 million metric tons of DRI.

Another crucial part of our work to optimize existing operations is Nucor's ongoing very proactive role in the fight for free and fair trade. We are working closely with the U.S. government to see that our nation's trade laws are enforced and effective import monitoring systems are maintained. The course manager's team is constantly monitoring global steel product pricing levels and [inaudible] offerings. Maintaining the current antidumping and [inaudible] orders on beams, plate, corrosion-resistant products, hot-rolled steel, and rebar are an important factor in determining the domestic industry's future performance. We are prepared to act quickly in conjunction with the appropriate government officials to address any import surges of dumped and illegally traded steel before they destabilize the U.S. steel market.

Of particular importance, the global steel industry must be careful about investment in new capacity, as over-investment remains the biggest risk factor facing our industry. More work remains to be done by the global steel industry and by governments to end the subsidization or existing and new capacity. I reiterate the comments I made at the recent International Iron and Steel Institute annual meeting of the Board in Korea. What steel producers should be doing is investing capital in new technologies and making existing plants more efficient, not just building new capacity at a rate greater than the increase in demand requires.

I can assure you that Nucor will continue to apply our firm's can-do attitude, both to commercializing new leap-frog technologies and to influencing global steel trade issues.

Acquisitions are another key prong of our growth strategy. Our acquisitions over the past four and a half years have expanded our annual finished steel production capacity by more than 7 million tons, and these acquisitions have enhanced our vital product line diversity, boosting our annual bar mill capacity by more than 3 and a half million tons, our annual sheet mill capacity by more than 2 million tons, and our annual plate mill capacity by more than 1 million tons.

Our most recent acquisition, Nucor Steel, Marion, completed its first full quarter as a member of the Nucor family during the third quarter of 2005. You'll recall that this acquisition in June enhanced Nucor's leadership position in the bar business by expanding our bar mill group's nationwide network to ten bar mills with total annual capacity exceeding 7.5 million tons. I am very pleased to report that Nucor Steel Marion generated an attractive contribution to our operating profit for the just completed quarter. Our team at Marion is already proving to be an excellent addition to Nucor's bar mill group. Congratulations.

Our growth strategy recognizes that technical innovation must remain a major competitive strength of Nucor. In 2004 our team at the Castrip facility in Crawfordsville, Indiana successfully commercialized revolutionary new technology to directly cast sheet steel into final shape and thickness. Moving through 2005 the Crawfordsville team has continued to refine the castrip production process and expand the grade of steel that can be produced applying the castrip technology. As evidence of our strong and growing confidence in castrip's future, we are very pleased to announce the selection of Nucor-Yamato Steel in Blytheville, Arkansas as the location where we intend to build our second castrip production facility. John Ferriola will share additional details on this exciting news in his comments on our sheet, plate, and beam business.

As you can see, the Nucor team's strong focus remains fixed on continuing to build sustainable earnings powers and returns that reward our shareholders. We are encouraged by the results we've achieved through 2004 and the first nine months of 2005. Over this period our cumulative net income has been approximately $2.1 billion and our cumulative cash provided by operating activities has been more than $2.7 billion dollars. However, we view these results as just the initial payoff from our strategic plan. Knowing that the Nucor team has the right people and a sound strategic plan, we can confidently say Nucor's best years are still ahead of us.

At this time, Terry Lisenby will provide additional information on our just completed quarter and our financial position. Terry?

Thanks, Dan, and good afternoon.

Sales for the third quarter of 2005 were $3.26 billion, down 7% from the year-ago quarter. The first nine-month sales of $9.494 billion were 15% higher than the year-ago period.

Third quarter of 2005 total steel shipments were 5,358,000 tons, a new quarterly shipment record and an increase of 8% over the year-ago quarter. September 2005 was the first month that Nucor's total steel shipments exceeded 2 million tons. First nine months of 2005, total steel shipments of 15,504,000 tons increased 3% over the prior year period.

Steel joist production of 150,000 tons for the third quarter of 2005 increased 5% from the year-ago quarter. First nine months, steel joist production of 413,000 tons gained 4% over the first nine months in 2004.

Steel deck sales for the third quarter of 2005 were 104,000 tons, or flat with the year-ago period. First nine months, steel deck sales of 285,000 tons increased 5% from the year earlier period.

Third quarter of 2005 cold finished bar sales of 85,000 tons were up 29% over the year-ago quarter. And first nine months, cold finished bar volume of 261,000 tons advanced 24% year-over-year.

Our sales growth in cold finished steel bar reflects our acquisition of Nucor Cold Finish Wisconsin in February of this year. With our expanded network of four plants, Nucor is the market leader in this attractive value-added business.

Our third quarter 2005 average composite sales price for steel and steel products of $571 per ton was down $97 per ton from the year-ago quarter and was down $50 per ton from the second quarter of 2005. The average selling price declines were the result of weakness in sheet steel spot market pricing and the impact of lower scrap market pricing on our raw material surcharge.

Reviewing third quarter 2005 year-over-year changes in selling prices by product, sheet declined by $170 per ton, bars declined by $47 per ton, beams declined by $26 per ton, plate declined by $105 per ton, joists increased by $70 per ton, deck increased by $80 per ton, and cold finished steel bars increased by $103 per ton.

In looking at the quarter over quarter changes in selling prices by product, sheet decreased by $86 per ton, bars decreased by $3 per ton, beams decreased by $13 per ton, plate decreased by $83 per ton, joists decreased by $28 per ton, deck decreased by $37 per ton, cold finished bars decreased by $64 per ton.

As Dan noted in his comments, Nucor's diversified product mix has allowed us to benefit from relatively more stable pricing of long products and fabricated products. Our average usage cost of scrap and scrap substitute for the third quarter was $217 per ton, down $29 per ton from the second quarter 2005, and down $31 per ton from the year-ago quarter. However, our monthly purchase scrap cost increased by $70 per ton from July to September. We expect the recent trend toward higher scrap prices and product selling prices to continue into the fourth quarter of this year.

Our spread between the average steel mill selling price and the usage cost of metallics was $313 per ton for the third quarter of 2005. The metal margin spread declined by $20 per ton from the second quarter of this year and decreased by $77 per ton from the year-ago quarter. Recent increases in sheet spot market selling prices should support metal margin expansion in the fourth quarter.

Third quarter 2005 earnings before income taxes of $89 per ton declined from the second quarter's $104 per ton, and the year earlier's quarter's $138 per ton. Nucor's effective tax rate was 34.7% for the third quarter of 2005 and 35.2% for the first nine months in 2005.

Our cash provided by operating activities for the first nine months of 2005 was $1.727 billion, up from the 895 million of operating cash flow for the prior year period. Cash and short-term investments totaled over $1.6 billion at the close of the third quarter of 2005.

At the close of the third quarter of 2005, Nucor's debt-to-capital ratio was 18%. We view Nucor's strong balance sheet as an important competitive advantage in a consolidating industry.

For the first nine months of 2005, capital expenditures were 223 million, and depreciation expense was 281 million. For the full year of 2005 we project capital spending of approximately 310 million and depreciation expense of approximately 375 million. Our 2005 capital expenditures forecast has been reduced from the earlier projection of 415 million, primarily due to the timing at the NuIron project in Trinidad.

During the third quarter of 2005, Nucor repurchased approximately 722,000 shares of its common stock at a cost of approximately 39 million, or an average cost of $54.43 per share. Since we reactivated our share repurchase program in the second quarter of this year, we have repurchased a total of approximately 4.7 million shares at a cost of approximately 245 million, or an average cost of just under $52 per share. Nearly 3.8 million shares remain authorized for repurchase under the current program.

Reflecting the supplemental dividends paid this year at an increased base rate, cash dividends paid to shareholders through the first nine months of 2005 were nearly 189 million, three and a half times the dividends paid in the first nine months of 2004.

Nucor's ongoing focus on the careful allocation of our shareholders' valuable capital as demonstrated by our disciplined approach to acquisitions, supplemental cash dividends payments, and share repurchases, our team is working to build upon Nucor's long-term record of being an effective steward of our shareholders' investment.

U.S. Department of Commerce data indicate the 2005 is on track to be the first up year in five years for nonresidential construction spending in this country. Nucor is well positioned to benefit from this developing trend at both our steel mills and our downstream businesses. We are encouraged by current trends in our order books and backlogs.

Consistent with this outlook for business conditions staying strong through the fourth quarter and into 2006, our news release this morning gave the fourth quarter 2005 earnings guidance range of $1.70 to $1.90 per diluted share. We believe Nucor's well positioned to continue delivering attractive returns to our shareholders as we move through the economic and steel market cycles.

Thank you for your interest in Nucor.

Thank you, Terry. At this time I'd like Mike Parrish to talk about our long products group.

Thanks, Dan, and good afternoon.

In general, the bar markets are very strong right now. The rebar market, which has been good all year, continues on pace as demand stays positive, and pricing is very good. In addition, rebar imports, which are 967,000 tons through the first eight months of this year, are 28% below the same period last year when imports were 1.3 million tons.

Light structural and merchant bar demand increased for the first time this year in the third quarter, mainly due to an increase in the construction markets. We fully expect continued strength here as nonresidential construction is improving and our manufacturing business is expected to remain steady.

SBQ and cold finished products also gained some good momentum in the third quarter. We continue to see the SBQ market as a good opportunity for growth as we have been successfully moving up the quality food chain into various automotive parts, including high-end cam shaft applications.

Summing up the bar market picture, inventory levels appear to be more in line with demand and we expect an improved order book across all products. We are in a much better position entering '06, as the inventory overhang that occurred in '05 is not expected.

Selling prices and metal margins remain steady and continue to be competitive with global markets. We are expecting a low level of imports throughout the balance of the year. However, as always, we will continue to monitor import activity closely and respond as necessary in order to remain competitive. We are optimistic going into the fourth quarter as our customers report strong backlogs.

Finally, I would like to congratulate the entire bar mill group team for another record performance in the third quarter as we set records in production, sales and shipping, and overall performance. Thanks to everyone in the bar group for their focus on teamwork and relentless pursuit on a continual improvement.

Thanks, Dan.

Thank you, Mike. Mr. John Ferriola will talk about our steel, sheet, plate, and shapes group.

Thanks, Dan. Good afternoon.

The sheet market improved substantially during the third quarter. Service center inventories are in line and end use demand continues steady. Most of Nucor's customers are in markets that have been strong all year. OCTG remains one of the strongest steel-consuming markets. Heavy equipment, appliance, and HVAC shipments year to date are at pace with last year's level and nonresidential construction is gaining momentum.

Imports are currently not disruptive. Service center customers are reporting import offerings, but most buyers seem willing to unwilling to risk a large import purchase that my result in a costly over-inventory possession. Given these trends, we expect the sheet market to remain solid through the end of the year. Nucor's sheet mills are essentially booked through December.

The vacuum degasser at Berkeley continues to operate very successfully and is currently being utilized at near-rated capacity. Berkeley is making a wide range of deep-drawing steels for automotive, appliance, and HVAC applications, as well as developing new markets in electrical steels and [inaudible] steels.

Contract negotiations with our customers for next year continue at a brisk pace. We expect approximately 40 to 50% of our overall sheet business for next year to be contractual, and we have roughly 25% of our capacity in the first half of 2006 under contract today.

During the third quarter our sheet group faced a hydrogen shortage brought on by hurricane Katrina. Two of our four sheet mills rely on outside suppliers for their hydrogen, an essential raw material for our annealing and galvanizing operations. Our four sheet mills worked together by sharing their hydrogen supplies and by rapidly securing equipment to produce additional hydrogen. This teamwork avoided any interruption of deliveries to our customers. I want to thank the entire sheet group for an incredible display of teamwork and for once again taking care of our customers.

During 2004, the castrip team at Crawfordsville concentrated on proving the commercial viability of the Castrip process. Operating levels of throughput, yield, refractory life span, and others were successfully achieved, proving Castrip a commercially viable operation.

Dan mentioned the increased value of our Castrip technology in today's high energy cost environment. Quite simply, from liquid to steel -- from liquid steel to cold rolled products, the Castrip process consumes about 95% less energy than an integrated facility, and about 92% less energy than a thin slab mini mill facility.

As an example, at our CSP mills, we consume about two decatherms, converting from liquid steel to cold rolled product. The Castrip process, on the other hand, consumes about .17 decatherm, converting from liquid steel to cold rolled product. At today's energy costs, this equates to about $25 to 30 a ton.

During 2005, the focus at Castrip has been on improving product quality and product development. Notable improvements in surface quality, shape, and physical properties have been realized. Files continue with new customers and new applications.

Because of the extremely high cooling rates during solidification, Castrip products exhibit some very unique characteristics and are just now being fully explored. Of particular interest is the formability of the product as compared to conventional low carbon sheet. During recent trials with a potential European licensee, products were successfully produced using Castrip material that far exceeded the expected formability of traditional carbon sheet products.

As Dan mentioned, the next Castrip facility will be built out at our Nucor-Yamato division in Blytheville, Arkansas. Although several divisions made a strong business case for locating Castrip at their divisions, markets, logistics, and excess melting capacity gave NYS the edge. Congratulations to the NYS team, and thanks to the other divisions for your help in selecting the best site for Nucor's second Castrip facility.

In beams, the market improvement that we saw at the end of the second quarter continued into the third quarter. The improvement was broadly based among all of our beam product lines. With improved commercial and industrial construction and the increased activity in the light beam business, we expect reasonably strong business levels to continue into the fourth quarter. During the third quarter, we geared up light beam production for the manufactured housing and RV products for displaced residents of hurricane Katrina. We believe this effort will extend well into next year.

Service center orders have improved. In addition, our fabricated customers continue to see more construction jobs awarded and many fabricators are building backlogs for the first part of next year.

The piling market has been solid all year and is now showing signs of increased activity. Our H-piling and sheet piling business is strong as a result of our product line expansions. Our new PZ35 and PZ40 sheet piling products have been well received in the marketplace and those products are now being rolled in every production cycle. These sections did not even exist last year. Congratulations and thanks to the NYS team for developing these successful sections so quickly. Today's activity bodes in non-residential construction bodes well for beam demand in 2006.

The plate market is also experiencing steady demand in the second half of 2005, with the first half inventory overstocking issues now resolved. As a result, monthly order backlogs have returned to desirable levels. End user demand in key plate markets appear steady through the first half of 2006. Strong demand in industrial equipment, construction equipment, bridges, wind towers, and other plate-consuming industries, has held the domestic plate supply steady during the bulk of this year and looks promising as we move into 2006.

At Nucor our people are our most important asset, and our number one goal is to provide a safe work environment for them. Our plate mill in Hereford County, North Carolina has excelled in that area, and as a result has been recognized as a North Carolina Star Site. This designation is the most prestigious award given by the state of North Carolina for safety in the workplace and is earned by businesses that have provided an exceptionally safe work environment for their employees. Congratulations and thanks to the entire team at Hereford for earning this distinguished safety award.

As always, Nucor's goal is to provide our customers with high quality steel, on time, with excellent customer service. We continue to focus on developing value added products to serve value appreciative customers. I want to thank all of the team members at our plate, beam, and sheet divisions for making that goal a reality. Thank you.

Thank, John. At this time, we want to entertain questions. And as usual, per our request, please limit your questions to one at a time, we'll come back and catch you all on the second round. Thank you.

Thank you, gentlemen. As you stated, our question-and-answer session will be conducted electronically. [OPERATOR INSTRUCTIONS]

And our first question today will come from Michelle Appelbaum from Michelle Appelbaum Research. Please go ahead.

Hi.

Good afternoon, Michelle.

Good afternoon. I was hoping I could get some comment on the steel market, overall. We're seeing kind of anomalous situations where -- there's been good news from China, they had net imports of over a million tons in September again, and so that's, you know, the whole net export thing that had been going on last year seems to have abated, yet at the same time we're seeing prices there coming down. Prices in most of the west, not just the U.S., are going up.

Can you talk about that kind of contrast? We haven't seen a lot of that in the past. And your thoughts about what it means in terms of, do we have a ceiling on prices, domestically, for future increases?

Well, as far as how we see the market in the States and throughout most of North America, and we see the market as continuing to improve as long as our economy does not start sliding backwards because of all the issues that we're all well too aware of. And the demand that we see here domestically and the order entry and backlog data is all very supportive of a strong fourth quarter and extending into first quarter of next year and that's as far out as we will dare look.

As far as the situation and the anomaly you're discussing, it's a situation at the present time unique to China because of the massive amount of capacity that they've built in that country. And how that impacts the global steel industry, the global marketplace, which will obviously also affect our marketplace here, is yet to be determined, because there have been a number of somewhat conflicting signals coming out of China with respect to the Chinese government who, as you know, owns the steel industry, owns the companies.

They have expressed a desire to consolidate, to create a situation in China where massive consolidation and restructuring takes place with the -- there's probably in excess of 100 million tons of very inefficient, old, antiquated technology, steel operations in China, that I'm sure that they would like to see be eliminated because of their very inefficient use of energy, water, iron ore, raw materials of all types, and replaced by the new capacity that they've been building the last 10, 15 years. So they have a situation in China where what they're doing over there right now is encouraging the competitive forces to take place within China to promote that type of restructuring. That's the way that we see it. That's the way that a number of steel industry people see it around the world, but it remains to be seen how effective they will be in achieving that.

So whether or not that -- those drop in prices that we've seen there, which is against what we've seen elsewhere in the world, impact to global industry is still an unknown. We'll just to have see how good the central and provincial governments are at actually fostering the restructuring that they need to have from a standpoint of cost structure and efficiencies that don't currently exist to a significant portion of their industry.

Next question, please.

And we'll move on to David Martin from Deutsche Bank for our next question. Please go ahead.

Good afternoon, David.

Good afternoon. Thanks and congratulations on a good quarter.

I wanted to focus on your fourth quarter outlook, if I may. Given your guidance of $1.70 to $1.90, you're effectively suggesting the quarter is going to be kind of a flat to down quarter relative to the third quarter, and just generally wondering what you're assuming. Spot prices have been up in recent months. I think you mentioned earlier that your metal margin will be up in the fourth quarter. I guess I'm asking, what am I missing?

Well, the first thing is we're not forecasting a flat to down quarter in the fourth quarter. I know you've read the earnings release that we put out today. We said that we believe that business will continue strong into the fourth quarter. There are several unknowns out there. And we have a history of being -- practicing prudence when it comes to forecasting and being conservative, because of the unknowns and with respect to the scrap volatility, with the energy situation, you've got two more hurricanes lined up to hit the Gulf Coast area, looks like one may miss it, but in terms of the energy producing area of the Gulf, but there's a lot of unknowns. We saw some dramatic things take place in September as a result of these hurricanes, and so it's just prudent on our part not to be getting carried away with projections and forecasts.

We do know that costs of all types are going up. While our seller prices are also projected to go up, and our order books are very strong, so right now our forecast for fourth quarter into first quarter is strong business conditions, improving business conditions, but also we'll be dealing with increased cost pressures and so our forecast is as we've stated it.

Next question, please.

And our next question today will come from Mr. Chris Olin from Longbow Research. Please go ahead.

You had some flat-rolled contracts expire this summer, and I'm not sure if you referred to that during your comments, but I'm just wondering, during the renegotiations what was the outcome on pricing?

I'll let John deal with the details on that. But basically we are in the middle of contract negotiations as we speak. They've all been delayed a little bit because of uncertainties out there, and, John, you want to take a shot at that question?

I'll just comment that in general, during the last contract negotiation season, the market was very, very strong, and as Dan said, we're in the middle of it now, we're both kind of dancing, waiting for the market to be at the optimum point. But we see the surcharge, all of our contracts will be base price plus surcharge, and given that we see the scrap pricing moderating a bit, we think we can be pretty aggressive on the base pricing. But again I can't give any firm numbers, as we're in the middle of negotiations now.

And we'll now move on to our next question from UBS's Timna Tanners. Please go ahead.

Yes, hi, good afternoon.

Good afternoon, Timna.

I had the same exact question as my colleague from Deutsche, but I guess that's the answer we're getting. So I wanted to ask you about plate. If you could comment on the pricing environment there, seems a little lighter than I would have thought. And if you could talk a little bit about that market in particular.

Again, I'll turn to Mr. Ferriola to get into the details of that, but one thing that I will caution all those listening to the conference call to focus on is not just pricing but margins. Because of the volatility of the scrap situation, pricing can go up or down, but that doesn't necessarily mean margins are shrinking. John?

The only thing I would add is that we see the plate market very strong going into the fourth quarter. Very strong. And we think the pricing will be accordingly very strong. So I'm not sure what you're asking. You say you think plate pricing is going to be weak in the fourth quarter --

No, no, no, I was talking about the third quarter, the realized price is a lot lower than I would have expected it, 625.

That realized pricing is really driven by what scrap did throughout the quarter. Hold on for one second.

And our next question today will come from Mr. Jeffrey Lee from Owl Creek Asset Management. Please go ahead, sir.

Before we go on to the next question, to finish answering Timna's question on the third quarter, we include -- at Tuscaloosa we include the coiled plate that they make, which really is -- follows hot rolled sheet pricing. We include that in the plate pricing composite that we put together. So, some of that, that drop-off that she was referring to, has to do with the inclusion of the -- basically, the play [inaudible] price of sheet price out of Tuscaloosa and its impact on the pricing -- the composite pricing for plate overall. But if you look at plate, cut to length plate, the product out of Hereford, you don't see the same trend that you're talking about, or we don't break it out that way.

I'm sorry, next question?

We will now go to Mr. Jeffrey Lee from Owl Creek Asset Management. Please go ahead.

Good afternoon, Jeffrey.

Good afternoon. Can you guys talk about the Castrip in the Nucor-Yamato facility, and is that being funded solely by you guys? Or -- I realize it's a JV facility. What is the economics behind that?

It is being funded completely by Nucor. There will be a transfer pricing mechanism set up with the joint venture to transfer the liquid steel to the Nucor Castrip facility. John, any other things you want to add to that?

No, again, you're right, it will be wholly owned by Nucor.

Part of your question had to do with costs.

Yes.

Is that correct?

Yes.

Could you restate it, please?

Just the cost of building the facility.

Again, we're still doing the engineering. We've just begun the engineering for the project so we've got to look at the on-site, the cost for capital on site, the modifications that have to be made in the mill. Typically, we say that a Castrip facility, the latest estimates are in the 110 to $120 million range. But again, that fluctuates with the particular facility it's being placed in.

Of course, that's being added to the facility that has significant excess hot metal capacity already proven, and so you won't be talking about building a melt shop of any type. There will be a vacuum degasser that will be added there.

Okay, great.

Next question.

And our next question today will come from World Steel Dynamics' Peter Marcus. Please go ahead.

Hi. Good afternoon.

Good afternoon, Peter.

My question is about Castrip and the extent to which the hot rolled band that is produced needs to be pickled in oil before it's made into galvanized sheet, and are you planning at Nucor-Yamato to get into galvanized?

Peter, we've had -- we've had trials where we've taken our Castrip product directly to the galvanizing line, and we've had a lot of success with that. Depends on what the final application of the steel is. Again, we've had quite a bit of success taking our Castrip product directly to a galvanizing line without pickling or doing any additional rolling.

There's also additional work being done to minimizing even further the need to worry about the pickling operation, even in some of the product lines that right now we would probably still continue to pickle. So continued development in that area to eliminate the pickling operation.

And you said you're adding a vacuum degasser at the Castrip unit? Isn't that something new?

No, at that Castrip facility in Crawfordsville, we have a vacuum degasser. And what Dan was referring to was the new facility in Blytheville would also have a vacuum degasser.

One of the double benefits there is that vacuum degasser will also be used to make large jumbo beam sections that will have enhanced properties due to the lower dissolved gases of hydrogen and nitrogen. So it's a positive for both our sheets, the Castrip side and for the beam side.

Next question, please.

Moving on, we will now turn to Daniel Roling from Merrill Lynch. Please go ahead.

Thank you. Could you share with us the price that you hedged your gas at going out into the next year or so?

Good afternoon, Dan.

Good afternoon, Dan.

It's actually -- there's a number of different prices that we've hedged at, that we have a large portion of our natural gas hedged at a price that was locked in, oh, six-plus months ago, and we have some that had been locked in in the last six months and some more that we've locked in recently. So it's a composite of a number of different locks and pricing, but it goes through most of the first half of 2007, is that right?

March.

March of 2007.

Okay. I bet you're happy.

We're happier than we would be if we weren't hedged, but we're not happy about the poor planning on the part of our government in terms of having an energy policy that doesn't penalize manufacturers more so here than the rest of the world. It's a sad situation that we have, and hopefully we're going to get that addressed here because of the crisis, energy crisis that's going to be impacting all consumers here very shortly.

Very shortly. Thank you.

And our next question will come from JP Morgan's Michael Gambardella. Please go ahead.

Good afternoon, Dan.

Good afternoon, Mike.

I have a question on process technology. In the past, the technology has been a big part of some of the growth periods in the Company, particularly at the end of the '80s when you introduced thin slab casting. It really not only cut your costs, but got you into a whole new market, the sheet market, which was basically double the size of the potential markets for the Company.

That's very true.

How do you look at your array of new process technologies, Castrip, the Trinidad plant for DR I, the Brazilian operations, all of the HIsmelt, all the scrap substitute. Going out, say, five years, how do you kind of think about how extensive they will be in the organization and what type of earnings impact they will have? Because they're not necessarily getting you into new markets. They're more cost cutting and margin improvement technologies.

Good question. Joe Rutkowski is going to give you some feedback on that.

Hi, Michael.

Hi, Joe.

Several things. Let's just take -- one of things you need to know, we are in the middle of trying to put a portfolio together of incubating technologies, none of which we're ready to talk about, but we actually do a portfolio in hand today, and they span anything from future metallics technologies, such as HIsmelt, but we have others, to just incremental improvements at the facilities for processing. So that's one thing. So it's not like -- you don't know of all the things we're doing, but you know some of the big ones with HIsmelt and Castrip.

When we look at Castrip from a growth perspective, we believe, as we've said in the last few calls, that we are going to be able to take Castrip and help us build an international platform with it. And Castrip right now is a nice wildcard to have in your hand, because it is -- you could think it's incremental, but it's not, because you're -- not only is it a cost savings, but you are producing a product that isn't produced today. It's a very, very economical and efficient way to make a small scale plant that can produce a cold rolled replacement product, a thin product, with very, very unusual qualities. And we see that on formability.

So when we look out, not only do we see it as a growth platform within the U.S. and this hemisphere, but also as a worldwide growth platform for joint ventures and for wholly owneds, but also it is getting us into a different product line, and it may end up creating its own product line. We intend to work on that branding very hard as well as within Castrip LLC, which is our joint venture with Blue Scope and IHI.

So I would say the other thing is, you know, being part of the HIsmelt technology and any of the other technologies we do, we utilize these things as, one, improving a partnership and giving us -- taking our partners, other partners and their customers and being able to utilize that network for future growth. And we do that. I mean, our joint venture with CVRD lets us get to know a lot more people in other parts of the world. Our joint venture with Rio Tinto does the same thing. So it's not just the technology, but it's also the partnerships, and that's how we look at partners and -- in the future of the Company and how we're going to grow.

Rio Tinto brings us views of China and Asia that we would never be able to have, and with a partner that we trust. So those are the kinds of things it brings to us, and the other thing I think you have to keep in mind is that all the technologies that we are working on we always now want to protect, have it protected, intellectual property, and we feel very comfortable with that on all the technologies we're working at, and quite frankly, that's where the value is going to be in the future as well.

Would you -- one last one. Would you envision having Castrip at some bar facilities in the future?

Well, we're putting it in at Nucor-Yamato, which --

Yes, beam. But I mean, could that be something that you put out west in Utah?

We could put it almost anywhere. Honestly, the other thing that we've done, when we talk about new products, Michael, we have actually made good strip from .6% copper. That can't be done. It can only be done with the solidification technology that exists within a Castrip-type plant. And so our abilities to use, let's say, rebar type or merchant bar type scrap makes that even more viable, the question you just asked. Literally, we could melt the same scrap we're melting today at most of our plants and be able to make strip out of it. Now, the quality may be more of a commercial quality than a higher quality, but still, it would be usable strip.

Thank you very much.

Michael, just a little follow-up on that.

Your points about the Castrip technology, the HIsmelt technology not really bringing us into really huge new markets, it's partly true, but as Joe said, where it really does offer us huge opportunities is in the joint ventures internationally. As we've talked in the past we've talked with 40, 50 different companies around the world, Castrip, and at the present time we've narrowed it down to three international partners that we are in final discussions with to pick a JV partner for our first international Castrip opportunity, and whether we get that worked out before the end of the year or in the first quarter, that timing remains to be seen, but that's the time frame that we're looking at. So over the next five to ten years, the biggest growth opportunity for Castrip, and also HIsmelt, will be international joint ventures as well as us using it ourselves.

On the HIsmelt side, it does get us into an area that we haven't been in the past in potentially a much bigger way, and that is in the production of iron units, both by joining our partner, Rio Tinto, in the production of iron units, using the technology, or in the marketing of the technology to blast furnace operations. We want to, instead of rebuilding the blast furnace, we want to change over to a new, more efficient, lower energy, less emission technology for producing iron units and pig iron. On the liquid state or in a solid-state.

And on the uniqueness of the product, we are currently taking Castrip material, as John mentioned earlier, European customers have found that the trials they've done on what amounts to deep draw quality applications, that the Castrip material has done exceptionally well. And so those opportunities there move us into markets that -- with that technology that we haven't been in in a wide, broad way yet, although Berkeley is doing very well on those things, it's not something that we are the major player in today and this technology offers us that opportunity.

Next question, please.

Our next question will come from Morgan Stanley's Wayne Atwell. Please go ahead.

Thank you. I hate to beat Castrip to death, but --

That's all right, keep beating it. It's not dying, it's growing.

Right. You sort of mentioned this, but timing, when do you think you might actually start construction at Blytheville and when would it be finished and size -- 500,000? What kind of size would that be?

As we've said in the past, the size can vary dependant upon the widths and the gauges we're producing, but we're going to be wider there than we are at Crawfordsville, so probably on the order of 500,000 tons, give or take 100,000 tons. And as far as timing goes, this won't be actually to the point where we're breaking ground, or what have you, until probably first quarter next year.

I'd say the end of the quarter.

End of the first quarter. As we complete the engineering studies and what have you for the things that we're changing from what we've learned from the first Castrip facility, and I imagine that we're looking at a start-up that's somewhere, 12 months after we break ground.

16 months.

12 to 16 months after we break ground.

So mid-'07.

Yes.

Thank you.

You're welcome.

And we'll now turn to CIBC World Markets' John Novak for our next question, please. Go ahead.

Just back to the energy discussion, can you give us a sense in terms of how much of your natural gas and electricity have been hedged? Is it two-thirds, three-quarters?

All of our electricity is on a contractual basis, with utilities. Usually contracts that last anywhere from five to ten years, so that is all under contract today. Now, there are fuel adders depending upon how much natural gas some of these utilities might use for peak generation that could impact the cost of the electricity in that contract. Occasionally, somebody will have a coal-fired facility go down for maintenance and back it up with a gas-fired peaking unit, and at today's prices that can get pretty expensive and they can pass that along. But in general, electricity, we are all under contractual situations.

The issue would be, can we hedge the natural gas side of things on that, or will our utilities. There's another crime. The utilities in this country have not done any hedging on natural gas, and they've built all these new peaking units, which has driven the shortages that we're seeing today in natural gas, and high prices. Yet they've not done anything to protect their customers because they get to pass it along one to one. I mean, that's absolutely ridiculous. They need to take care of the customers. They should have been doing hedging all along just like we've been doing and other people have been doing on major purchases of natural gas.

As for as the natural gas hedging going through March of 2007, we are probably -- at least 40% hedges on that. But that's just here at corporate, and the divisions have more that they've hedged on.

And at this time we will take our next question.

Through the winter of 2006.

March 2006.

Through March of 2006 we're about 85 to 90% hedged, and -- but past that we're about 45% hedged.

Next question.

My apologies for the earlier interruptions, gentlemen. Our next question today will come from Bramwell Capital Management's Sanil Deptarter. Please go ahead.

Could you indicate what is the scrap availability?

Scrap availability is good. We've never had a problem getting it. It's a matter of pricing. Hopefully that will remain that way. Nucor is the largest purchaser of scrap in the world, certainly the largest producer -- purchaser of scrap in North America. We pay our bills on time, and our supply base appreciates that, and so we haven't had trouble getting scrap, but the price of it is pretty volatile, and that's the main issue.

If we ever had a problem getting scrap because of too much was being exported, then we would raise some questions about what other countries are doing to limit the exporting of their raw materials. But at this point in time, that has not been an issue and we don't foresee it being an issue.

Okay. In your presentation you mentioned about improving business conditions. Is it -- are you seeing real demand or just [inaudible -- highly accented language] What is your view on that?

This is your second question. It will be your last question until the next time around, if you want to ask another question later, but we're talking about demand oriented, not restocking oriented.

Next question, please.

Our next question will come from Frank Dunau from Adage Capital. Please go ahead.

Okay. I want to go over the mysteries of LIFO accounting again.

Deja vu all over again.

Right. I saw the price of scrap go up a lot from the end of the second quarter to the end of the third quarter, which would imply a charge, but then it looks like you drew down physical volumes of inventory which means you may have gone through some LIFO layers, so I'm trying to figure out how you got to a $50 million credit and what a reasonable person might also expect in the fourth quarter.

Keep in mind that when we do a LIFO analysis we're projecting where we think it's going to be in December, not at the very end of the quarter.

Right.

So while pricing went up for part of the quarter, it also came down hard in October. And so if you -- based upon what we see it's going to be in December and where inventories are going to be, that's what resulted in that LIFO number. And at this point in time I think we -- if you take a look at the first nine months of the year and look at the average LIFO credit that we've taken, we're forecasting our numbers based upon a similar amount in the fourth quarter.

So the average -- So I should take the average of the first three, and that gives me the fourth?

No, we're going to be around 50, 52 million is what we've got in the budget for the fourth quarter.

Thank you.

And we did not liquidate a layer.

You didn't liquidate -- I guess I get no more questions, right?

That's right. Until the next time. You can come back in the queue again.

All right, let me try that.

We will now move on to John Hill from Citigroup for our next question. Please go ahead.

Congratulations on a great quarter and some very exciting news out of the Company.

Thank you, John.

Just revisiting the energy subject, obviously you're talking cost per ton up $12 year on year. I was just kind of curious, if we stay with similar pricing and market conditions for where we are right now, what type of escalation should we look for next year, relative to where we are today?

In terms of energy costs?

Yes.

Let's see. If I can answer that question I'll go on to the energy business and do a little hedging and try and make some money at it. Who knows. Other than to say that the trend that we see going forward is a cost going up, not down. The natural gas situation is really, really the big issue for us in the United States from the manufacturing standpoint. Not just steel industry. Because it's natural gas in this country that's much, much higher than the rest of the world. And, again, that has to do with the well intentioned increased use of natural gas as a clean burning fuel, and they won't allow any more drilling of it so we get into shortage situations, but that's another subject.

Looking into next year, we really don't have a forecast of where we think things are going to be, although by our hedging activities on natural gas, you can take it that we're concerned that there's going to be some more upward pressure.

Fair enough. I guess that question is really, if all things being equal, where it would be, but that's a lot of moving parts. Alternatively can you tell us what the total energy cost per ton was, so essentially the basis upon which this $12 was measured?

Do you want the number for the fourth quarter or year to date, Dan?

Either one.

Year to date.

Third quarter was about $41 a ton.

About $40 a ton in the third quarter. Year to date was in the mid 30s.

Great. Thank you.

And our next question today will come from John Tumazos from Prudential Equity. Please go ahead.

Congratulations on all the progress. Dan, I share some of your worries about the electric utility industry that might buy spot gas, and coal companies generally sell in one to three-year contracts. Coal to utilities, but utilities sometimes offer ten-year contracts to customers without having the fuel established.

Right.

Could you describe the power generation method, coal versus other, of your suppliers in Arkansas, Alabama, and the Carolinas in your primary hubs where it's key, and how long they have their fuel bought for? And your duration, if you may.

John, I wish I could -- I was knowledgeable enough about the fuel side and what they've done to be able to tell you. I can tell you that it's principally a coal-fired generation that supplies our mills, some nuclear, and then for peaking situations, most all utilities have built natural gas-fired units for that, which obviously has been a huge, huge mistake, and they really did a good job of taking care of their customers there, but most of our electrical contracts have to do with coal-fired facilities and nuclear, not any major, except peaking on natural gas, and some hydroelectric out on the west coast, and some spot hydro around the country. Arkansas has a little bit of hydro that it generates.

Dan, other companies we follow, AlCan, Alcoa, Newmont Mining, Phelps Dodge, paper companies, have some of their own power plants. Since you guys are smarter than a lot of other businessmen and manufacturers, do you think that it would be a good use of shareholder funds in isolated situations for Nucor to generate its own electricity?

It could be. It could be, and to say that that's not something that we've thought about or are thinking about would be an incorrect statement. It is something that does cross our minds. We have thought about it. We've even joked that we used to be known as Nuclear Corporation America. [Laughter] Maybe we should get a couple of nuclear power plants around the United States in key locations. But, certainly it's something that you, in this environment, you have to take a look at, but there are no current plans to move forward on anything like that, John.

Go for it.

You never know.

And we will now hear from Fine Capital's Deborah Fine. Please go ahead.

Hi, gentlemen. Congratulations on the quarter. You're being very tough on the questions here, so I'm going to try and ask quickly.

Okay, Deborah.

The sparse buyback that you did over the past quarter I assume is not a reflection of your idea of what the stock should be valued at. And was the limited buyback because you were actively looking at acquisitions? Did -- when you took a look at Roanoke, what were you thinking there, and is the acquisition prices that you're seeing in the market of interest to you or not, and if not, why aren't you buying back more stock?

[ LAUGHTER ] That was a very unique one question.

Did you get it all down?

I'll let you get away with it, Deborah. As far as why we only bought back the number of shares that we did, Terry, you want to take a shot at that one?

We have sort of set a point to buy below, not really relative to value, just a decision theory, and we're probably going to be more aggressive on that in the future, but --

I don't know what that means, relative to decision theory.

Meaning we had just set a target price. We were buying when the market was below it and not buying above it.

As opposed to just saying we're going to buy five million shares back or something.

Okay. Well, that's saying that you don't think -- that doesn't seem to reflect how you guys think about the value of your Company accurately.

Well, that's -- that's only part one to the answer to your question. Part two is we are very active in assessing acquisition opportunities that are out there and we've not commented on whether we were involved with Roanoke or not, but there are a number of opportunities in front of us at any given time, and so we are still of the mind-set that share buyback is not the primary way for us to return shareholder value. It is through taking advantage of the opportunities that we're looking at as they present themselves. Sometimes it's a matter of price, sometimes it's a matter of timing, sometimes it's a matter of things just not working out in your discussions, but there are numerous opportunities that we're looking at, so that's still our primary goal for returning shareholder value.

As you know, we have brought -- we have a special dividend that we put out there, we continue to look at that as a possible way to return value to the shareholders, but the primary way for us to do that is acquisitions, and I would not assume it's because we don't think the value of the company stock today is worth buying. And while we do have quite a bit of cash on hand, we also still have about $900 million in debt, so we're very careful, as you well know, and so just -- stay tuned, we'll see how things develop over the next 12 months.

And we will now move on to Mr. Charles Bradford from Bradford research. Please go ahead.

Good afternoon. I'd like to --

Good afternoon.

I'd like to know what was included in the net interest item that went down so much.

Just interest expense net of interest income.

But what was the interest income? Was it something unusual? Because the debt level was about the same.

Cash has gone up a lot.

Okay.

Cash is up, what, 600 million?

Yes.

Okay.

And I think probably interest rates have gone up a little bit on the cash that we do have out there and the 1.6 billion of cash that we do have out there. So all of that has contributed to it.

And at this time we have time for one final question, and that will come from Mr. Aldo Mazzaferro from Goldman Sachs. Please go ahead.

Good afternoon, Aldo.

Hi, Dan, how are you?

Fine, thank you.

Hey, I just had a question on the variety of the raw material technology that you're developing and the inflation that we're seeing and may see in iron ore and coal and gas is what it is. Are you having any second thoughts on the economics of these? Or are they testing the limits of the economics at all?

No, not at all. Keep in mind that, you know, on each of these individual projects, and I'll walk through each one with you here, on the DRI plant in Trinidad, we have a 20-year or more contract that basically gets us gas at $2.00, plus or minus $0.20 or something like that. So we have one major cost component under a 20-year contract at very, very, very attractive prices. What we didn't announce yet is that we have this drilling platform going on an angle through the Gulf to Trinidad. Only kidding there. Only kidding.

And so iron ore isn't going to be a component, but one of the major components, bigger even than iron ore, the natural gas issue is well under control. At the Brazilian pig iron project, what we have under control there, again, is one of the major cost components of the process, not the iron ore, those will be done on 12-month contracts or what have you, but the charcoal. The charcoal is in the forest and eucalyptus trees that will be harvested and you can look at that as a relatively fixed cost as well.

On the HIsmelt, what you're looking at there is -- in total you're looking at the ability to use a wide range of various qualities and grades of iron ore and coal, and not having to be working strictly with the highest quality of levels that you would be in typical blast furnace operations and coking coal operations. So they each have with them a raw material benefit that makes these technologies and the iron units they will be producing very, very cost competitive, regardless of the price of iron ore.

In general, you have to always remember that an iron unit is an iron unit is an iron unit at the end of the day. So on a relative competitive basis, we'll be in much better shape with these technologies than the folks who are just using conventional ones.

Great. That was a great answer. I guess that drilling platform would have to be put on hold along with the uranium mine that you might develop.

Stay tuned for more developments. [ LAUGHTER ] Thank you all very much. We -- are we ready to close? Are we still on?

Yes, sir, your line is open. Please go ahead.

Okay. Just want to thank you all for participating, and again, thank all of our teammates around the Company for helping us continue our drive towards another record year, and again, our best years are still ahead of us. Thank you all very much.

Thank you, everyone, for your participation, and that does conclude today's conference at this time. You may now disconnect.