Posco Holdings Inc (PKX) 2011 Q1 法說會逐字稿

Good afternoon, ladies and gentlemen, and welcome to the CLSA conference call. Our chairperson today is Mr. Geoff Boyd. Mr. Boyd, please begin your call and I will be standing by. Thank you.

Okay, good afternoon. Thank you for joining this call. Today with us, we have -- my name is Geoff and I'm the Head of Regional Steel for CLSA and here in the room, we do have a good representation of the POSCO IR team led by Tae Hwan Choi and some of his colleagues.

Now, the results came out on the 22nd last Friday but this is the first time they had a chance to do an analyst conference call for foreign investors and so we thought we would just go straight to Q&A because I think everybody has the presentation that was given last Friday.

So operator, perhaps you could explain how they ask questions?

Thank you, sir. We will now poll for questions. (Operator Instructions)

And while we are waiting, I mean just to start the ball rolling, POSCO has had two days of meeting domestic investors and institutions and one of the more common questions was that the price hike was fairly large in the Korean market, larger than most were expecting. But also, relative to Asia, it looks perhaps aggressive in terms of where Asian prices are right now.

So the common question was how well these prices would stick going forward and maybe I could have POSCO address that question since I'm sure it's going to come up anyway. We will start with that question and by all means, if you have other questions, please put them through.

Hi, this is Tae Choi, Team Leader of Investor relations at POSCO. Welcome. As Mr. Boyd mentioned, I just wanted to hold this conference call to respond to some of the questions that you may have on the finer details of the presentation some of the followers.

Yes, we did a few meetings for the last couple of days and even though the long awaited price increase was announced last week, the share price hasn't been fully reflecting it, so I'm a bit confused as well.

But one of the questions was that whether that price hike was realistic, whether it will stick and whether we plan to provide discount over the list price. The answer is no. The price hike has been accepted by our customers. We have been explaining this to our customers before we formally announced it and as we speak, the orders that are flowing in are at the new price, the KRW160,000 increase.

Yes, we do not plan to provide any discount at this moment because it has only been three or four days since we raised the price but we have been deliberating or contemplating on how much to increase for quite some time. So we have been monitoring the market. We have been monitoring other domestic markets of nearby countries and yes, we are pretty confident this price is accepted. Accepted and will be sustained.

Now, a few announcements that followed. Hyundai Steel raised their HRP price by the same amount. The pipe -- domestic pipe manufacturers, they raised the price by KRW170,000. Slightly above KRW160,000 of our price increase and we expect other domestic steelmakers to announce their price increase by the same amount in the coming weeks.

And maybe -- I know one of the questions that will come up will be on the export side of the equation. What are you seeing in the export market because that is still 30% of your volumes and how aggressive can you be on the export pricing? I mean is it realistic to expect the same level of price hikes, or what level do you think is possible?

Right. Yes. It is difficult to disclose the detailed -- finer details of export price. But for now, we are expecting at least similar amounts of price increase on our exports.

The export price has been -- we have been raising our export price January, February, and March for three months. And for the second quarter, we have offered a price that is quite higher than the first quarter's price. At the end, on average, it will be similar increase.

Good. Operator, do we have any questions in the queue?

Yes, sir. Our first question comes from Mr. Ajay Sharma from Singapore. Thank you.

Yes, hi. In terms of your raw materials can you tell me in this quarter what percentage of raw material will be at the higher cost that is like 33, 34 coal and what percentage will be at the lower cost?

Low cost, high cost for the second quarter you mean?

Yes.

For the second quarter, what percentage will be at the new contract -- quarterly contract price for the second quarter and what percentage will be from the first quarter and will there be any lingering from the fourth quarter?

Okay. No, roughly, it's first in, first out in monthly moving average. But we hold about 30 days of inventory -- physical inventory on our yards and another three weeks' worth on route from Brazil and Australia. So roughly, two months' worth will be reflected -- two months so April, May will be using the raw material that was procured in the first quarter and beginning June, we will begin to use the ones for this third quarter.

Does that answer--

Right. And is that the same for coal, or is that identical for coal or?

For coal, it's a little bit tricky. What happened was some volume was not delivered in the first quarter because of the flood in Australia. We have been able to get some of those lost volume -- carry over volume this quarter, so coal can be slightly higher.

So coal will be less than a quarter volume from this quarter's procurement and more than three quarters from last year's price.

Right. And can you also tell me what was the average export price in the first quarter?

The average export price was lower than domestic price. I'm sorry, yes, the average sales price, including all product mix, was actually at par. But in terms of HRC or CRC, it was roughly $50 less than domestic price.

Right, right. So you expect to maintain the same differential between the export and domestic for this quarter?

No, the gap between the domestic and export price was closed this quarter. So the gap should be less than the $50 that was shown last year.

Because the domestic is having $150 price hike let's say, right? But -- and also, plus you have that currency adjustment, right? So in US dollar terms, going out maybe $230 from the fourth quarter level, right? So you are saying that the export price is going to go up more than that to narrow the gap?

Okay. Yes, the export price has been rising on a monthly basis so the volumes are -- agreed, on a quarterly basis. The finance prices for the most part are settled on a monthly basis and yes, we have been raising our price in March, April, and we will continue on for May and June so--

I mean another way to look at it, the current price domestically at $980 per ton, which is the $1,060 divided by $1,080 or whatever. So I mean, I guess what he is saying is that $930 would be what he would expect if the gap stayed the same on the export pricing.

For HRC.

Right.

Yes.

Okay. Thank you.

I'm going into too much of a detail. Considering product mix as well because we export more of CRC than HRC and more of the automotive steel than regular hot-rolled coil. So considering those, the increase will be similar to slightly higher, and average price the domestic and export will come closer than shown in the first quarter.

Is that it then or--?

Just a last question on the raw material. Do you guys have any visibility in terms of where the coal price might settle at for the third quarter? Should you expect a sharp correction there or stay at higher levels?

No sharp correction. Perhaps now the flood is over and some of the repairs are done, the coal price, in terms of spot price, coal price may fall slightly but we don't think it is going to go through that much of a difference from our current spot price. And I think that is exactly what we are seeing in the current spot market for coal.

It has -- the price shot up to almost $400 per ton level some time in January and February, right, but it has come down to the $320 level. We expected it to fall even further even a month ago, but it is holding steady at that level. So slightly weaker, maybe, but not much dip.

Thank you very much.

Okay.

Thank you. Yes, sir. We have the next question coming from Mr. Spencer from Morgan Stanley in Singapore. Thank you.

Thanks for the call. I have three questions. The first is can you comment on your order book and if you are capturing any benefit from the shift in auto or white good production from Japan to the Korean market?

We are going through the questions one by one, right?

Okay. Sure.

We'll do that. So are we getting any orders? What we have received was some emergency orders from our domestic customers who import steel from Japan and some of our customers in Japan that we have been exporting to. Now, more orders came in from those two group of customers for March, April, May and June shipments. But beyond that, we haven't seen anything significant yet.

So for the second quarter shipment, we have received more orders but we have been running at full capacity anyway so we couldn't cater to all those needs. Only about 80% of deficit -- you have the numbers, right?

Yes, about 500,000 tons that we are going to try to produce and supply more to both domestic customers and customers in Japan. Also some to Southeast Asia [and also] from Japan.

That is it.

Okay, thanks. The next question is surrounding the price increase. Can you just comment on why the price increase took a bit longer than expected and also, can you comment on how that price increase might affect your margins looking into 2Q as it sounded like from your earlier comments you might be beating your cost increases slightly so maybe you will see a margin expansion? Correct me if I'm wrong.

Yes. Our price increase announcement was not delayed if you look at the history. If you remember for the third quarter, fourth quarter last year and first quarter this year, we announced our quarterly price beginning the first of the first month. But beginning January of this year, we abandoned that practice and went back to our original position and price policy which is that we monitor the market and we analyze our cost structure and we make adjustments to our price when it is necessary.

So that's exactly what we have been doing and this year it's not different. We have been planning to raise our price actually last week which is exactly what we did.

Last year, the price increase was as of May 1 announced April 26. The year before, the same thing. Two years ago, the same thing. So every year our price was announced late April or early May and this year it was just the same.

As for the margin improvement, yes, it is still fluctuations and differences on a quarterly basis. At this stage the top management has expressed that this year's total annual operating profit will be well above that of last year which is KRW5 trillion. So yes, combined with some of the price increase, some of the cost reduction and making product mix a little bit more advanced that we will be able to reach -- or we will be able to generate more operating income than we did last year.

Okay. Just looking at the sequential improvement 2Q versus 1Q with -- I like to look at things sort of an EBITDA per ton basis but maybe you look at things a little bit differently. It looked like the profitability was running between KRW250,000 to KRW300,000 for -- or KRW200,000 to KRW300,000 for much of the first three quarters last year, and then it collapsed in the fourth quarter down to KRW150,000 and it seems like you have come back to about KRW175,000 in the first quarter. Are we going to be going back up to the traditional range that we saw in the first half last year of KRW200,000 or somewhere north of that in the remaining -- in the 2Q with the new pricing?

Right. Okay, yes. Yes, pretty much because our plan is that -- our plan reflects that, or shows, on quarterly basis, second quarter, third quarter, fourth quarter there is going to be some fluctuations, so the deviation is going to be very minimal. So pretty much even number of quarterly operating income. Of course, that could be slightly more on the second quarter and slightly less in the third and the fourth quarter, but not by much.

Now, the guidance that this is better than last year, meaning for the next three quarters, including this quarter, we have to make well above KRW4.1 trillion of operating income. That averages out to around or above KRW1.4 trillion of operating income per quarter on average for the next three quarters.

So volume increase is not going to be that great for the next three quarters and yes, the absolute amount of versus first quarter is going to be somewhat significant.

Got it. Last question if I may is on cost and there was a comment earlier about coking coal. One of the interesting dynamics in the market is that there seems to be much cheaper Chinese coking coal than the seaborne price. Is there any way to capture that for you, for POSCO?

That will be spot, right?

Right.

Our --- well, maybe a little bit but no, our even on the coal side, our arrangement is long term contract in terms of volume. It's more likely that we are going to honor that contract and stick with it.

But yes, in isolated incidents we [test it], but total portions will not be that great.

Basically, almost percent of your volumes are on contract, right?

Yes.

Okay.

Got it. Thanks very much.

Thank you.

And I guess the one thing I would add to that -- our second question is it does seem like the timing of when your price lag is going through in the middle of May is when it starts to hit your books is pretty consistent with what you were saying before on the iron ore cost hike having like basically seven weeks or eight weeks type of thing, so it's almost notching up quite nicely.

Right. And that has been -- as I said, that has been the practice in the previous years.

Yes, okay.

Operator?

Yes, sir.

Any more questions?

(Operator Instructions).

Okay, maybe I can ask a question and I don't see if anybody else have thought of it but on -- I mean there has been a lot of questions over Korea Express and whether POSCO is bidding on that. Maybe you can talk a little bit about what is the timeframe -- the latest timeframe on what is going on there and if a deal was done, when would it happen and what management is thinking on that?

Yes, the easy question first. The easy part first. The time frame, May 13th the people on the shortlist will submit final bid. That is Friday the 13th of May. Probably the following week they are going to come out with a preferred bidder.

That would be one name?

One name. Just one preferred bidder.

So right now, the preliminary bid was sometime last month in mid-March and three people came for what was on the short list, POSCO, CJ and Lotte. And they have opened a cyber room for these three companies and we have been doing some due diligence. Now we are analyzing our findings in China and come up with a reasonable valuation, or a correct valuation of it.

We are interested but only at a reasonable price. And our interest lies in the cost savings side. The Steel business, the second largest chunk of cost is logistics cost. So some of the logistics cost is included on our raw material cost, but still, if you combed that out, total logistics cost is more than 10% of our total cost. So now what we are doing is we are outsourcing this function to various logistics companies and we believe that our logistics cost can be improved and become more efficient.

If you look at other global companies, they have internal like logistic functions. These have been with some of the other global companies and so we believe if we internalize logistics function we can make our internal logistics more efficient and find cost savings. Also, they can contribute a lot on our overseas fuel investments including downstream mills that already exist and/or are being constructed in Vietnam, Mexico, Indonesia, India and as well as China. So that is where the interest lies.

You know any mergers and acquisitions, any acquisitions, the synergy that can be created is either revenue managing or cost reduction or both, right. Korea Express is more on the cost reduction side and I emphasize this because cost reduction is pretty straightforward to calculate the benefit and so we are finalizing our findings as I've said, and we are only interested in participating in the bid to the extent of regional price where we believe spending this money would bring in more cost savings.

Okay.

Sir, are you ready to take the next question from the audience?

Yes, sure.

Okay. Our next question come from Mr. Gordon Mackay from the UK. Thank you.

Hi, I have just got two questions. The first question is can you tell us has there been any change domestically in terms of pressure from the government not to raise price because of inflationary concerns which gives you confidence that this price -- these price hikes will stick without incremental discounting? So that is my first question.

And then secondly, what is your expectation on when Japanese production will actually normalize?

Thank you.

Alright, the first question first. Your question, I'm sorry but your question was has there been any changes in the current atmosphere where the government's pressure doesn't matter anymore? Is that--

Well, yes, or has moderated from where it was and why that would be the case?

Right, Okay. No. Your question assumes there has been certain pressure or influence from the cost of the debt. It is not the case and we have been exceeding those so far.

The government does not have influence on POSCO's business decisions. Decisions on operations. That has been the case in the previous years and that is the case this year. So yes, no, there hasn't been any pressure to begin with. It's difficult to say that there has been changes.

What I can tell you is steel -- even if government expresses concerns on inflation, that is mainly focused on consumer products right. Steel is not a consumer product. If you look at any car, be it luxury or regular sedan, a unit of car consumes about a ton of steel. If we raise the price by roughly $140 - $150 a ton, $150, even if we give -- $150 a ton increase is $150 per unit of a car. That doesn't really have that big an impact on the consumer price index to begin with.

So yes, I don't know. I don't know how to respond to that, but there hasn't been any pressure and there is--

Yes. Okay.

The production of the plant. The [KFC] steel, the two larger ones, they say the repair takes time. Whether they can go back to full operation that remains to be seen because iron making and steel making mainly is iron ore and coal, and from there, the finished product is hot-rolled coil, controlled plates. These have to go through rolling factories which consumers a lot of electricity.

And soon, summer will come and we will have to see how the electricity supply and demand is in Japan to fully interpret this. But yes, in terms of repairing of the damaged facilities, I think the facilities are all repaired and prepared to run.

Okay.

Gordon, any more questions or?

No, I think that's covered it. Thanks.

Okay. Operator, is there any...

Yes, we have the next question coming from Mr. [Baratt Pateka] from SCB Singapore. Please go ahead.

Yes, hi, thanks for the call. My question is with respect to your funding plans for this year. Can you throw some light on how much debt you plan you raise through this year and how much of that will be in the form of foreign currency?

I'm sorry, you -- can I get your name and institution again please?

My name is Baratt. I am a Credit Research Analyst for Standard Chartered Bank and my question--

Okay, yes. I'm sorry. I didn't get your institution's name right. But yes, still, our original plan which was finalized and announced in January that reflected some of the net debt increase, so funding of about KRW110.5 trillion. Now the situation has changed somewhat. Our total capital expenditure hasn't changed, but we are projecting slightly better cash inflow or income than we did three months ago. So whether we will go ahead with it or not, we will have to see.

There is some of the net debt maturing, though the most part will be refinanced. But in addition to that, if we need to raise more debt here, we are monitoring. The original plan as I said was KRW110.5 trillion. I think it will be reduced because of increased earnings and also some of the investment projects we are looking for some of the strategic investors to partner with.

Okay.

And but -- as for the currency, that depends on the currency situation. It wouldn't be too far from our existing portfolio. Our domestic debt is about half and the foreign currency is the other half.

Okay, and that could mean -- you have raised $700m to the international bond market earlier this year, so--

We did.

Yes, so would you rule out trying to tap the market again later this year?

Yes, a decision hasn't been made yet.

Okay.

It depends on the condition.

Okay. Thanks for that.

Thank you. Our next question comes from Mr. Simon Park from Korea RBS.

Thank you for taking my call. I have two questions. The first one is actually regarding Korea Express. I understand the logic behind it how your logistics business is important especially when you are trying to expand your overseas -- global presence and business. But what we understand is that Korea Express doesn't really have much overseas business. Correct me if I'm wrong but that is what I understand. So I would like to know how you plan to sort of expand Korea Express business overseas operation. That is my first question.

And the second question is actually the one that I asked during the Korean analyst earnings conference in Korea and I'm asking it again because perhaps -- the intention of my question wasn't really understood completely.

And the question is you know, when a foreign analyst -- foreign investors think of POSCO, one of the things they always think of is national service, right? I mean, whenever POSCO is facing cost increase, instead of passing on this cost increase completely in the form of steel price hike, we tend to see POSCO raising as little price hike as possible and cost due to internal cost saving to try to maintain the margins.

But we feel that, as Geoff mentioned, we feel that this price hike this time around seems quite strong and much bigger than the market expected and higher than the regional or international prices. So we feel that now you guys are focusing more on the profitability side especially because you have -- you are facing stronger competition in Korea and no longer this national service -- it's not something that you are doing alone. So I just would like to know if you know, you are leaning forward to more profitability going forward? That is it.

Korea Express first. It does have some experience. Korea Express, what we can do is when I say internalizing it, we are not necessarily saying that we are going to cut all the outsourcing volume and give it all to Korea Express or whatever internal function they perform are. No, what we are saying is some of its expertise and knowledge and experience in logistics can function as the control tower that oversees all logistics whether it be itself doing it or be outsourced to a third party which we have to function internally with experience, there is going to be a lot of deficiencies on both POSCO and to the companies that we outsource it to because they will -- the control tower will make some recommendations to improve the logistics company gets better revenue whereas POSCO is saved some cost at the same time. So this is what we are talking.

Second, Korea Express does have experience overseas. One example is its Chinese venture that it went prior. Kumho Tires, when Kumho Tire went to China to set up a plant, Korea Express went with it and set up the logistics for it and made it very efficient from day one of the operations.

So I think among all the Korean logistics companies, Korea Express has the most experience in overseas business and establishing the logistics.

The second question regarding the national service, I do understand there is an investor concern. I do know -- but what -- it is [in succession]. National service such as that POSCO -- what is the word? POSCO give up or -- its main purpose which is to generate profit and at the expense of other business mainly, our customers.

Yes, there is no evidence. The only time that I remember in the last 10 years where our price was lower than the import price was in the midst of super-cycles at the end of -- in the for five or six months in 2008. Any other year, our price is dictated by the market supply and demand and import price. And on average, we have always maintained premium to import steel because of our superior quality, service, delivery, consistency what not.

So the assumption or you know, if the assumption is we have been doing this national service now as there have been changes in the management policies, I don't agree with the assumption to begin with. POSCO has always pursued profits and always shown that history of profitability over any other company, any other steel companies in the world and that continues.

Okay, Simon?

Yes. Thank you. I think that is the answer I wanted to hear. Thanks.

Okay.

Thank you.

I mean just to add to that, I mean when we look back at the prices historically, I mean we compare it with China Steel and Taiwan and definitely, during the downturn in the fourth quarter '05 and then again in other downturns China Steel has taken down their domestic price much more aggressively than you have.

And even today, I was commenting that their domestic price is 785 whereas your new price is 980. So--

Yes. One thing I wanted to add on this, we value our relationship with our customers and our relationship with our customers both domestic and overseas. It's a long term relationship. So if market condition changes even slightly over a very short period of time, we don't change our business policy or our business strategy.

What we want to pursue is consistent long term relationship and stability for both our customers and us. And so at times, our domestic price is slightly lower, but in the most cases it is higher than international price or import price and our customers understand it. So when other companies or other suppliers are charging outrageous price for a short brief period of time, we maintain a previous -- say previous price for a certain period of time. But that almost immediately pays back when the market shifts. And that is exactly what happened in 2008 and 2009.

Okay. Operator, do we have any more questions.

Yes, sir. Next question come from Mr. Andrew Tan from JPMorgan, Singapore. Thank you.

Yes. Good afternoon. Again, my question is regarding your profit guidance for the whole year. Do you think that it could -- it will be well above the level last year but there has been a change in the depreciation policy under IFRS so I'm not sure whether they are comparing like for like. So my question is on a like for like basis, do you see that statement holding that your profit will be still higher on a year on year basis?

And alternatively, if you could quantify for us what's the boost to earnings that is going to come from the change in depreciation policy because I'm not sure which part of the depreciation will be subject for the change? Thanks.

Alright. The second question first. So the first year, the first quarter this year, yes, in adopting IFRS, we revalue all our equipment and so our asset value -- book value of the equipment have been increased. Hence, that raises our depreciation cost for all quarters to come.

In time, beginning this year, the useful life of some of the equipment have been elongated from eight years to 15 years, so that brings down our depreciation amount.

This is the first quarter since we adopted IFRS, so I am a little bit reluctant to give you detailed numbers. The finer numbers will come when the audited financial statements and its footnotes come out. But roughly, first quarter the increased impact from revaluing equipment is about KRW90b where the decrease because of the making useful life longer is about KRW240b. So net-net, 15, no, KRW150b of more operating income than before. So on an annual basis, the net impact would be depreciation amount reduced by KRW600b. That clarifies things a little bit.

Now, in terms of doing better than last year, as I've said, this year, IFRS base, or new accounting base is going to be better than last year but last year, I quoted the number KRW5 trillion. That is really comparing apples to apples. We are not prepared to give you a specific answer because the numerical guidance number has not been released yet but comfortably, we will go with that.

So I guess what you are saying is that KRW5 trillion last year is equivalent to KRW5.6 trillion this year?

Yes.

Okay, that is very clear. Thanks.

Thank you. There seem to be no further question at this point in time, sir.

Okay, I think I will ask one more question and then if there is no more questions after that we will just wrap it up. But I mean, one thing, because everybody was asking earlier about the process of pricing discount, right? And so when we look back historically in the fourth quarter and there was a discount given on the -- off the list price, what was the process that that -- how that occurred? Like in other words, was it something where you went to charge your customers and you are just getting too much pushback in the marketplace and then finally your internal marketing people said okay, we are not going to take down the list price but we are going to give you a discount? And what was the -- I mean maybe just to - let us understand the pressure points of the market and how that -- how that actually unfolds. Like who -- like how does that become self-fulfilling that people start to get a discount? Because historically, you haven't really given much of a discount.

In bad years, I remember a long, long time ago, 2001, 2002 when there was a -- when import steel purchase price was below $20 that time. Of course, raw material price is different then. Still, at certain points -- for a certain period of time, we have given some discounts.

I don't quite remember when there was an issue of overflow of steel from China and other -- a brief period of time, we gave to in certain instances, we decided that this was the case. If you remember our list price for HSC was KRW900,000 in the fourth quarter last year, KRW1,100 per dollar, that's about roughly $800 per ton whereas November and December, some steel from China made its way to Korea at $600 a ton approximately. So we had to give a little bit of incentive. Not much, a little bit of incentive to some of our customers.

The discount level is done at the very front level at the sales people level, but there is a certain allowance that can be done. Roughly like $30 or $40 a ton at most.

Okay, I guess the one question I have and I'm just going to explain what I have seen in the market but you correct me if I'm wrong. In January and February, my understanding is that things were pretty good around Asia, like decent anyway except for maybe China where it wasn't quite as strong post Chinese New Year as people were kind of hoping for and maybe some of the liquidity issues or whatever. But my impression was that in March, things changed a little bit in Asia. Like talking to some trader and you saw what some described as a drying up of orders where it's like suddenly people were sitting on their hands. Especially in Southeast Asia we heard a lot of anecdotes about the Vietnamese import market being kind of weak and sluggish.

And so now it seems like China is improving a little bit at the margin in the last couple of weeks. But even the production numbers coming out of China are a little scary because they are starting to get back above 700m production number.

So my impression is that the steel market is actually, ironically post-earthquake, it hasn't been as healthy in the near term as it was maybe in January or February and some of that January or February may have been restocking because people worried about cost increases and this sort of thing. I mean, are you seeing a market that is significantly different than that, or is that consistent with what you are seeing, or what are you seeing right now in the near term that like on a barometer scale, is it stronger, or weaker than it was, you know just three months ago?

Definitely better than three months ago. Three months ago was January. It has improved in February and March in terms of our price and in terms of the strength of the end consumer it is still pretty strong, especially for the industry that we, POSCO, sell our products to.

I know there is some other signals, or forecast that is coming out, but the customers, the car makers, the appliance makers that we export to in China, they are still running at pretty good utilization or production. Their demand is pretty good.

Domestic customers are doing better than ever this year as (inaudible) set another new record in total car production. Machinery, shipbuilding, all these things will be more than that of last year.

So our customers grew both domestic and export especially those with higher premium steel. Their demand is pretty good.

Good. It seems like we haven't been seeing that in the spot market for HRC like just because the Asian price is still sort of stuck in the $760 to $780 range from what I have seen. But that is the price that the dynamics is quoting for Asia and steel business briefing in its industry newsletters.

So, I don't know, it just seems like the Chinese export price hasn't really improved much in the last. In fact, I don't know, today, the guy is saying $700 FOB is the price that I was hearing and so again, it just doesn't seem like a very strong market but maybe you are seeing a bit of a dichotomy in terms of your customers.

Yes, this time around, hopefully, the first steel makers to kind of set the tone of the steel price going forward among the various regions like China. If we considered all factors and we analyzed all the market and supply and demand and cost mix and everything, yes, I think our current price rate price is adequate.

Well, I think we are going to wrap it up there. It's almost been an hour. I'm assuming we don't have any questions, operator?

No additional questions, sir.

Okay, great. Well, I think we will just wrap it up there and by all means, I would like to thank Tae Hwan and everybody else here from POSCO IR. And if there are any follow up questions you could always direct them to myself or directly to POSCO but if it goes to me, I will be happy to forward it as well.

So thanks for your time and I thank POSCO again for your time.

Thank you.

Thank you for your participation. This concludes your conference. Thank you.