美國鋼鐵 (X) 2012 Q4 法說會逐字稿

Ladies and Gentlemen, thank you for standing by.

Welcome to the United States Steel fourth-quarter 2012 earnings call and webcast.

At this time all participants are in a listen-only mode.

You will have an opportunity to ask questions after the presentation.

Instructions will be given at that time.

As a reminder, this call is being recorded.

I would now like to turn the conference over to our host, Mr. Dan Lesnak.

Please go ahead.

Thank you, Mary.

Good afternoon and thank you for participating in United States Steel Corporation's fourth-quarter 2012 earnings conference call and webcast.

For those of you participating by phone, the slides that are included on the Webcast are also available under the investor section of our website at www.ussteel.com.

We will start the call with introductory remarks from US Steel Chairman and CEO, John Surma, covering our fourth-quarter results.

Next I will provide some additional details for fourth quarter.

And then Gretchen Haggerty, US Steel Executive Vice President and CFO, will comment on a few financial matters and our outlook for the first quarter of 2013.

Following our remarks we will be happy to take your questions.

Before we begin, I must caution you that today's conference call contains forward-looking statements.

And that future results may differ materially for statements or projections made on today's call.

For your convenience, the forward-looking statements and risk factors that could affect those statements are referenced at the end of our release.

And are included in our most recent annual report on Form 10-K and updated and quarterly reports on Form 10-Q in accordance with the Safe Harbor provisions.

Now here is US Steel Chairman and CEO, John Surma.

Thanks, Dan.

Good afternoon, everyone.

Thanks for joining us today on what I understand has been a very busy day for most of you.

We appreciate you taking the time to be with us.

Earlier today, we reported a fourth-quarter net loss of $50 million, or $0.35 per share, on net sales of $4.5 billion and shipments of 5.2 million tons.

These results included a benefit of $0.06 per share from the favorable settlement of a supplier contract dispute.

Although our segment operating income was significantly lower as compared to the first three quarters of 2012, our Flat-Rolled, European and Tubular segments all reported positive results in the fourth quarter.

While the global economic recovery has been slow and uneven, most of the markets we serve have shown some improvements over the last two years.

Overall, steel consumption has increased.

But in North America and the EU, it still has not returned to pre-recession levels.

We have focused on improving our cost structure and our operating performance, factors that we can control.

And our fourth-quarter results this year are significantly better as compared to the fourth quarters of 2011 and 2010.

Now, before I go into more detail on our segment operating results, I would like to comment on safety.

We continue to make significant improvements in safety performance, which remains our Company's key core value.

These improvements, both in the reduction of injuries and the elimination of workplace hazards, are evident throughout all areas of our Company.

2012 was our best year in terms of reducing the rate of the most serious injuries, as our days away from work rate was reduced by 8%.

In addition, our management team, combined with the efforts of our production and maintenance employees, made significant strides in risk assessment and hazard elimination, further reducing the exposure of our employees to potential injury.

In 2012, seven operating facilities went the entire year without experiencing a days-away-from-work injury.

Our Keetac facility has not had a days-away-from-work injury in over three years.

And our Fairless plant has reached almost six years without a days-away-from-work injury.

Zero really is possible.

In 2013, we continue our efforts to maintain and improve upon a sustainable safety process that provides the opportunity for every employee to return home safely each day.

We believe that our focus on safety also has tangible benefits in terms of productivity, reliability, quality, and cost control.

Now back to the numbers.

For the full year, our segment operating income was $855 million, an improvement of almost $800 million as compared to 2010.

with all of our segments reporting positive results in 2012, The sale of US Steel Serbia at the end of January 2012 resulted in a significant improvement for our European segment year-over-year.

While our North American results were similar to 2011.

Now turning to our Flat-Rolled operations, we reported income from operations of $11 million in the fourth quarter, an improvement of $83 million, or $22 per ton, as compared to the fourth quarter of 2011.

The decrease in operating income from the third quarter was primarily due to lower average realized prices and higher energy costs, partially offset by lower raw materials and repair and maintenance costs.

Following completion of several major projects earlier in the quarter, our facilities ran extremely well.

With steel utilization rates at our US plants well into the 90% range.

2012 was the first year that our flat-Rolled segment reported positive operating results in each quarter since 2007.

Our Flat-Rolled shipments in the fourth quarter decreased slightly.

Automotive demand remained strong.

And most other markets we serve were generally stable.

In total, North America remains a relatively attractive market in comparison to many other regions.

Imports did increase in the fourth quarter, and continued to negatively impact both prices and shipment levels for our Flat-Rolled segment.

Now turning to US Steel Kosice, we reported an operating profit of $7 million in the fourth quarter, a significant improvement over the fourth quarter 2011 loss of $22 million.

For the year, USSK operating profit was $51 million, as compared to an operating profit of $44 million in 2011.

While economic conditions in Europe continue to be challenging, this operation has remained profitable in all but the most difficult steel market conditions.

While we expect raw materials costs for our European operations to increase in the first quarter, reflecting price trends in the global iron ore market, we anticipate improving demand in many of the markets we serve.

With several showing a positive direction in the first quarter as compared to the very difficult market conditions in the fourth quarter.

Our Tubular segment income from operations was $32 million in the fourth quarter.

Off significantly from the third quarter due to lower shipments in prices, as drilling activity and line pipe purchases slowed late in the year.

For the full year, our Tubular segment shipped almost 1.9 million tons, which included record shipments of premium alloy product.

And reported operating income of $366 million.

While US rig counts trended down throughout the year after peaking in January at more than 2,000 rigs, and finishing the year at 1,763, the average weekly rig count in 2012 was 40 rigs higher than the 2011 average, resulting in record consumption of Oil Country Tubular Goods.

As well as a strong year for line pipe used in gathering and transmission systems.

Despite declining rig activity throughout the year, imports continued to come in at historically high levels, exceeding a 50% share for the year in both the Oil Country Tubular Goods and line pipe market segments.

Now, before I turn the call back to Dan, I'd like to discuss our continuing efforts to improve our cost structure in North America.

Carbon costs continue to be the biggest market exposure that we manage.

And I'd like to provide an update on our overall strategy to achieve the lowest cost to produce hot metal in our blast furnaces.

For several quarters now, we have been discussing with you our investments in new facilities at Clairton and Gary, to become self sufficient in our coke-making abilities.

And eliminate the need to purchase expensive and often lower-quality coke in the merchant market.

And we have aggressively worked to adjust our coking coal blends in order to lower our overall coke cost.

We have taken advantage of opportunities to utilize the abundant supply of competitively-priced natural gas from the continuing development of share resources in North America.

This development is a significant driver for our Tubular segment, of course.

And has enabled a significant change to our Flat-Rolled segment cost structure, primarily through the use of natural gas to decrease the use of coke in our blast furnaces.

We have increased natural gas injection capabilities on our blast furnaces, allowing us to maximize our use of gas and reduce our coke rates.

With the start up of the Clairton C-Battery, and the first of two carbonics units at Gary Works, in conjunction with the improvement in our coke rates, we now have the capability to produce all the coke we need in North America.

All blast furnaces have unique operating characteristics.

And with all these capabilities in place, we now have the ability to optimize the blend of fuels to attain the lowest carbon cost for each particular furnace.

As well as the ability to continuously adjust our fuel blends to maintain the lowest cost based on the changing relationship between coke, injection coal, and natural gas.

In addition to cost benefits, this strategy also allows us to make more effective use of our investment capital.

The capital cost of reducing our coke rates through the increased use of natural gas has been minimal.

And has allowed us to become coke self-sufficient without investing in additional coke-making capacity beyond the Clairton C-Battery and the Gary Works carbonics units.

And increasing our ability to invest in other potentially high-return projects in the future.

Now I'll turn the call back to Dan for some additional details on the fourth quarter.

Dan?

Thank you, John.

Capital expenditures totaled $187 million in the fourth quarter, and $723 million for the full year.

Capital expenditures are projected to be approximately $800 million in 2013.

Depreciation, depletion and amortization totaled $171 million in the fourth quarter, and $661 million for the full year 2012.

DD&A is expected to be approximately $690 million in 2013.

In the fourth quarter, pension and other benefits costs totaled $120 million.

And we made cash payments for pension and other benefits of $188 million.

Which included a $75 million contractual contribution to our trust for retiree healthcare and life insurance.

Full-year 2012 pension and other benefits costs were $512 million.

And cash payments, including the $75 million trust contribution, totaled $567 million.

We also made a $140 million voluntary contribution to our main Defined Benefit Pension Plan in 2012.

Now Gretchen will cover some additional financial items and our outlook for the first quarter of 2013.

Thank you, Dan.

I'd like to start with our projections for our pension and other benefit costs for 2013, which we expect to be approximately $440 million.

A decrease of over $70 million from 2012, but still quite a bit higher than pre-recession years when discount rates were higher.

The discount rate used for the remeasurement of our plants at December 31, 2012, was 3.75% as compared to 4.5% at the end of 2011.

The negative effect from using this lower discount rate was more than offset by the favorable effect of retiree medical benefit and plan design changes in the new labor agreements we entered effective September 1, 2012.

As well as the natural maturation of our Defined Benefit Pension Plans and asset returns that were in excess of our expected returns.

In addition to lower costs, we expect our cash payments in 2013, excluding any voluntary pension contributions, to be approximately $550 million, down slightly from the 2012 level of $567 million.

Our cash from operations remained positive in the fourth quarter.

For all of 2012, cash from operations was just over $1.1 billion.

As we recovered from the low point of the global recession, we rebuilt our working capital base throughout 2010 and 2011 from the extremely low levels that we had at the end of 2009.

So last year, 2012, our operations were more stable than in the prior years.

And we managed our working capital to more appropriate levels.

Making working capital a source of cash for us.

Excluding changes in working capital, our increased cash generation over the period reflects our improving operating results.

In 2012, we reduced our net debt, as reflected on the balance sheet, by approximately $450 million.

As the cash we generated in excess of our capital spending in dividends was used to repay borrowings on our credit facilities and to increase cash on hand.

So we ended the fourth quarter with cash of $570 million and $2.4 billion of total liquidity.

Now, turning to our outlook for the quarter, we continue to be challenged by uncertain global economic and steel market conditions.

We expect a slight improvement in the European and Tubular segment operating results, with Flat-Rolled segment results expected to be near breakeven.

Total reportable segment and other businesses operating results are expected to be comparable to the fourth quarter.

For our Flat-Rolled segment, steel buyers in North America continued to exhibit caution early in this year.

But recent increases in our daily order entry rates suggest increased spot demand as the quarter progresses.

We expect higher shipments in the first quarter than the fourth quarter, with increases across many of our industry segments.

Average spot prices are expected to be higher in the fourth quarter, as recently-announced price increases take effect.

Lower prices for our market-based contracts, which tend to lag the spot market, are expected to offset the higher spot market prices.

With overall first-quarter average realized prices for the Flat-Rolled segment being comparable to fourth quarter.

Raw material costs are expected to decrease slightly, as lower coal prices are partially offset by higher scrap prices.

And our total operating costs are expected to be slightly higher compared to the fourth quarter.

Now for our European segment, first-quarter results are projected to improve compared to the fourth quarter, due to a significant increase in shipments.

Despite the continued economic challenges, shipments are anticipated to increase due to additional contract volume and improving spot market activity caused by service center and distributer restocking.

Average realized prices are expected to decrease due to a higher mix of hot-rolled shipments, as well as the effect of lower firm contract prices.

Which are partially offset by increasing spot market prices.

Our iron ore costs are projected to increase in the first quarter, as John mentioned.

For Tubular, we expect first-quarter results to improve compared to the fourth quarter due to decreased operating costs and a slight increase in shipments, as drilling activity begins to improve.

Our average realized prices are expected to be slightly lower as compared to the fourth quarter.

While operating costs are expected to decrease due to reduced repairs and maintenance costs and improved operating efficiencies.

I'll turn the call back over to you, Dan.

Thank you, Gretchen.

Mary, will you please queue the questions?

(Operator Instructions)

Shneur Gershuni from UBS.

I've got two questions.

The first one on Tubular, the second one on Flat-Rolled.

Starting with Tubular, the fourth quarter was definitely a difficult quarter.

I understand that it's expected to be better.

But it sounds like it's going to be challenged compared to some of the numbers we've seen in previous quarters.

There is supposed to be a pick up in drilling activity in the Gulf of Mexico this year.

I was wondering when we would see that impact?

And then, despite the fact that there's flattish to downish rig counts, we might actually see more well counts and longer laterals, and so forth.

Is US Steel expected to benefit from that as well, too?

Or is the tepid guidance, a lot of it has to do with the imports coming in and taking away some of the opportunities?

Okay, I'll take a stab.

There's a lot there, Shneur.

I think the Gulf of Mexico has been a good news story for us already.

I think the rig count was at 50 and maybe went back to 48 within the last day or two.

There must be something moving someplace.

But that's the best level of activity in the Gulf than in quite some time.

And it's a very good place for us.

We have some of the larger-diameter, heavier-wall capabilities at both Fairfield and also in Lorain.

And we're booking those mills quite well for that business.

So we've already had some of that.

The more that goes on in the deep Gulf, in particular, the better it suits our particular facilities.

And more is better, so we encourage them to continue to keep drilling.

And those are great prospects.

And once they do a discovery well and develop it, then a platform and 16 or 18 additional wells, that's all great for us.

And we hope that that would continue.

In terms of the -- I think what you're really asking is how much footage will be drilled and what does that mean for us.

We have a guess at the rig count for 2013.

We see what others prognosticators who probably know more than we do say.

We can take a look at what the oilfield service folks have said.

A couple of them have already reported and we look at that very carefully, of course.

There is certainly a move to longer laterals where that's geologically possible, because the productivity is quite good, and they're really good at doing it.

That suits our product very well.

Our alloy heat-treat shipments were at a record level for us in 2012, and that's one of the reasons.

And additionally, the rig efficiency, in terms of how long it takes to get down, to get out, to get fracked and to get in production, is really good.

They've turned this into an outstanding operation.

It's almost a manufacturing process, as we see it.

And it may well be that even with lower rig counts, that the actual number of wells drilled could be higher and the amount of footage could well be similar or higher than last year.

So I think, in our view, the overall demand probably is similar to last year, maybe a little bit higher.

We think the demand in things that we're particularly good at -- deep Gulf and some of the alloy heat-treat demand -- should be as good as last year, we hope.

There is, of course, the spectre of imports, which are well over 50%, as I noted.

To the extent that's mostly on the lower end carbon, it's not in our zone directly, although we do some of that.

But it does affect the overall structure from a pricing standpoint and inventory level.

We're very mindful of that and we're mindful of where it's coming from and what their costs are, we think, and what the prices are we can see.

And that's something we have to take in mind and decide if we take action, that may well be something we do.

So I think you've diagnosed it pretty well.

All those things are in there.

We think the picture for 2013 can be pretty good.

But just looking out for the first quarter, we're coming from a slower start, and we'll see how we do quarter by quarter.

Great.

And a follow-up question with respect to Flat-Rolled.

I was a little confused about the guidance for Q1.

You commenting that it would be close to breakeven.

Given the amount of maintenance that was spent last year, you would have expected an increase in your capabilities in 2013; the natural gas to coke switching and so forth.

And then finally a tail wind on improved met coal costs.

Wondering why we end up flattish?

Is the tail wind on coal cost not as good as we would have thought and so forth?

I was wondering if you can expand on that a little bit.

Sure, it's a fair question.

I'll make a few comments and Gretchen may want to add on from her perspective.

But just a couple things.

One would be, as you mentioned, coal.

We do expect lower coal costs for the year.

We won't get all of that benefit in the first quarter.

There's some carryover inventory that we have to chew through.

So we typically give you figures that say what our overall purchase cost will be, we think, on average for the year.

The first quarter would be the highest.

Still lower than fourth quarter but higher than the second, third and fourth of 2013.

And will come out to an average that's probably 20% or so below where we were last year.

So we have some tail wind, if that's the term, in the first quarter, but not as much as you might have expected.

And we'll get more of that in the second, third and fourth quarters.

We do have continuing benefit from optimizing our fuel blends on the blast furnaces, as I commented on.

We continue to push the envelope on gas and on injection coal and on coal blends.

Our coke rates are quite a ways down.

And I think we have very competitive carbon costs in terms of our overall reduction costs.

But there are some other things that were benefits in the fourth quarter.

Small items we don't talk about a lot.

Could be inventory adjustment or a few other items Gretchen may want to mention that were good in the fourth quarter that we don't plan necessarily on in the first quarter.

And we do have slightly lower maintenance costs in the first quarter versus fourth quarter.

Although this is the quarter we typically do a good bit of work at our Minnesota ore operations because we're not in a shipping position, necessarily.

And we get a lot of the outage work done there on the different lines.

And that's well underway and we'll spend some money on that during the quarter.

Those are a few odds and ends.

Gretchen, anything you want to add to that?

I think you've captured it right.

We do expect a benefit from lower coal costs this year.

But John describes it exactly right.

It's not going to all come through right in the first quarter.

And these small items, we had some favorable items in the fourth quarter that aren't going to repeat themselves.

And there's really no one single item to call out.

We did have, the one thing we did have an extra month's worth of benefit from remeasuring our labor contract, which was probably on the order of $5 million.

It's that kind of thing that we're absent.

And we do expect, I think, slightly higher scrap cost and natural gas cost.

Those are both going the other way.

They're not huge amounts for us but they all add up to something.

Evan Kurtz with Morgan Stanley.

Just a question on Kosice.

We've heard a lot of reports floating around here the news of some people looking at that asset.

Just wondering if you can give us some color on how you think strategically about Kosice and how that fits in with the portfolio?

Sure.

As I said in my comments, it's an excellent facility with excellent productivity capability.

We've spent a good bit of capital there over the years trying to improve the product range.

And so we've got a good position in automotive now, tinplate and electrical motor [lam], et cetera.

And we're doing some other things now.

We've got a good color coat line.

We're trying to choose some of those capabilities up.

So I think it's an outstanding facility.

It's in a difficult part of the world, but really good cost structure, good energy position.

And in the part of Europe that's probably been about as good as any part of Europe in terms of overall demand.

So it's a good facility in what historically has been a pretty good place.

And as a result of that, we guess we've had some expressions of interest in the facility to see if it might be worth more to somebody else than it would be to us.

We think we have a responsibility to our shareholders to explore that in the context of our overall capital allocation.

That's what we're doing.

But, really, no decision made at this point.

So that's really all we can tell you.

It's an excellent facility.

Not surprising others might be interested in it.

Right.

Would you be able to walk me through maybe some of the liabilities associated with that facility as far as maybe benefit liabilities and any financial liabilities and so forth?

I'll let Gretchen comment, but really, when we acquired the facility in 2000, it was free and clear.

And, really, the structures are such -- social structures are such -- that we don't really have those kinds of things.

If they are, they're minimal.

So it's a pretty clean operation as far as that goes.

Gretchen?

And we have disclosed, though, that we do have some upcoming capital commitments on the environmental side that we've estimated over the next number of years to be on the order of $400 million or so.

So that would be probably the biggest item I could think of, John.

Good point.

Great, that's helpful, thanks a lot.

And then maybe just one other question.

You didn't talk really about DRI much on this call, but I know in the past you've thought of that as something that you might invest in the future here in the US.

Any update on that?

Is that something that we could perhaps see as early as 2013?

Nothing formally to update, Evan.

The technology and the economics around natural gas and DRI are still really good.

So the lack of mention was not intentional.

It's very good technology.

And it's got a really good place in North America, I think, because of our energy position.

It's possible we might have something to talk about this year.

Trying to find the right time, the right place.

And for a project of that magnitude, just given our capital position, we've been very cautious about getting into any major new projects, just given all the uncertainties in the world that we all have to deal with.

But we still find the technology and the opportunity very attractive.

And we would like to find a place for that inside of our production profile.

We're just trying to figure out the right way and the right place to do that.

And there may be some things behind that in terms of pellet investment to make sure we've got the right material, as well, that could be helpful.

So we're looking at a lot of things.

But it's excellent technology, the economics are really good, and we'll continue to look at it.

Dave Katz with JPMorgan.

I was hoping we could just come back to the US Steel Europe guidance.

Obviously, on slide 17, you're guiding to increased shipments but lower prices and higher costs, yet overall higher results.

Given that the lower price and the higher cost would indicate, perhaps, on a per ton basis margin compression, and per ton margins were already relatively low in fourth quarter, I was hoping you could square it back to the higher operating results.

Sure.

These are all small numbers to begin with.

After going through a lot of work to make 1 million tons of steel and shipping it, these are all small numbers.

And we would like them to be much larger.

So we may be implying a level of precision which really isn't there.

But we have some benefit on, we'll do a little better on carbon costs.

Because of what's happened in the iron ore markets, even though we're not necessarily pricing off that, we'll get some higher ferrous costs.

We expect to have some benefit in terms of volume.

You've heard what Gretchen's comments were about pricing.

There's some spot pricing benefits, but overall price is not particularly attractive.

And I think what we have is another case of our team doing a really good job on the cost side and keeping all of the other costs we can control in a very good position.

And it's a very efficient plant and we're able to stay profitable.

Barely.

Wish it was much more.

When we put it altogether, we are able to stay profitable because our group is controlling cost really well.

Gretchen, anything else you want to add?

Did you mention the higher volume?

That does have --.

Yes, we do have some additional shipments, which helps.

I think our utilization rate in the fourth quarter was 77%.

Is that right, Dan?

Is that the right number?

I think that's quite low for Slovakia.

We'll probably operate, we would expect, much higher than that in the first quarter.

And that has some pretty significant per unit benefits from a cost standpoint.

That's a good point, Gretchen, thank you.

Thanks.

And, then, for my second question, a little while ago we had heard some concern about potential strikes at the ports, which could inhibit importation of tin.

How, if at all, would that affect your business?

I don't have a good answer for that.

When we heard about the port strikes, I asked our folks, both on things we would have outbound and things we might have inbound, and some things that would be coming inbound that we wouldn't want to come inbound if we could help it.

And what I was told was that there really wasn't anything that's significant for us.

We do have some outbound shipments but we are going to be able to make the schedule that we were committed to before there was any action on the tin, or zinc side, for that matter.

I'm afraid I really don't have a good answer for that, but it wasn't on the list of things we were concerned about.

So my sense would be that we thought there was sufficient supply available to us for however long it would have taken.

Brett Levy of Jefferies & Company.

Really, the only question I have has to do with ThyssenKrupp and their assets, and your status on bidding on them.

And if you don't win it, what are your concerns?

Okay.

The latter part's pretty hard to answer since it's hypothetical.

But the specifics of that you'd have to really address to the seller.

They are the ones that are conducting the process.

And the only thing we would be in a position to say is that we've said for a long time that we look at things that might be attractive within our business model, that would add value.

And things that are in product ranges we're familiar with.

And geographies that seem to have some regional association where we are.

And these assets fit those criteria.

So I think that's really all we can say.

They fit that criteria and they are matters of interest.

Really, anything specific beyond that, it's hard for us to comment on within the rules that we're operating under.

Timna Tanners with Bank of America Merrill Lynch.

I wanted to ask a little bit more, just taking a step back, and you talked about your carbon cost being a really important focus for lowering your cost structure.

And you've made a lot of advances there with natural gas and with all of the other initiatives.

But just what are the other ways that US Steel, broadly, over the next five years, can lower its cost structure?

You've talked about DRI.

Can you cut labor costs?

Can you do things with your people?

You have fixed costs in a lot of areas.

So just wondering how you look at your ability to cut costs further.

That's a good question, Timna.

We look at costs all the time.

We just were reviewing all of those things earlier today.

And each business unit at the business unit level has a continuous cost improvement plan value.

It's usually expressed in dollars per ton.

It's not insignificant.

And then that gets pushed down and populated.

So all of the different operating units and any place that there's cost in the Company.

And we hammer away at that.

And usually we end up racking up more in terms of savings than we had as an objective.

If you look at where the big costs are, you named most of them.

On the labor side, not as big as it used to be.

Our productivity rates are way better than they used to be.

We're following up a couple of the labor contracts where we've agreed that productivity is a good thing, and that has been very helpful to us.

We'll continue to work at that, some of that is capital enabled, some is just through different ways that we can find to do a little bit more with a few fewer people, as attrition would take place.

So we'll continue to work on that.

Whether there's any big breakthroughs coming, that's a little bit harder and more problematic to look at.

The carbon thing, I think, still remains one of our biggest opportunities.

It's the single biggest cost that we actually can manage where there's market exposure.

And where technology and things like working on our stove and hot blast delivery capability, to see if a higher hot blast temperature -- instead of 1,800 Fahrenheit we go to 2,200.

We plug it into the equation.

Can we use more injection coal?

What does that mean for gas?

And what's the relationship of those things at that particular time, because, depending on how much coke you're displacing with gas, it may or may not be a good thing.

We've focused a lot of attention on that.

And then on the overall maintenance cost, trying to find ways to string the time out longer between major blast furnace projects.

That may be refractory innovation, and using more copper and less cast iron, depending on the value.

So I'd say it's across that whole range, Timna, but I can't give you any specific breakthrough right now.

We do focus on all those things and I would say we continue to do that.

Gretchen?

I think that's good.

That covers a lot of ground.

That's helpful.

And then I just wanted to switch to Canada, if I could, real quick.

Two areas.

One is, we're hearing Lake Erie has a contract due in the next couple months.

Any thoughts there?

And, then, under what conditions do you think about restarting Hamilton?

Thanks.

Sure.

I think we've disclosed that there's a contract expiration at Lake Erie.

I want to say April 15.

Is it April 15?

Yes.

April 15.

And we'll get about that fairly soon.

We're optimistic we'll be able to reach a competitive contract without any disruption, as we did back in September with the larger group of plants in the US.

So that's on the agenda and we'll get to it fairly soon.

Again, optimistic we'll reach a contract.

Hamilton -- really nothing new to report.

We look at it all the time.

We measure what the current market situation is.

We try to think about the sustainability of the market situation, if it looks favorable.

And then we take a look at what the costs are and say, is this something we can do based on what the demand is.

Those conditions really haven't occurred recently.

When you look at overall steel consumption, if you look at US and Canada combined, we're still 10% or so below where 2007 or some pre-recession number would be.

And it's taking a while to get back to that.

We're making gradual progress every year.

I think the world steel forecast for this year is an increase of 3.7%, something like that.

But we just haven't had the right combination of factors.

We would love to be making steel at Hamilton but we've got to find a way to do that and make money at the same time.

Luke Folta with Jefferies.

Quick question on the carbon cost side.

You talked, there was a number, 20% down number, you threw out earlier when it pertained to your coal cost.

Could you just talk about what the annual coal contract price changes year-over-year?

And also if you could give us some sense, because you've been making so many different improvements on reducing the coke rate and natural gas injection, and all that, why do you think your carbon cost per steel ton is going to be down in 2013 relative to 2012?

I'll see if Gretchen -- I'll cover the first part and see if Gretchen can figure out the ton figure.

We'd have to do a couple calculations there.

I'm not sure I have it handy.

But on raw steel in North America, it's $20 or $30, probably something like that.

Something in that range.

But I think the coal numbers you're looking for -- and, Dan, correct me if I'm wrong -- but we used as a reference point in 2012, we talked about $188.

Is that right?

And I think the point estimate for -- and it's an estimate -- for 2013 would be $152.

Dan, does that sound right?

It does.

That's for the year.

It wasn't the first quarter number, as I said earlier to an earlier question.

That's for the year.

And those are point estimates.

But that's probably a reasonable assessment.

I'd just observe in that -- I think that's roughly 20%, if my math is right -- that inside of that, keep in mind that when you look at '11 to '12, our figures didn't increase nearly as much as the benchmarks did.

And so that's reflecting what's happened in '12 to '13.

But if you look inside of it and get something that's comparable, a hard coking coal number that would be comparable to the figure you would see in the eastern Australia benchmark, the overall reductions we have are a little bit more.

So I think our directions were quite similar.

And what you're seeing in the overall composite is just that the type we're using, we've changed a lot in the last couple years, and this is what the cost is.

This is the best cost for us.

Okay, that's helpful.

And then last quarter you guided to higher maintenance costs in the fourth quarter.

And it looks like they actually fell, if I read it right.

So, did you push out some work there or was just the estimates too high?

Can you give us a sense of what happened there?

Honestly, I think what happened, Luke, is we did a really good job of doing the work that we had in that quarter.

And they got done faster and less expensive than we thought.

And then they otherwise -- our Flat-Rolled guys did a really good job managing their costs in the fourth quarter.

And they had higher shipments and stuff.

So we actually really ended the quarter in better shape on cost and volume than we were expecting.

And just one more, quickly, if I could.

The new labor contract for North America, for the US, I think had a wage increase provision in it for 2013.

Can you give us some sense of what impact that might have?

It's small enough that it doesn't make my list of big changes.

Yes.

We'll have it disclosed.

Yes, it's a relatively modest amount.

We'll have something in the 10-Q about it, perhaps.

But it's a relatively small amount.

It doesn't make the list of things we try to call out to talk to you about.

So I would say it's relatively modest.

We'll highlight that to you.

We have to find it in the document.

But we did disclose it in the Q, I'm pretty sure.

Okay.

Thanks a lot guys.

Brian Yu from Citi.

John, could you talk about the fixed price contracts with the auto and appliance producers?

And directionally, is that flat?

Hopefully up in 2013 versus '12?

A little bit.

We don't like to talk too much about individual customers, of course.

But just in general, contracts, either firm or firm with a cost adjustment in them, '12 to '13 you always have to consider where you're coming from and the duration and the market and all that.

So there's lots of qualifiers to put around it.

But, in general, when I put it all together and look at it, I think that '12 to '13 would be slightly down.

Slightly.

Slightly might be 1% or 2%, something like that.

So I would say contract pricing, because there is some adjustable items in there, we would look at as being relatively consistent '12 to '13.

Maybe slightly down would be the direction.

But I think we're pretty pleased with where we ended up.

We've got great relationships with our contract customers.

And we spend more time talking about quality and delivery and technology and the future, than we do about pricing, necessarily.

But I think we did okay.

Okay.

And my second question is just on, you mentioned imports having an impact on domestic pricing.

When we're looking at the international, China, European prices, they're not that far off from the US.

And I was wondering if there's some other dynamics in the US that's contributing to it, besides imports.

Just whatever color you could provide would be helpful.

Sure.

I think when you look at -- and I don't have it in front of me -- but we take a look at data points across a range of geographies and freight, insurance and customs, duties, and all those sort of things.

And China has moved up quite a bit.

And they're not particularly different than the US prices, North America prices are.

I think it's more of an issue in the Black Sea, CIS countries particularly on the hot-rolled side.

And then in some of the Asian territories on the downstream products, it's become more of a problem from a price standpoint, with quantities of cold-roll and coated, GALVALUME, tinplate.

Those are products where even a small amount can really have an effect on the market, when it's indiscriminate.

So, even though the volumes were up somewhat, the impact, particularly in the downstream products, has been much more pronounced, and something that has our attention.

John Tumazos, Tumazos Research.

It's a little hard to understand how autos and housing are so good, and lumber prices rose 12 straight weeks through the winter.

And the farm economy, fertilizer prices.

Containerboard is booming; ran at 95% last month.

Why are these poor steel customers so scared?

I don't know, John.

You have to ask them, I suppose.

But I think that's the nature of the market.

I think the fact that the large piece of the market, the distribution service center, first day processors, those kind of folks, they're very concerned about holding inventory, only to have it be devalued.

That's happened to them many times.

The price volatility in the marketplace has become a much higher amplitude.

We think maybe that 2013 might be slightly less than that.

But I just think they're very concerned about being stuck holding too much inventory.

And with lead times late in the last year, calendar year, really coming into maybe three weeks or so for hot roll, there really wasn't any reason to hold inventory.

And I think that really got people on the sidelines.

Our order rates have been better so far in January and this year, and progressively improving.

So we think that's a good sign.

But I just think that those that hold inventory for a living are very concerned about holding inventory right now because they are concerned about getting stuck with something they don't want to hold.

That's the only answer I could give.

John, for undifferentiated commodity sheet products, do you think your business would be better if you charged 10% less, sold a lot more, and imports were more expensive relative to domestic steel, and these distributors would be a little bit less frightened?

Interesting idea, John.

I don't know.

We have, we think, pretty competitive costs.

We produce pretty well now, and ship into these markets pretty well as it is.

I think if the intermediate inventory holding types of customers were less concerned about imports, it certainly wouldn't hurt.

I think that would be a big help, and we would feel better about it, too.

But whether that would change the psychology of the market, John, I don't know.

It's an interesting question.

David Gagliano from Barclays.

I just have a couple of quick questions.

First, just to clarify one comment in the outlook commentary for the Flat-Rolled business.

The press release says total operating costs are expected to be slightly higher compared to the fourth quarter.

That's a total number, correct?

Unit costs are expected to be down sequentially, is that fair?

Per ton costs?

Yes, because we are expecting higher shipments, so I would think just with the law of small numbers that we're dealing with here that I think it probably would be.

Okay.

And then on the Tubular segment, can you remind us again, the 47%, that's program business in Tubular, how are the prices set for that?

Are there lags?

And when do those prices roll and things like that?

Program business is, in recent quarters and probably in this current quarter, will be more than 50%.

I think that our program customers have really come our way.

I think we've developed good relationships with them.

It's generally a program that has us committing a certain amount of capacity.

And our customers saying if they need pipe they will take on my capacity.

And the prices are negotiated at an arms length basis generally once a month, maybe once a quarter, something like that.

Periodically.

So it's a negotiated price discussion in most cases.

There's a few where we have some indexes and things like that.

But in almost every case it's a negotiated price.

Okay, but there's no -- okay, that's what I needed.

Perfect, thanks.

And it does take time, David.

There were some price changes in the marketplace.

Mostly [RW], not all.

And usually that takes a quarter or so to work its way through because of these kinds of arrangements.

Richard Garchitorena with Credit Suisse.

My first question, just on the CapEx of $800 million for this year, can you give any color in terms of where the major portions of that are going to?

I think we do have, we still have some fairly significant carryover on our coke projects that we're wrapping up.

The Carbonyx facility and some carryover on our Clairton C Battery.

It's a series.

That would probably be the single biggest item.

Yes.

I think we have, though -- no one has asked about it but we do have some maintenance plan this year.

And in that process, there will be some blast furnace work that would be of a capital nature.

It would be more significant and more substantial.

Hearth work, those kinds of things.

And that would be -- there'd be some of that that would take up a good bit of that capital.

There's a big chunk of environmental and infrastructure spending.

And probably the single biggest thing would be mining equipment and other mining activity.

We have a lot of equipment we buy.

This happens to be a year, I think, where we're going to be buying a little more than normal.

So a lot of mining equipment, also.

So it goes pretty much across the board.

But there's no real one single nameplate project that we can give you, other than the coke things we're finishing up.

Okay.

And then my other question, just you talked about the savings on the carbon cost side.

Can you talk a little bit about iron ore pellets?

Is Keetac still on the board at some point?

It's still there.

I think our overall pellet operations are running extremely well, both our wholly-owned and joint ventures.

And costs very competitive, as they have been.

I think they will stay competitive.

The Keetac expansion is certainly a possibility that we have the opportunity to get into.

It's a big project for us.

And given this world we're in, kicking off a big project like that in this world, with uncertainty, not just about capital in the market, and cash flows, but also about the strength forward on iron ore, what does it look like, what's the economics on it.

Depending on your assumptions on the future, you could have quite different sets of economics there.

So we are taking our time to think that one through.

But we still have the opportunity to do it.

And the resource is not going anywhere.

It's still there.

Justine Fisher with Goldman Sachs.

I just have a question for Gretchen.

And I feel like I've asked this before on conference calls, but I've gotten a lot of calls about this recently so I wanted to ask it again.

Plans for the convert.

It becomes current in a few months and we're getting a lot of questions about [refining] that.

The convert market and the bond market, how is the Company planning to approach that?

We've already done some things to allow that to be a little bit more manageable, Justine.

And the main thing was we got rid of our maturities in 2013.

So I really don't have anything to worry about this particular year.

It's not the kind of thing -- I think it's reasonably financeable at the level that it's at.

But that's not my favorite strategy, to wait until May of next year and have that done.

So I think it wouldn't be unreasonable to think that we might try to take care of some of that, or at least maybe finance in advance of some of that before this year passes.

Okay.

And then just a question on the Tubular market.

Clearly imports are a problem.

As far as the domestic capacity is concerned, are you guys seeing any signs that there might be some sort of slowdown in some of the domestic capacity expansion that we've seen?

Or do you think there may continue to be an issue on that side in addition to the imports?

I'm sorry, Justine, you were asking if we think that capacity expansion will continue or might it slowdown and abate a bit?

Was that your question?

Yes.

There's a lot of US-based tubular capacity that's coming online.

And I was just wondering what your thoughts are as far as the future of that is concerned, regardless of whether we can stem the tide of imports with some sort of duty or not.

That's a good question.

I think we're certainly concerned about it.

It is a good bit of capacity.

A good bit of it is aimed lower down in the food chain than where we do most of our work.

But, still, there's some that we'll contend with.

If the economic theory works out right, a lot of that capacity, of course, should displace imports if, in fact, they are fairly traded, and the laws of economics would hold.

We'll see if that does or doesn't hold.

But there's a certain amount of demand and you can make your judgment about how much more demand there is in the future.

And if the US energy sector continues to develop, there could be more.

But we can see pretty well what we have in the next year or two, probably, within reason.

And does the market need more capacity to serve that -- I guess that's what you're asking -- and I wouldn't think so.

But that's not my decision.

Arun Viswanathan from Longbow Research.

The first question is on the sequential break out.

What do you guys think through the year this year?

There's been a number of price increases last year.

Will those start to flow in, in the second quarter?

Or how does that jive with your guidance, as well?

There were a number of price movements just within the last week or ten days or so, if that's what you're referring to.

And it's really hard to tell -- too soon and also very hard to tell -- what that impact might be.

But for us, at least, assuming things go reasonably well on that front, we would get some benefit from that in the first quarter.

We would get more of it directly on spot business in the second quarter, and than indirectly eventually through some index changes, we hope, also in the second quarter.

So I think we would get some benefit.

Keep in mind that I think our overall spot book, I'd estimate, is on the order of 30% or so.

So it's not a huge portion of our business and it will take a little longer to get through it.

But we'd get some benefit in this quarter.

The only assessments I've seen so far from outside parties, one was at 6-30, Midwest Hot-Rolled, which was up by 20-some from the last assessment.

So that seemed to be moving in the right direction, but it's take some time to see how successful this is.

We're just in a process of having conversations with our customers right now.

But overall we indicated we thought spot pricing was going to be up quarter-over-quarter.

And so that would really imply that our expectation would be that would flow through our market-based contract into the second quarter.

But it also reflects the fact that our fourth-quarter book had some relatively depressed prices because it was a very competitive market at that time.

So it was very difficult.

So we would expect that the first quarter should be better, as Gretchen said.

Okay, thanks.

And the other question I had was on Europe.

What's the long-term view there?

Are you comfortable with your position?

It maybe is improving year on year.

And when you say shipments are going to be up significantly, can you just quantify that a little bit more for us?

Just our longer-term view -- I'll let Gretchen comment on the shipments -- but on our longer-term view it's an excellent facility.

With all the good things that I enumerated earlier on this call.

We've been doing business in Slovakia for more than 10 years, and have made really good returns there.

Made great money there over most of the time.

It's a good government to work with.

We get along fine with them.

The V4 countries are very positive from an economic development standpoint.

They like manufacturing; that's why all of the automobile manufactures are there.

So we think we can do real well there for the long term.

Whether somebody else thinks they can do better is a different question.

Gretchen do you want to comment on the shipments?

When we say significantly, to us that means kind of a magical thing.

But I would say probably order of magnitude, you're looking at 150,000 or so tons would be -- 5%, let's say, over.

Dave Martin with Deutsche Bank.

I had a question first on pension and healthcare costs.

I know, Gretchen, you had said that your costs in '13 would be down a little over $70 million versus '12.

Versus the fourth quarter annualized, it's more like $40 million.

What I'm wondering is if all that decline is embedded in your reported segment guidance.

Or does some of it fall outside of that segment reporting?

I think probably most of it will fall outside of the segment.

It is embedded a bit there.

But if you think about our retiree benefit expense line, it tends to be maybe 85% or so of the total.

So we're looking at maybe $60 million a quarter or so.

Dan, right?

On each quarter of total benefit expense, was what I think that we would be expecting, based on the total.

Most of the retiree benefit expense is going to retirees, though.

Most of the OPEB and pension spend.

Okay.

And could you tell us what your assets and liabilities were at year-end?

And then, lastly, just coming back to your comments, John, on coal costs, have you purchased 100% of your anticipated coal requirements for this year, ex-Hamilton?

Hamilton coke plant is running, so it's included.

So we're not ex there.

But along with a gold mill and two galvanizing lines.

What we have operating at Hamilton is operating great, and we've got great employees there.

Our coal costs, our coal volumes for the year are spoken for, either through contracts or with some carryover volume from 2012.

Or with some options we have to increase volumes, if we would need them.

So we think we're pretty well situated, have flexibility to get what we need at very competitive prices and to manage the inventories in a place we want it.

So we're in pretty good shape, Dave.

Yes.

And then on the pension, are you really interested in the unfunded status?

I can give you order of magnitude.

It'll be in the 10-K in a couple weeks.

It will be in the 10-K.

On the OPEB side, because of a significant reduction in obligation that we told you about in September, as a result of the contract, even though we had a higher discount rate, we did have better than expected -- our asset performance.

So we're down about $500 million unfunded status on the OPEB side.

So it goes from 2.7 to about 2.2.

And then on the pension side, the discount rate effect increased the obligation more than our asset performance was beneficial.

So we probably went from about 2.4 to 2.7.

So those will be roughly the numbers you'll see when the 10-K comes out.

Sal Tharani with Goldman Sachs.

John, a question on Thyssen.

I know you don't want to comment too much.

But back in a couple years ago when Mittal Steel bought Arcelor, they got Dofasco and they had to divest something in the US.

And they divested, I believe, Sparrows Point.

And if that's the case that ArcelorMittal now gets Thyssen, and they have to divest some of their assets because of the Department of Justice requirement, would that be of interest to you?

Like if Cleveland, Ohio plant or Indiana Harbor West plant, would that fit in your portfolio if you get the opportunity to look at them, in case you don't get the Thyssen plant?

That's just a hypothetical, Sal, so I'll take it in that context, as a hypothetical.

I'd give the same answer I gave on the earlier comment, is that we like to look at things that are within our geography, regional, product range, some physical market synergy potential.

And everything you just mentioned probably would fit that.

I'd just also observe that over the years we've looked at some of those things before, before the current owners had them.

So that would not be anything new for us.

We would look at anything that would be available.

And if it was in our zone, we would take a look at it.

So we've generally done that pretty thoroughly.

And would you have to expand your iron ore production for that, to add any more furnace?

It depends on a lot of different things.

We're in the slab business today.

And if there's a chance to convert that, we're in the hot-rolled business today.

So, depending on what the issue is, depending on what's available.

If it's just a coating line, it's one thing.

If it's a blast furnace with a steel shop with it, it's something else.

It really would depend on where in the zone of production it was.

And we would have capability across that whole range.

It all depends on what it would be.

Okay, great.

Thank you very much.

David Lipschitz from CLSA.

My questions have been answered, thank you.

Tony Rizzuto with Dahlman Rose.

I've just got a couple questions here.

And obviously thanks for your stamina on this call.

You were kind enough to give us some sense of other contracts.

I was wondering if you can comment about your tin mill business that you do.

And just directionally on those contracts.

And I just want to delve into the maintenance expense area a little bit.

In your third quarter guidance that you gave for the fourth quarter, and I heard you respond to a question earlier, originally the maintenance expense was supposed to be down.

And you did a little bit better on that.

But I was wondering how much lower was it in the fourth quarter versus the third quarter.

And then overall for 2013, you talked about a blast furnace, some maintenance there.

Was wondering if you could give us a figure, and how that might compare as you see the 2013 shaping up versus 2012.

There's a couple things there.

I'll let Gretchen look at the specifics about quarter to quarter.

But just in the general, on the overall maintenance, as we currently see it, maintenance broadly defined the major projects that we take production action for.

And other maintenance costs that we would categorize and gather.

Probably '13 is down compared to '12.

Not a huge amount, not $100 million but probably more than $10 million or $20 million.

That's going to depend on how the equipment behaves and what we end up doing for the rest of the year.

We've been spending more heavily the last couple years, either in total or on a per ton basis.

And I think our equipment has become a little more reliable and has been performing better.

And I think it's starting to pay off for us.

Costs are improving, as well.

So I'd say in general we probably would have less in '13.

Maybe fewer blast furnace projects.

Although one of them, I think, will be a larger project, assuming we pull it off this way.

But the schedule, of course, is fluid.

And most of that will take place in the second and third quarter, as it normally does.

But probably less than we had in 2012.

So I think, on balance, maintenance probably down, to some degree.

On the tinplate, those activities, Tony, were included when I gave my overall assessment of contracts by being down a little bit.

That's a market segment which for us has exhibited a great deal of stability over the years.

It's an excellent customer group.

We make really good product and it goes into things that you all on the phone have in your pantries and we've very proud of it.

So excellent products and our relationship is very positive, overall commercial relationship.

It's inside that slight downward number that I gave you before.

All right.

And, John, I always appreciate your view of the larger picture developments in the industry.

And obviously recently there have been more discussion about a carbon tax.

And it seemed to be in the President's address.

And I was wondering what your thoughts are there, and impacts that you see from a manufacturing perspective in the United States.

I think all of the folks in Washington have to do is read the European newspapers and see if that's what you want.

The gradual evisceration of heavier sector, in particular, industry, the reduction of energy supplies.

The two largest EU industry association trade groups recently wrote letters to the EU Commission saying that the US advantage in energy is almost unassailable and will result in severe damage to the European manufacturing position.

And that's probably true over time.

So I think all we have to do is look at what Europe's done, where they're into no nuclear, no coal, and all wind.

And try running a steel mill on that and then see what result that's gotten.

And, by the way, US carbon emissions have been far better controlled than the European emissions.

The program there has done virtually no good.

If that's what we want, I can't figure out why.

We have a perfect example of what that looks like, and I'm not sure who would choose that.

So I'd like to think that our policymakers will be more thoughtful and have a slightly more informed view, once you can see what some other things do in different parts of the world.

Mark Parr with KeyBanc.

Good call today.

Thanks for all the color.

I had a couple of questions.

I was curious on the Tubular side, is there any color you can give in terms of the growth in tons that you might expect from offshore applications in drilling for 2013?

Not that I have in my head, Mark.

I'd say we had a pretty good year last year offshore.

And to the extent there's more rigs, we'll have some.

But inside of our roughly 2 million shipping capability, it was 1.9 million in 2012, something like that.

And I'm only going to guess that maybe the capability we would have to get into that kind of a market is a few hundred thousand tons, probably, at the most.

Maybe a little bit less than that, probably.

So that's the kind of zone we're in.

But it's really good business for us and it takes away a lot of metal.

Productivity rates are really high.

And the more of that we can get onto a boat and get offshore to a rig, the more we like.

So whether it's going to be a real meaningful percentage change, I don't know, but every little bit counts.

It's really good business for us.

I was thinking about that in terms of the new heat treat line in Lorain.

Was that really put there to enhance your capacity for offshore?

No, it would be aimed more at the onshore markets.

It's a smaller-diameter heat treat.

We have a large-diameter heat treat that we put into Lorain in 2001, or something like that, if I remember right.

The new number 6 Q&T was really aimed at the 4.5 to 5.5 zone that a lot of the onshore casing uses now.

Yes, right.

One other question, if I could.

As far as just getting an update on advanced high strength steel.

And how's the PRO-TEC thing?

You may have mentioned this, I may have missed it, but how is PRO-TEC expansion coming along?

Any color that you want to give on this ongoing discussion between steel and aluminum for The Body in White.

I don't think we mentioned it, Mark.

And just for the record, the discussion is between us -- it's not between us and the material you mentioned, it's between us and the customers.

And we're doing real well with that discussion.

I think we should have updated you on that.

I'm sorry I didn't.

We're making good progress at the new continuous anneal line at PRO-TEC in Ohio.

We're doing coal commissioning now.

I think we actually have some of the furnaces lit to begin refractory dry out, and getting that ready.

I think the entry reels have coils on them, and we're working through the control systems there.

I think they may be as far as the welder, if I have it right, the last report that I saw.

And we'll actually have a coil going through the system at some point in the next month or two.

And actually expect to have product coming off sometime in the spring.

And so we look forward to getting up to speed as quickly as we can.

We've had a lot of customers that are already involved in discussions about that.

We think it's an excellent answer to automakers who want to maintain the kind of strength and reliability and elongation formability that steel provides.

With all of the manufacturing benefits that goes with that -- magnetic handling and all those things that goes with it.

Weldability.

All that.

Coatability.

But also giving them a really good weight advantage.

So we think this is a really great product that's going to allow our auto customers to achieve a lot of the weighted savings they want, but maintaining many of the benefits that steel has.

Among them, a really good value, as well as a way lower carbon footprint, if you look at the total life cycle, than any of the other alternative materials.

So, we just think it's a great answer.

That's a long speech, Mark, I'm sorry.

But it's one I like to give.

We're excited to have the plant almost done.

We look forward to having it up and running later in the year.

Just one follow-up, if I could ask on that.

Are the economics compelling enough that you can really get a premium for the incremental value you're adding up front?

I guess I'd say it this way, Mark.

We have a lot of capital invested here.

This is going to be a premium product and we expect to have a return on our capital.

We think that's only fair.

And we think there's enough value creation here that our customers can get a really good value, particularly in comparison to other materials.

And still leave some for us to have a good return on our investment.

We think we're in a good place here.

And both we and our customers should be able to benefit because this is a really first-class product, with great strength capability, great elongation capabilities.

And something that's going to make their job to maintain really inconsistent virtues of lightweight and high strength and safety.

That's a hard thing to do, and we think this lets them do it.

I apologize for calling that less dense material by name.

That's okay.

You're allowed to.

It's okay.

We don't mind.

It's okay.

All right, John.

Good luck on the first quarter.

We have no more questions in queue.

Thank you, Mary.

We certainly appreciate everybody joining us today.

Like John said, I'm sure it was a very busy day for everybody.

Thank you all.

We certainly look forward to you joining us again next quarter.

Thank you.

Thank you.

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