Q3 2020 Ramaco Resources Inc Earnings Call
Ladies and gentlemen, this is the operator todays conference is scheduled to begin shortly please continue to standby and thank you for your beach and ladies and gentlemen, the operator todays conference is scheduled to begin treating each please continue to standby and thank you for your feature.
[music].
And welcome to Ramakanth resources incorporated third quarter 2020 earnings Conference call. At this time. All participants are you know you can only mode. Later, we will conduct a question and answer session and instructions will follow at that time, if anyone should require assistance. During the conference. Please press Star then zero on your Touchtone telephone.
As a reminder, this conference call may be recorded I would now like to turn the conference over to your host today Mr. Jerry needs US Man Chief Financial Officer, Jerry the floor is yours.
Thank you on behalf.
Ramco resources I'd like to welcome all of you to our third quarter 2020 earnings Conference call.
With me. This morning is Randy Atkins, our executive Chairman and Mike Baur sex, our president and CEO.
Before we start I'd like to share our normal cautionary statement.
Certain items discussed on todays call constitute forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
These forward looking statements represent ramcos expectations concerning future events. These.
These statements are subject to risks uncertainties and other factors many of which are outside of Ramcos control, which could cause actual results could differ materially from the results discussed in the forward looking statements any forward looking statement speaks only as of the date on which it is made and except as required by law remic or there's no.
Not undertake any obligation to update or revise any forward looking statements, whether as a result of new information future events or otherwise.
Lastly, I encourage everyone on the call to go onto our website Ramco resources dotcom download todays investor presentation under the events calendar with that said, let me introduce our executive Chairman Randy Atkins.
Thank you Jeremy.
I suspect like many of US we had a long night last night, and it's probably going to be a long few days, but as always I'd like to thank everyone for joining us today to talk about our third quarter results.
Like many of our peers, we've come through this quarter, which has been marked by continued market softness and why the uncertainty as we approached 21.
As you saw in our release this quarter was clearly not exemplary from a financial perspective, but.
But it has positioned us to end 2020 in perhaps the strongest financial condition, we have been in from a liquidity standpoint, and with some very hopeful markers on sales and marketing for the years ahead.
I'm going to let Jeremy drilled down on our financial individual metrics for Q3, but.
But it's almost as if we had a tale of two quarters in three months.
July and August continued to show the effects of market weakness plagued the industry since COVID-19 hit at the end of the first quarter.
September however turned out to be a particularly strong sales month.
For the month of the quarter and it is carried that forward.
This has created some very positive momentum for us.
First we're going to have to record export corridors for sales.
Second we now have new acceptance of our coals into some export markets, we have not tapped before and.
Third this has enabled us to end the year with what we believe will be the strongest liquidity position, we have had in any year end well.
Focused on that last point for a second.
[laughter] COVID-19 hit in the first quarter, we have been focused all year on maintaining and building liquidity as a firewall against the overall market and operating confusion, which is grip not only us but every industry.
I can assure you that up until last month. If you had best me that we would end the year with both this level of liquidity and our revolver completely paid down that you would have won a very good bottle of Kentucky product for me.
We're also on track to produce a modest level of free cash flow for this year excluding growth capex.
And we're hopeful we build on this progression into 2021 to the point of perhaps being in a position to consider a dividend at some point next year.
Again, I want to sense, we will be in a small club in the coal space by ending the year with more cash than we began this year.
I'd also like to spend a moment and make some comments on the general markets and how we've approached them this year and how we're going to look forward into 21.
As many of you know, we have traditionally weighted or some coal sales domestically law.
Logically as a new company, we wanted to get into as many domestic plans as we could before we started to build any kind of an export book.
This year, we found certain larger domestic steel companies were particularly unreliable they canceled higher price contracted tons and pretty much forced our hand to look overseas for 2021.
So I'm somewhat a happy to say that we have now booked almost 800000 tons of new export sales for 20 and 21 within the last 60 days and many of these sales were to first time customers.
Indeed, the last quarter of this year, we will it will be our strongest sales quarter, we've ever had.
Our overall projected 2020.
Sales of about 1.8 million tonnes, almost 50% of that will be export for the first time.
And were projected to end the year at an average sales price of roughly about $86 a ton.
For 2021, we have now sold roughly 1.1 million tons for North American delivery at about $84 per ton all all of which is our high levels. We were unwilling to place more domestic tons into September and what we perceive as steel fire sales.
Oh prices and into a market, which is now starting to slow some signs of life.
We expect to have as much as another 1 million plus tons available in 21 to place into these higher hopefully higher priced export markets.
Indeed, we just green lighted at our last board meeting a week ago, a small 250000 ton low vol. Pocahontas for met seem low vol met same near our Berlin complex, which we're calling tried.
Mike is going to speak a little bit more on that in a moment.
It's about a $1.5 million capex spend and will operate with mine costs in the mid seventies.
We'll speak about it more but we regard that mine as somewhat of a bridge for our local product until we are willing to continue the larger Berlin slope when we feel the local markets then stabilize.
I will close with some brief reflections on the state of the markets met coal is simply a proxy for steel which is in turn a proxy for GDP.
Domestically from the start of the third quarter until the end use steel capacity has risen from 50% to 70%. This.
This is on the back of both strong auto sales and significantly stronger housing markets driven by low interest rates.
With third quarter GDP on up almost 40%, we do not think that trend is going away.
And overseas China is always continues to be somewhat inscrutable, but theyre sitting on about a $70 per tonne arbitrage right now between export and domestic met prices.
This is probably set to correct sometime within the next 90 days and when it does all benchmark prices should move forward and hopefully upward.
Europe of course is still a question mark because of the recent wave of cobot outbreak, but it still had a 13% positive bump in third quarter GDP.
South America. After two quarters of contraction also seems to be rebounding and we're seeing some strong interest in met coal from Brazil.
So to close this year has once again proven the fragility uncertainty of the markets in general.
With that said we are poised to end the year in a very strong financial condition from a balance sheet perspective.
And hopefully 2021, we'll hold much greater promise for the met markets and also of course prior level of earnings for Us.
So at this point I'm going to turn the floor back to Jeremy to provide us some of the financial milestones for the quarter.
Thank you Randy and.
In terms of third quarter, 2020 financial highlights I'm going to try and break it into two areas first overall metrics second liquidity on our balance sheet to begin with I believe the metrics do not tell the real story of the third quarter from our perspective overall.
Overall third quarter 2020, EPS revenue and adjusted EBITDA were all down from a year ago. We will have company here as I suspect every public coal company, we'll be reporting substantially lower earnings this quarter.
This is of course due to the fact that smart pricing fell by almost 30% year over year between Q3 2019 in Q3 2020 on the back of COVID-19 demand related concerns.
Losing roughly 90000 tons of already contracted $91 per ton price annual business in the third quarter to force matures hurt us in all three phases volume cost and of course pricing into.
In total Q3, adjusted EBITDA Zero point Sixmillion was negatively affected by 2.6 million from higher priced contracted business getting re sold into the spot market.
While we were successful in reselling. This call. It was of course done at spot prices, which were hitting a multiyear low during the quarter.
However, as Randy touched on we were able to place almost 800000 tons of new 2020, and 2021 sales into the international market in the last 60 days or so which gives us an excellent momentum heading into the end of the year.
On the cost front in July and August we were negatively affected by having extremely high inventories.
We effectively produced for just half of the month in July given the combination of the July 4th holiday week as well as an extra weeks furlough to manage stockpiles.
Based on stronger sales, our cost returned to more normalized level in the low to mid sixtys per ton range at Elk Creek in September.
Our stronger sales, let us run the mines and capacity given that we literally shift as much coal in September as we did in July and August combined based.
Based on our current book of business for Q4, we'd expect to build on the momentum we saw in September from an overall cost and production standpoint, though this of course will be pushed partially offset by the normal Thanksgiving and Christmas week holidays.
One other thing to keep in mind on the financial front.
When comparing results to the second quarter I would note that other income fell from 8.5 million in Q2 to 1.7 million in Q3 Q2 contained $7.3 million of other income related to the anticipated forgiveness of funding under the payment protection program loan.
I now want to shift to another positive impact of our strong September and October sales and that is liquidity in our balance sheet.
We'll start with capital expenditures.
Earlier in the year, we noted that because of COVID-19 related uncertainty in the market, we stopped all major growth projects.
And due to timing, we expected that we would finally see capex at pure maintenance levels in Q3, I can proudly say that we achieved that goal with Q3, capex coming in at $2.5 million, which compared to $9.1 million in Q2.
Fourth quarter Capex should come in much closer to Q3 than in the first half of the year with a small creep due to capex associated with the $1.5 million Triad mine.
Now the key credit metric that we are especially proud of is our trailing 12 month net debt to adjusted EBITDA ratio simply put this remains among the best in the industry at under 0.7 times as of September Thirtyth.
Now in terms of liquidity. This stood at 20.7 million at the end of the third quarter. While this is down from June Thirtyth I'd remind everyone that working capital has been a roughly $10 million use of cash through the first three quarters of 2020 on the back of meaningful inventory and accounts receivable builds we expect Q4 working cap.
Notable working capital to be a meaningful source of cash based on the combination of strong September shipments, which led to an unusually large accounts receivable balance at the end of Q3 as well as record anticipated fourth quarter shipments of over 500000 total tons year end 2020 liquidity as anticipated.
Got it to be about $30 million. This is roughly in line with June thirtyth levels and compares to 22 million at the end of year end 2019.
As Randy noted in his remarks in the press release, we are likely the only publicly traded met coal producer that should be able to say we ended the year with more liquidity than we began with this.
This was accomplished without touching our mining complexes for debt or issuing new dilutive equity simply put we will end the year in a very strong position from a liquidity standpoint, I would now like to turn the call over to our president and CEO, Mike Baur sacks.
Thank you Jeremy.
The third quarter of 2020 was substantially impacted by the worldwide pandemic.
COVID-19 continues to impact our operations.
To date, we had nine of our employees diagnosed with the virus.
Really none of these employees had serious cases and all are back to work.
Ramco continues to keep all sanitizing, social distancing and personal protective equipment policies in place.
We continue to adopt best practices as well as comply with any changing guidelines from the CDC and our state and local health departments.
Maintaining a healthy and safe work environment is our top priority.
To add a bit of granular comments to randy's market commentary over the course of the third quarter, our north American customers displaced approximately 200000 tons out of 2020.
These lost tons due to their above market prices will obviously weigh on our financial results for the remainder of the year.
Well, we could allow the realities of losing these turns to dominate the script for Q3 that is fortunately not the case the third quarter became the quarter when we transition to a more balanced company from a sales perspective due.
Due to restocking by customers combined with intense marketing efforts that were already underway.
We've been able to place over 400000 tons of seaborne volumes into the Atlantic basin in the back half of 2020.
While the pricing for much of the new international volume during the second half is less than desirable.
It is influenced by a couple of large shipments of semi salt high volatile coal a new product offered from our L. pretty complex. This.
This allows us to better utilize a portion of our production mix at Elk Creek, which do not meet typical metallurgical specifications selling these turns as a semi soft metallurgical coal.
While price lower than our typical product is far better than marketing them into otherwise weaker markets.
During the third quarter, our mines operated at productivity levels exceeding our targets and better than the same period in 2019.
Unfortunately, due to the aforementioned displacement of shipments the utilization of our operations has been severely curtailed.
At our underground operations alone, we have over 25% fewer underground shifts than our original budget and almost 13% fewer ships than the same period last year.
This has resulted in losing production of nearly 300000 tons split between the second and third quarters of 2020.
The production cuts occurred in the form of additional furlough periods in July.
Due to elevated clean coal inventory levels at Elk Creek, we were also forced to briefly idle our preparation plant for a portion of a week during August.
Fortunately since the start of September we have been able to move tons at a more balanced manner operationally. The Elk Creek mine facilities are back to near full capacity by the end of the third quarter.
As Jeremy also mentioned the impact of lower incremental costs on these additional tons can be clearly seen in our cost performance continuing to operate at these levels allows us to reduce inventories, providing us with more flexibility going into the first quarter of 2021.
Which will be challenging due to the substantial amount of lakes business. We have placed for next year.
At our notch Creek Berland operations, we have not returned to pre pandemic production levels were staffing the berwyn number three mine at little more than care and maintenance levels.
Production is continuing at the mine to fulfill 2020 term business as well as to complete development of Airways required for long term ventilation, but the larger Berlin Pocahontas number for reserve.
As mentioned in the press release, we are acting on one of the items that we have in our internal line on the triad mine into Pocahontas number foreseen. It has a short term life can be developed with very little capital. It has the opportunity due to advantage coal heights minimal out of seem dilution and substantially huh.
Our plant recoveries to make a sizable contribution to earnings in 2021.
This call is projected to have petro graphic characteristics similar to our future berwyn production, allowing it to be a source for test shipments.
We will begin excavation and construction in the fourth quarter low vol production will transition from the Berlin mine to the Tri Ed mine likely in the first quarter.
I do want to take a moment to recognize our highwall minor operation at Elk Creek that received the National Mining Association since most of Safety award, which recognizes coal and mineral mining operations for recording the most hours on a calendar year without a single lost time injury. It was one up just 20 mining operations and.
The United States six of which were coal mines to receive the award for its performance in 2019.
This operation is also a great example of a safe mine also been productive.
This operation continues to be amongst the most productive and low cost mines in the Ramco organization.
We applaud their efforts and the rest of the employees at Elk Creek for showing that safety is everyone's responsibility.
During the third quarter Ramco resources joined with a number of other metallurgical coal producers to transform the Virginia coal wind Energy Association into the metallurgical coal producers Association.
We believe that it is important to differentiate what we do as an industry and the positive impacts we have on society in general and the environment. We think that this effort is well timed as everyone. In the space is facing unprecedented challenges well documented well documented challenges like the lack of access to capital markets and difficult insurance Mark.
Which are impacted by the perception of our business. We hope that this effort and other parallel efforts will help us turn the tide on how metallurgical coal mining is viewed not only by our stakeholders, but the general public.
In summary, we remain cautiously optimistic that the worst of the cobot impacts are behind us we've taken clear steps forward to diversify our customer base and look forward to further cementing some of those relationships during the fourth quarter and early 2021.
Thanks to everyone, who is participating in this call, especially those who continue to cover mtc.
I'd now like to turn things back to Randy in advance of taking questions. Great. Thanks, Mike for round up so moderator, we will turn it back to you to address any questions that the audience might have thank.
Thank you so much ladies and gentlemen, if you have a question at this time. Please press Star then the number one on your Touchtone telephone. If your question has been answered or you wish to remove yourself from the queue. You May proceed sales team. Please standby you will be compiled bikini roster.
Once again, you May press star one to ask a question.
Our first question comes from the line of Mark Levine from the Benchmark Company. Your line is open.
Great. Thanks, very much I appreciate all the color. This morning couple of quick questions.
Just kind of thinking about Q4, it sounds like Q4, you're going to have a banner shipment quarter.
You should should that imply that cost would be lower sequentially and and then also I think you referenced a full year price.
I want to make sure I got that right. So that we could back into the fourth quarter price or maybe just any any color you're willing to give on youve, obviously provided production thoughts and it sounded like price or maybe just kind of.
Fourth quarter Threeq to Fourq you bridge.
So mark this is Randy and thanks for your question, let me break that down to sort of two parts. So in terms of costs. We had as I said kind of a pretty junkie July and August which.
Needless to say cost for higher production was lower and as we've been able to ramp production, which we continue to feel will be much stronger in Q4 than obviously, our costs have come down and as far as pricing Jeremy you want to talk about yet or so Randy Randy mentioned in his prepared remarks, and we've kind of project and the year.
Sure it close to $86 a ton right Mark the way I think about that is.
We we've given you we've given you our 2020 committed sales volumes as we I think clearly no.
That includes everything which may which included what's been force majeure. It so when you kind of net.
Take into account the moving parts, including what's been force majeure at what's been resold at index.
And where the index is today.
I think that's that's kind of how we're getting to that number.
Got it no that's that's.
Very helpful and I'm going to ask the requisite 2021 question. Although I know you guys have not provided guidance, but just if we were to assume.
Net prices remained under pressure and hopefully that will not be the case hopefully they will rebound in the first quarter, but just for the sake of argument if met prices stayed.
Stayed depressed or around where they are right now any idea. How you think capex would look next year and then I guess as a corollary if the market recovered, let's say into kind of the 145 150 range what might capex look like under that scenario.
Well I think the answer is this is Randy again to answer your last question first so we've got as both Mike and I alluded to we've got the small mine Tri Ed, which we're going to start spending on this quarter.
Which which will bleed over a little bit into the first quarter of next year in terms of Capex, we're kind of at maintenance levels other than that and other than you know.
The larger spend for us of course is the continuation of the Berwyn slow.
When we decide to push the button on that which is about another 10 plus million dollar spend to get us to production in the pokey for and we're not going to push that button until we frankly see some decent stabilization in the low vol markets.
There is a lot of moving pieces as youre, probably aware of as anybody in the in the us in the industry.
As to how low vol metrics are moving around the table right now so it's a little bit unsettled, but we are we're breaking into some low vol markets overseas that weve never.
Encountered before.
And so we're kind of hopeful on 21 in terms of.
Low vol stabilization, not only domestically, which we probably won't have to.
Consider too much until probably next summer early fall, but in the interim we're looking forward to sort of seeing how our low vol is begin to play out into the export markets if that kind of addressing here. Your two point that's perfect. Yes, Thats perfect. Randy I think you would think just last sort of like sort of in the weeds question I guess I'm asking it was up and.
Thank you did mention that just growing the growing internal sales team was was a part of it is that the quarterly run rate for us DNA that we saw this quarter is that the one that you would just kind of annualize or think about as a new run rate going forward I'll, let Jeremy take that yes, so mark.
I think in terms of Q4, that's that's probably reasonable with that said that there is some overlap on so I would I think it's reasonable for Q4, while I don't want to get too in the weeds for next year.
I would not annualize it for next year, there will be some things that roll off.
Great well, thanks very much appreciate all the color this morning.
It's mark.
Thank you. Your next question comes from the line of Great Woodworth from Credit Suisse. Your line is open.
Thank you good morning.
Foreign currency.
You know Randy with respect your comments that you could be in a position to returns capital to shareholders next year.
Just curious if you could expand on that what would you need to see I mean clearly.
Given the liquidity position and you're going to run a maintenance Capex you you should be fairly free cash generative.
So if you could just kind of outline the thoughts and potential timing on offshore. So we've said in the past Kurt as you know.
We hope to.
Grow up so to speak and be up probably.
Four or five years out from our IPO in Vienna posture that we were throwing off some some free cash because we've got a very low debt structure of course, and we have low cost structure and sort of those two hallmarks I think are beginning to bear fruit as we mature our portfolio and start to get into this.
Lightly higher numbers and production so without trying to get over my skis in terms of what our forward projections for 21 are.
The market of course can.
Okay as it always does get can move around quite a bit on us, but we have some scenarios, where we would end the mark in the year next year with some some pretty decent.
Free cash flow and in terms of looking to what we would do with that.
I think.
We always look at sometime around in the third quarter to sort of look as to what we want to do for the balance of the year I would expect sometime.
Sort of the September October period of next year, we would consider what it is we might want to do depending upon how we look financially, but the nice thing is to have free cash and with a little bit of luck knock on wood will be in a in a very good position next year to at least be able to make that.
Make that decision one way or the other.
That's great to hear.
And then on triad, the expectation that you could run close to the 250000 ton rate all of next year or is it more backend loaded because you're going to have a ramp up in one Q sure I'll, let Mike take that.
Yes sure its.
We're going to have a couple of options to meet a lot of it comes down to what kind of ships, we run in those sort of things.
Our our objective would be to run at all.
Obviously that would help the.
Cost structures and.
And everything else and it's critical that we get that coal out in the market and do test shipments and stuff in advance of the Berlin slow. So the objective would be to run it all.
The good thing is.
With the conditions that we have to have a reasonable cost structure. We don't have too. So it's one of the reasons why it makes sense to pull the trigger we could run.
Well over half those tons over the over the last.
Three quarters, if we choose to so lots of flexibility there.
Yes, and and Curt just to put a sort of an underline on what Mike just said when we looked at at placing low vol. For the 21 domestic market, we kind of pull back and said look.
We don't really.
I think the price structure that we're looking at here in September early October of this year is going to be reflective of what full 21 is going to look like so we deliberately.
Took the decision to scale back what we were potentially capable of putting into the domestic market because we want to save some of that.
Since and selling your coal.
For a cheaper price than what you think hopefully the market will look like somewhere in the neighborhood of the next four to six months.
Yes, great thanks to make sense.
And then I guess with respect to the export market. You commented that you have roughly I think 1 million tons available.
For export can you also comment is that in the last 60 days you sold 800000 tons, which is sort of the mix can you comment at all on what your export book looks like today April 21 in terms of volume and price.
I'll, let Jeremy take that one yes, so Kurt I think when we talk about the 800000 tons, just just to clarify our remarks.
That includes back half of 2020 of course in the spot market and then some.
Some fixed price business for 2021.
So I think we've given kind of an overall pricing for 2021 a of $84 a ton I don't think we want to necessarily at this point get into.
Great town of of the various reasons, but.
Needless to say right right now.
It's a very very good sign at least when I look at.
Where we were a year ago versus where we are today, we're certainly as Randy noted breaking into new markets that we hadn't broken into before.
And I think Kurt the most encouraging thing for me we.
As I said in my remarks, we've traditionally been a domestic house.
We placed.
Practically 80, 90% of our tons of various years in the domestic markets.
And as a result, we really haven't had much of an export book well.
Literally within the last few months, we have gotten.
Trial shipments into some markets and some customers that we frankly.
Did not have before.
And as a result, we're kind of hopeful that.
Some of those foreign export steel.
Steel groups are now, saying well, we want to we want to look at mid Prime Echo Kohl's.
On par with some of the more established domestic producers, which we think is a very good thing at least as far as our future export book looks like.
And.
In terms of the export penetration is it.
Are you trying to market. This is more of a pure high vol. A to displace the low vol or is it I.
I know it can kind of go both ways have a blend but.
Is it seems like to some degree there is a growing or increasing appetite or are shifting a coke blends more globally to have acceptance of high vol. Higher vol Abbey types Bancshares I think traditionally as mainly just Europe that typically bought that as that.
Somewhat fair, yes, I think that I think that's a fair point I mean, our.
Our cold EEZE itself up as being a pretty.
Pretty very close of course to a pure a blend.
And some of our export customers look at it as a day some of it look at as a as a blend some of it look at as a b.
It's kind of a you know.
It depends on which country you are trying to market to and what their particular blend specifications are so we've got to call that I think works well in a number of different markets, which.
Suits us well, obviously, we're not a huge low vol producer at this point, but we certainly.
As we go forward if we are really more when we put in berwyn at some point.
We'll have a pretty decent balance in terms of our overall quality book, So thats going to open up against some other opportunities for us.
Great. Thanks, very much for your time.
Thanks Kurt.
Thank you. Your next question comes from the line of Lucas pipes from B. Riley. Your line is open.
Hey, good morning, everyone.
Hi, Andrew.
It's early.
I have another question on 2021 and wanted to hone in a little bit on that on the cost side.
Based on your response to two.
The prior questions on tree, yet so we kind of assume for an average cost kind of mid mid seventys on and try and then kind of mid Sixtys on your remaining productions on on Elk Creek to come up with a reasonable kind of weighted average that would you say that there are a.
Couple other considerations.
You should.
Jeremy talk start on that.
Yes, I mean, I think Lucas with triad, we've we've kind of given given the number since it's and it's a new mine and obviously you guys need to be able to model it.
And with Elk Creek.
I think I think the answer is it depends I think costs should trend in the direction that you are are.
Our suggesting could clearly you feel that the biggest variable is.
Being able to run the mines more efficiently I mean this this year you saw what the cost could look like in Q1 in the low sixtys. When we were able to run the mines, well and that's presumably at a higher realized price, which means higher royalties than than at least what we've got locked in already so.
At the same time, it's the coal business. This year code coded came on.
And kind of knock everyone in the industry back a bit where can't run as efficiently and so you lose kind of the.
Enemies at scale, and so I think bottomline as we're going through a pretty detailed planning session over the next call. It one to two months and.
I think we'll we'll come out with some more official guidance, probably next time, we speak but directionally I think you're you're thinking about it correctly at least year over year.
Very helpful. I appreciate that and then taking a step back again on the exports versus staying domestic question.
And can you just elaborate on kind of how we should think about that is it is it that you didnt like the pricing in the domestic market.
Just kind of given where we.
Well, we were here over the summer negotiating during a pandemic or is it that.
That market is just maybe shrinking due to.
Changes in the industry on the steel side can you elaborate a little bit more kind of whats.
What's what's pushing more more of your sales focus.
I'll make a comment and then I'll, let Mike also chime in here. So you know.
All right, it's a little bit about timing as you well know better than anybody Lucas so as we as we got into the traditional domestic sales season, which is kind of August September we were coming off a July and August of exceedingly low.
Demand.
From the domestic markets based on co bad and and this complete uncertainty as to where we frankly still were as a country. So.
In terms of.
If you had to pick a perfect storm.
We hit it in terms of.
Being at a point, where the steel companies domestically could take the posture Gee whiz.
Cases are low were not going to give you too much benefit and indeed.
Many of them did that.
And of course as I mentioned some of them canceled contracts that were at higher prices and a few other things which.
Did not please us and so I think we step back to the table and said look you know.
We've got some pretty good Kohl's I think at that point and certainly September when we were finalizing contracts.
You know the market had begun to.
Pre the little life unto itself.
And.
We sat back and said do we really want to bite the bullet and take really low prices to move volumes at this level right now or do we want to step back a little bit.
Because again.
The good news for Ramco is we don't have the same pressures that some of our peers do we we don't have a lot of interest coverage, we've got to make.
We got we've got.
Very low cost structure is when we're running hard so we just said our.
21 looks like it's going to be a better time for us.
Let's see what the options are there and and we decided to to place our book Accordingly.
Mike do you want to kind of add a few comments to that.
Yeah, I'll jump in a little bit I do think that to.
Well the comment about the markets shrinking.
It is certainly true.
We believe it will be true.
Just especially with some of the consolidation and things we are seeing so it's another thing that we kept in mind as we as we continued to push our products overseas.
We've had at least one domestic customer that we've had from business with two years in a row, we should push back on those volumes. So a lot of the things pointed to having a bigger piece of the pie overseas and indeed as all of these domestic discussions were going on.
We are getting momentum.
And I think the momentum that continued to build help.
Helped us make the decision to pull back a bit.
And.
Certainly as we've seen and you will see in the fourth quarter as we ship.
It's a.
It's a big change for us and.
Frankly, having more diversity I think is good so.
Hopefully that momentum continues into next year and you just look at the numbers, we could be 60 40.
Favor domestic or closer to 50% will just kind of see how it goes.
Gentlemen, really appreciate the color very helpful. Best of luck. Thank you.
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Thank you. Your next question comes from the line of David Gagliano from BMO capital markets. Your line is open.
Hi, Thanks for taking my questions I think a lot of them been covered I just have a some assumption questions for.
Clarification purposes, I'm 2021, the commentary for for volumes was obviously 1.1 million committed.
Unpriced and North America.
And then I think in the press release, it said around 1 million tons open for the export market or less for the export market so as that.
Reasonable assumption for 2021 total volumes now is about 2.1 million tons or should we be thinking about something else.
Fair number David.
Okay, and then just on the triad.
Mine I may have missed this.
Is it expected to basically be like kind of a quick center here, where we got 250000 tons of production in 2021.
Is that the number well I think the beauty of the Tri Ed is it's a low cost operation for us we can weaken somewhat.
Have the modulators in terms of production to produce at all and 21, if we think the markets justify we want to kind of slow walk. It. We can do that I mean, it's not a lot of production, but at the same time.
Could make up a very nice margin on it.
Given its cost structure and its capex so well.
We'll just we'll just wait to see how 21 begins to play itself out we saw a spike we can dial it up if we see markets can track, we can dial it down.
Okay understood and then just the last one.
For the fourth quarter I just.
Can you help me understand so it. So there are slides obviously is as your sales, which is 2 million tons committed 1.8 million tons price an average price of maybe.
The over 500000 tons in the fourth quarter implies about 1.7 million tons.
So I guess it goes into the obviously the deferrals piece of this.
Is it right to assume that we've got.
Roughly 200000 tons that are kind of thing.
Pushed away or are those that are not going to come through in in terms of this.
This committed and then price of 1.8 million tons set at a fixed price of 80 Bucks is that we have about 200000 that goes away. Yeah, We've said and I think our earlier public statements David that we had a round number about 200000 tons as you correctly point out that were forced Missouri.
Principally to two customers and those were frankly.
Isely priced tons in the in the low mid Ninetys and they decided to just cancel them and walk away based on their perceptions of their operating situation cope it and so that was 200000 tons. We then had to replace out into the markets Needless to say.
At much lower prices.
Okay, and I'm, sorry was that domestic or export.
So.
Okay.
That's it for me thanks.
Thanks, David.
Thank you speakers I'm showing no further questions at this time I would like to turn the conference back to Mr. Randall asking okay.
Okay. Thank you so much well again as always we deeply appreciate.
You all being on the call today and your attention to us and.
We will look forward to having our next call I guess it will be next year and I have a feeling the rest of this year is going to be a pretty interesting ones. So best of luck to all thank you.
Thank you speakers, ladies and gentlemen. This concludes today's conference call. Thank you all for joining you may now disconnect.
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