Q3 2021 ArcelorMittal SA Earnings Call

Dear, ladies and gentlemen, thank you for your patience conference call will start in about two minutes, and if you would like to register for questions, please press star one on your touch-tone telephone. Thank you.

Okay, Danielle. You may start.

Thank you. Good afternoon, everyone. This is Daniel Fair Cliff from the Oslo middle investor relations team. Thank you for joining this. Call today to discuss the results for the third quarter 2021, which is being led by a CFO genuino Christino as usual. We published our results on our website. This morning, alongside the presentation with detailed speaker notes. So it's the intention of the call today just to move directly to the Q&A session. If you would like to ask questions.

Then please do press star one on your keypad, and we will take the questions in the order in which they received. Finally. I'd like to remind everyone that the of the disclaimers that are contained with the presentation online that do, relate to this call, and also remind everyone that this call is being recorded. So, with that, I will hand over to Jimmy. No.

Thank you, Daniel and good afternoon everyone. Thank you for joining. I'll call. Today is then, you just said, we have already published our presentation. We speak a noted notes this morning. So, rather than repeat it, I will spend a moment to draw your attention to some key points. So, first, this has been a very strong quarter for sellin meat. Oh, the bitter increased by 20%, to its highest level, since 2008.

A foot is strong.

Along with Equity account achieve. He's and Associated contributed to a net result of 4.6 billion, which is the second highest court in our in our history. So we enjoyed another quart of strong cash flow despite a further investment in working capital. This allow us to add further 1 billion to the buyback program which will continue to drive down and the share count.

I would just highlight in the earnings release and also in the presentation that we are giving you the shares outstanding at the period end so that you can update your models. And this is something that you can track on a weekly basis when our website. As we update for the continued stock repurchases, in terms of strategic development. This quarter has been booked waited by encouraging announcements related to our decarbonization plans.

And consistent with our strategy to grow their bitter and free cash flow potential of a kilometer further. Brownfield High return projects have been approved in Brazil and Mexico with this project. So we strategic couplings envelope is expected to add close to a billion dollars to our a bit numbers. So this is clearly a very significant and finally, the outlook for the business remains positive, with the exception of

Underlying demand is good and expected to continue to improve steel, prices remain at healthy levels, and we expect our contracted volumes to catch up to market levels as we enter 2022. So with that brief opening, we are ready to take your questions. Thank you.

Thanks Irina. And so we yes, we do have a queue of questions and we will move directly to the first question from Elaine at Morgan Stanley, please go ahead. Yes, sir. Good afternoon. Gentlemen, two questions from my sight. The first one is on the contract, negotiations. Can you confirm that you have around 5 million, tons of annual contracts, that will reset in Europe, on the first of jand, how much contracts do you have outside of Europe?

That's the first question. Thank you.

Hello, I mean it is, you know, I mean, we we have close to 20% of our shipments through contracts usually contracts out of that means about 60% is Europe and and then you have the rest split between NAFTA. In Brazil NAFTA NAFTA representing 30% And then Brazil, another 10% in Europe. Most of the contracts and little bit more than two-thirds will be set from first.

Generally you have also a large part of the eval contracts in u.s. Also resetting but not as high as in Europe.

OK. Thank you. That's that's very clear on that. And the second question is on Capital allocation, I guess on most estimates you will be in a net cash position by year-end and cash would be rapidly accumulating thereafter. Is it fair to assume that you did not intend to build a net cash position on the balance sheet and therefore we should think about all excess Capital being returned to shareholders thereafter. Thank you. Yeah. Sure. Well, it's it can it can actually happen. Right? I mean we are not seeing that we

I'm going to be net-net that positivity.

Happened. We don't expect this to to be a structural thing, but we would not rule out that situation to be there because it's, you know, we do have some volatility without working capital. So you can happen at this point in time. We are not really changing our policy. So our policy Remains the Same, the one that we announced at the beginning of this year so far. As you can see, we have been keeping our promises. So we are getting now close to six billion dollars of cash returns.

And we have just increased the BuyBacks, it's quarter. So I think and we have also we have also in our in our release also indicated that we expect. Cash flows to accelerated in Q4. So I think that bodes well for the cash distribution, All Shook, also going to 2022,

Thank you.

So we'll move now to Alan. Spence Jeffrey's, go ahead and thank you. So, the next good night, Stuart Mill's is expected to start up before the end of the year. You've given us projections on what it could contribute on normalized basis, but given that would potentially eight weeks away from it. What could that potentially do in the first quarter of the first half of next year?

Yeah, so we on track now, I mean, after the delays to start the year with the ramp up at the end of the year. We are expecting to First coil really at the end of December. So that's the Focus right now to get it going. And then of course we're going to have the ramp up to bring 2022. So as you know, I mean the 250 million that we have provided that reflects the store equal.

The HRC domestic against exports, of course today that is as we know quite different, right? So I think there is a lot of potential for us. So it's going to be really up to us how fast we can ramp up the production of the hot stream. You I think everybody did it's quite motivated. We have the teams in place, the commercial teams up and running. So I think we're going to be probably in a better position to update. You want to ramp up this?

Speed of the ramp up in in Q4, but at this point, we feel it's a little bit Market. Sensitive really to be talking about the speed of the ramp up, but I think the potential potential, we are very excited about the potential of this project for us.

Thank you. And is this for a second question? Capex. Guidance is 3.2 for the year. It seems quite a step up in the fourth quarter. He's all of that. Earmarked for projects, you feel quite confident will be complete by the end of the quarter or could that number come in a little bit like first got it.

Well, I think at this point in time is it is committed. So that's why we are keeping the 3.2. I think we should be there and as we are talking a little bit about capex, you know, out of this 3.2 billion, you have about 200 that it's on the allocated to the Strategic in the envelopes that we have. Right? So we have just announced the new three projects adding to our strategic envelopes, so too.

Of that is been.

This year. And then the remaining is really on account of, or maintenance environmental projects, and some other smaller projects that we expect will this envelope. This part of the envelope will continue going forward. And then you have of course, the Strategic envelope that we expect to be accelerating as we move into Douglas 22 and 23.

Okay. Thank you.

Thanks Harlan. So we'll move to the next question. From Seth at Exxon or came back, Saturday afternoon. Thank you for questions on the outlook for volumes. And in Market next, please in your presentation, you comment on some of the disruptions in. Q3. You are about a million times, with some hope you'll be well versed in the queue for, can you give us some color on? These are moving Parts driving your confidence and the reversal of those disruptions on the production side and shipment delays.

And then separately, you also often times you to Auto cancellations. We've heard that many of your peers as well. What are you hearing from? Those customers with regard to potential recovery of off? Take going into 22? Any since the timeline there and in the end can you place those times elsewhere or they simply lost for the time being?

Thank you, and welcome back. So yeah, first of all, I think we expect, of course, to recover some of the shipments and I think we have been clear about that. Some of the logistical issues. I mean, it's still linked to the floods that we had in Europe in July. Clearly, we of course, we don't expect that to reoccur. So that should be ok. We also face some issues in Brazil and CEO.

Yes, and we expect that we're going to be doing better there. So we are confident that shipment should actually improve next quarter. And also, of course the losses that we had in after because of operational issues. We don't we we don't expect a repeat of that at 300, kg that we expect to be recovering as we go into quarter for right? And then Automotive, really, I think our base case.

Is is that the level of shipments will not really change much. So we are not expect an increase in shipments to the oems. In Q4. We expect that the situation is not really much improving, so much into for, that's our base case. We'll see. And then, of course, in 2022, I think that is hope that we will see an improvement especially towards the second half. I think it changed varies from VM to VM, but our base case is that we will see an improvement.

And most likely more really towards the second half, but who see how they managed to resolve their own issues?

Thank you, if I can explain follow up, please earlier this year. When the market was saying, release urging steel pricing. We've heard from you and some peers that while in are like, Autos might have been a bit disappointed you to semies. You could sell the material to other customers very easily as customers are scrambling for tons. Is that still the case now, or are you seeing buyers running a bit more selective in their procurement, particularly any feedback on how distributors or buying right now? Given some of the softness for saying in pricing? Thank you.

Sure said well said I think the main level of the main levels are good. I think what a book.

Continue to be to be good long. So right now in Europe, We are booking well, into Q1. So we don't see issues with demand order then of course, with Automotive. I think they should this quarter was read that the cancellations came very, very late. So it was just not possible for us to read, redirect to Productions. So, so in that regard, we are not really, really concerned. I think you want

Brooke is good. And that is also true in other parts of the world as well. In Brazil. It's also true. I mean Trio point that we are seeing inventory levels coming back up a normalizing. I think we are in a path to normalization. Right? So, but right now, the real demand continues to be supportive and we are not having any problems to sell and the materials right now.

Perfect. Thank you very much.

Much. Thanks that. So move to the next question, please, from alone with you at Auto. Yes. Thanks for taking my question, I guess so you are giving free cash flow guidance for Q4 predicated. Namely on working capital release, how substantial can these working, capital, release be and do you expect a be that will be an incremental, positive sequentially?

So we had the free cash flow is not really only based on the working capital. I think it will support the free cash flow generation, right? We just reported it in a very good strong Q. Three numbers. Right buddy. Hi a bitter levels. The personally many, many years Q4 should also be a strong quarter for us. Of course. We we talked about shipment. So we expect shipments to be to be better, right?

So we always selling price is realized setting prices in Europe and I have to should continue to improve because of the legs.

So that should also be supportive. But at the same time we have also to acknowledge that we do have some some headwinds. We have seen during the court International prices softening. So that will have an impact in our CIS business. It will have an impact in our Brazilian business as well. We have seen some Rising costs, especially cool. We are seeing of course, I don't know.

Also going down that will also have an impact in our mining Division and we have energy cost is also escalating. So I think it's it's it's you have some some some positive some negatives. We'll see where we land. I mean, we don't provide the specific guidance quarterly guidance as you know, but we remain very confident that Q4 should be a good bit good quarter for us.

Thank you very much. And if I, if I can just ask another question related to capex. Could you also give us an update on the overall, capex envelope for 2022? And on the words, you know, with the announcement you have just done and also the decarbonization capex. We wished to have an idea. Yeah. Well, I think we're going to be updating everyone in Q4 more specifically, but as we discussed last quarter, I think.

guys, already have

It should be moving parts, right? I was saying, at the beginning of the code that we have 3.2 billion for this year, and I will split that into two components basically. So we have the Strategic envelopes. So, and you have the overall strategic angle, or the projects that we have announce. You have that in our presentation. So, out of the three point, two, two hundred is can be allocated to our strategic envelope and then you have three.

Billion for maintenance environmental in order smaller projects. So the three billion component will continue. So we don't expect significant change in that going forward. The Strategic very clearly. We will be spending more as we just announced the new projects. And we're going to be spending on some of these new projects in 2022 of the way to 2024. And then the missing component is the carbonization.

And and on that, we have already also provided our guidance, right? So we have announced the sponge as part of our second climate report, how much we're going to be spending all the way 2030 and how much we're going to be spending until 2025. So I think you have now already the components here to come up with a very good idea. And then, of course, in Q4, once we complete our budget exercise.

You're going to be able to provide some more call in terms of timing and in the mounts, but I would not expect significant change what I just described.

Understood.

Thanks. So we'll move to next question, please. From Patrick at Bank of America.

Hi, a good day. And thanks very much for taking the question. I just wanted to ask two questions. One is, can you give us an idea of the impact of energy costs on the business and maybe some sensitivities or just help us to understand? I suppose, how exposed you out to the spot market and you know, what impact it can have on on cost and then the second one is the change in sick.

232 that sort of tariffs to to a quota system. Have you guys looked or done any work that you can share with us on what Nate impact that could have on on your business? Thanks very much.

Much. So let me start with the energy costs. So if so, as we know, this is really an industry shoe. So, everybody's been impacted and there is already an impact. In our results in quarter 3. I mean we have seen power prices, natural gas prices rising during during the court actually started even at the end of quarter one, and we continue to see

Prices rise.

Especially in Europe. During even after the end of the quarter. We have seen a lot of volatility more recently. So you have to you have to start with that, that quarter tree was already impacted looking forward. We don't really expect any significant impact in our business order than in Europe and in part of our CIS business.

So, in Europe, we are as you know, highly integrated to power. So a flat carbon business will have minimal exposure. So level of natural integration and hedging is quite high. It's above 70%.

And then when it comes to natural gas, we have our hedging policies. So we will be covering on average, 50% of our needs on six months, rolling basis. So that should give you an idea of what to expect in in Q4. And then, of course, I would just highlight that or long business.

In Europe, doesn't have the same level of integration to power as our flat business. So they're our hedging levels are low. They are more in the range of 30 to 40%. So you have to take that into account as well. And then you see I is the exposure is reading Ukraine, Ukraine in operations where we are exposed to power and also to some extent to Natural Gas.

And then on section 2 32. Well, I think we welcome the, the the decisions that were taken. I think they are in the right right direction. I think a net-net. As you know, we are a major player on both markets net-net. We believe that for us. It should be positive. It should allow. So, with the with the, with the Cortez.

I always speak tation is that the level of exports from Europe, who kind of go back to the, the levels that we, we were seeing before, and, and that's the idea of the Cortez. So clearly we should see that. So it should keep the markets, maybe tighten, Europe will see that, and it should be displacing Imports that are paying tariffs in u.s. So, I think when a net basis, it should be positive.

For us, we we continue to export to you as from Europe even during section 232 even before this agreement, especially products that you cannot really find. Today in in u.s., This is primarily long. Our, some long business is jumbled beans and product like that.

that you

Being that there is ourselves. So to some extent, we should have some small savings by not having to pay their stories. So I think it's it's clearly a positive for the industry. Overall. I would say and I should be positive for business as well.

Got to. Thank you very much. Thanks Patrick. So, we'll move now to a question from Luke at JP Morgan.

I afternoon. Thanks for taking my question. A couple from me, firstly, just on iron. Or can you just remind us how much volumes been impacted by the operational issues there train derailment, Etc, in Liberia, and then just sort of a sense of when or whether we can expect those volumes to fully recover in Q4. And then previously before the change in.

Did used to give annual shipment guidance or some market price town, or just wondering if you're in a position to be able to give some guidance on what volumes could be for 2022. My first question.

So look, so in what happened was so we as you recall, we had during the second quarter. We had an accident with the locomotives to about locomotives. So so that was fixed in September. So we got two new locals in operations, but unfortunately, at the end of the month, we also, we had another accident a derailment, which damage some of the wagons.

So so clearly in in Q3, we were not really running, we could not produce, we could not be at normal run rate going into Q4. We will have still a minor. I would say minor impacts. So we're going to be increasing production quite significant with somebody going to be almost back to the normal levels of production in Liberia. However, because of

Wagons, we're going to, maybe I would say that we're going to still be below by about 200 kg, but that's it, should not be very, very significant. So we should be in Q4. We should be back, almost back to normal with our mining production in shipments. So, in terms of guidance for 2022, I think we will update you next next quarter as we talked about 2022, but at this point in time, as some of these

Roger that we have announced. Of course, they will not be impacting, our so much in 2022. Actually. It's going to take much longer as we know. So I would not really expect a significant change except of course, for the impacts of this, right? That we had in mind, scan and a during the second quarter. So that was as you recall, that was significant impact. Their we lost from memory, almost 2 million tons, so that we should be

That back, of course, and then hopefully we're not going to have the same.

These shoes from Liberia as well. So I think you can expect that production and shipments from all mining division will be improved by these factors.

Okay. Thanks. That's very clear. Maybe second question, just on on Caprica returns and dividends just for next year. I mean it's been sort of a running top up obviously with today's announcement. And with the, the H1 is that is this sort of a one-off exceptional because it is such an exceptional year in terms of profitability, but if next year, and it looks like it's going to be strong with, with contract research, which you spoke.

About. So, it can be another strong year is, is a running top part of the share buyback, something. We should be expecting, as well into to 2022 numbers.

Well, I think this quarter was relatively easy for us and we're actually is simple decision. Look, so strong, free cash flow, right? And very strong liquidity close to 10 billion dollars of liquidity. We believe the share price is still and undervalued. And as I said at the beginning of my have our discussion here, so we expect free cash flow to a seller rating.

So for I was, that was a no-brainer to top up the the by deckhand, and do more and buy more of those stocks. We, as I said, also, we are not going to change in the policy. We will see where we finally land in Q4, and we will apply the policy. And then we will see what happens in 2022. And as we discussed at the beginning, also, we remain constructive about the outlook for 2022. So I think it was quite

Well, for the returns true to our shareholders.

I can't thanks and maybe one final one quickly. If I made just on Brazil, they the recent announcement of down cutting the import tariffs. If you have any comments on the potential impact that may have on on pricing or the business down there. Be interested to hear. Thank you. Well, I mean, this is something that we were had already been announced. Sometime back. It's not really new so it's so the portal.

Seen Brazil, they were before 12% and they were reduced by 10%. So now it's 10.10 point eight percent. So it's, of course, net-net it small- for us, but it should not really have any significant impact. What do we have? What we are seeing in Brazil is that we had and we have an increase of the Imports that are now coming down so which is also good.

Demanding Brazil continues to be quite strong. We should be heading towards the high end of our guide as in terms of parents to consumption. So we are pleased with that. So operations performing, extremely extremely well. Unfortunately, we had the logistic issues at the very end of the quarter, but we are quite pleased with the performance of our Brazilian business. And in this change.

And though, it's a small, negative should not have really any.

An impact, we hope.

Thanks a lot.

Great. Thanks. Like so we'll move now to Christian at such. An yes. Thank you. Two questions. The infrastructure program in the US, which seems to be coming through. Now, if he's going to be a less relevant for you, that you filled more or less audio, long products capacity, you know, hands on flat flux, you shouldn't have as much of an impact. Or do you still, like, Alice could be

You fool.

Christian. I think it should be extremely positive for for, for the business, for this, for the industry in us and we should also benefit, right? I mean, we we know that so bit more than a, than a trillion announced incremental, we believe that it's more a little bit more than 500 incremental to be spent over the next couple of years, five years. So, that should be adding a good

An extra level of demand in us and as the market becomes tight. We, we also benefit.

And you're Canadian investment in India by New York, continuing to build up. Your DIY capacity, is that design utimately to serve your own needs. Or should we see that as a intended to serve the open market?

Well right now I mean this is been consumed internally most of it. But clearly we have the flexibility and that's the beauty of this asset. It's a tier 1 are set very competitive in terms of cause the quality of the palate is, it's really good and with this and we know that in the future having access to the right pellets will be also quite strategic.

So I think it's a great asset for what's in the middle. And and we have the flexibility, we can use it as we are today. Most of it internally or if you want, we could also be selling outside. But today it's primarily for internal consumption.

That's one thing you're doing High profits level in India. And Calvert is ilva profitable at this point or are you still building up possibilities are?

Yes, Uber is also a bit of positive Christian. So, yes, thank you.

Thanks, Christian.

Got one quick question on the model of our project. And what did they mean to do here? Some wondering, is this - a million investment only for the capacity increase of the steel mill and the upgrading of the downstream or if they're also portion included for the extension of the mine around it. Maybe you can remind us on what exactly are doing here right version. As you know, this is a project that we originally started a couple of years back and and the investments in the mind and unready mind.

Which is just a couple of kilometers away from steel. Plant was already was done a couple of years ago. So the capacity of the mine is already right sized for for the expansion. So we're not going to need to be investing to get the capacity of that. Mind back up. So that was already done. So. So the but we have announced today. This is 500 million Now is really to complete the Upstream, the, the blast furnace.

We will have seemed to plant and Costas and the deal hot. The Rolling Mill is already erected. It's already there.

So it's really now to complete the the Upstream.

Okay. Okay, excellent. And just one quick, follow-up on that, the the mining capacity at and rotten. Is it fully maxed out already? In terms of the production of I have you been holding it back because you were not able to use it in the orchard million. Maybe Logistics are not as good. Yeah, I think that's one of the concerns that we have there in, which is 6 for the, I don't know, but we were from time to time selling a little bit of the, I don't know to some other local place, but Logistics. Clearly constrain their in.

And in this case, it was really designed for the expansion.

Okay, perfect. They're not my second question is on the other side as well. I think they seem to be some pretty big plans to bring larger parts of the capacity, back to lawyers, your sister, the Capital Partner, they are so could you maybe bring us up to date on what the latest plans are Emilio? So of our, if necessarily you you would have a veto, right? If you feel that those plants are not reasons reasonable.

Well, it's a joint control partnership. Right? So we do have joint control within the target. So the decisions will need to be taken by both partners, and the plans have not really changed. I mean, they continue to be the same. Of course. We are in the process. Same as we are doing for all of our European science, going through the plans for, for decarbonization. And this is something that I'm sure we're going to be communicating more.

When we finish this plans and we have the opportunity to get everybody on board, have depart also agree. So this is something that is progressing and we will update you guys. Once we have that done.

Thank you.

Thanks, bestie. And so we'll move now to question from miles at UBS. Go ahead muscles.

Great. Thank you. Infantry is now like a More normalized Level to supply chain in Europe and North America. Me when we look at your own kind of production and sales. Clearly. There's been quite a big build by ourselves, you know, 5 million a year to date but maybe just touch upon that to start with. Thank you. Yeah. Yeah. I think you're right. I think I did mention at the beginning.

That we are seeing a normalization of inventories that is there was initially clear in international markets and we have seen inventory's being replenished in Europe and and after Brazil to we are clearly in a path of of normalization, but as we discussed at the beginning, so Rio demand continues to be good.

Good order books continue to be still extended. So I think what we are seeing something that of course, has to be expected, but giving the support from the real demand. It's it's good.

Maybe just thinking about these Arnold projects. And could you give us a quick update with Liberia? Is that still on track and also related to approvals and on oil prices have halved since since June. Is there a price point where you think? Well, let's hold back. These expansions. It's just better to buy it on the market should be assumed that this incremental 15 million, tons of iron ore will displace.

Import Show. So people and Supply. It's a party supply. Yeah. Yeah, that's that's a very good question. And in all these projects, they have been approved, take into account, very conservative pricing assumptions. Right? So you would need to see really a significant drop in prices to get for us to get to a point where we would probably have to change our plans. We don't really see that happening. I think what we get from this mind.

First of all, you have very large reserves. So these are assets that we own already. Right? So we have large reserves quality materials. So the type of cost that we can get out of this - is going to be extremely difficult for us to get elsewhere. So they are very strategic for us and we are very comfortable to go ahead, even seeing the correction in the in the market prices that we have today, right? And in some cases in,

A circle. For instance. We are just

Even back to capacity of the mind to what it used to be, right? An individual displays in this case Imports and and the production of Sarah's. Ooh, the 4.5 million tons will also will also have its own Market, which is our own operations in Mexico. Of course, we will have the flexibility if you want you to be in the Seabourn Market, but the idea of the project is to supply or Mexican operation. So that

We are fully integrated in Mexico. And then of course, you have Liberia part of that material, can be consumed. I'll show in our own operations. Europe would be the Natural Market for that. But the quality of the materials will be such that we're going to be also in opposition to be in the Seaboard Market. In Liberia. We are progressing. The, the project is progressing. Well, we had the MDA signed when the court. So we are now waiting for

For final approval from the Congress but it's it's progressing. Well, we are, we are on track the most.

What is your integration? Get to once these have all these projects have ramped up?

Well, right now. So without this project, we are a little bit below 60. So 60 percent and then I think you can, you can do the math. I mean, so it's we're going to be adding other 10 in, Liberia, right? And in Sarah's route, today. We are producing about 1.5. So we have to add 3 and in last two shirts.

Ask if we have to add another one.

Okay. Thank you.

Thanks. Master. Will move now to a question from Richard Hatch, at berenberg it morning and good afternoon. Thank you so much for your your time. And thanks for taking the question. Just to Christian on the the, the updated parents still consumption outlook for China, which you've reduced since key to can you just talk a little bit more about what's Driven you to kind of adjust? That given the fact that you raised it at the of the Q, two level and perhaps

Talked a little bit about the outlet for 2022. Any other four volts there from a China perspective, would be much appreciated. Thank you. Right. So, let's say no to comment on that.

Sure. Thanks Jeremy. And so yeah, it's it's been a clear slow sharp slowdown in demand in China during the third quarter. So you're right. It was only back in second half of July, that we were raising our estimates. We were looking for a full year demand of low single-digit growth. And now we're actually forecasting a slight correction in a parent demand this year all of China. And so it's been

Driven by factors. I think that

All appreciate. There's been a sharp slowdown in the steel. Intensive property sector and just generally, a lot of constraints have been made due to power availability and in China. So that that has put a, just a general break on industrial production. And so, if you look at the stats for for Q3, the, the economy was clearly

Only barely growing based on the official, stats and steel consumption with was significantly down relative to the second quarter. And I think, you know what? What's really interesting about what's occurring in China is that this this lower demand is actually being matched by lower steel production. So the government is strictly enforcing the production constraints and enforcing production cuts on the domestic industry.

Production had been very strong in the first half as demand was. And now in the second half, you seeing these these production Cuts really biting. I think last month production was down 20 percent on a year-on-year basis. If you look at production for Q3 as a whole, I think it was down about nine percent relative to Q2. So as a result, despite the weak demand and because of the production constraints, because of the removal of the VA T rebate.

Rather than seeing exports increase and a threat to X trying to steal conditions, were actually seeing exports dropping. So China exports, were down 20 percent in Q3 relative to Q2. And I think we're confident that that's going to be a continuing theme, and we will see much lower exports for the second half as a whole. And so I think this slowdown in China, in terms of Steel demand, normally, that would be

Dramatic for us and a source of concern for X China Steel conditions, but because of the lower exports, it's actually a net positive. Clearly. We are seeing an impact in Iron ore Market, but that yet and that's that's a headwind for our mining business. And, but you could argue it as a Tailwind for, for up for our steel business.

Thank you very much for the answer. I appreciate it.

Okay, great. So we will now move to a question from Karsten at Credit. Suisse go ahead, custom. Thank you. What prevented you for from an even better idea. Third quarter were clearly the weaker shipment. You mentioned the region, the reasons, Logistics, weather, etc. Etc. What I'm interested in is how much of those kind of shipments, which were apparently produced will actually be moved over to the fourth quarter. That's the first one.

Second question, I have is on the Asus shipments.

Tickler because they're not, not Auto exposed and hints. The, the weakness here seems to be more weakness in the market. Where does it come from? Which segments, in particular in the 80s Market are weaker? And the third question I have is on the net working capital release and the fourth quarter because of all these kind of shipment delays. What is your best guess? Or maybe you have the number? How much did it actually?

I've your net working capital up in the third quarter and on the opposite. How much could it actually be released when you actually release those volumes into the market? Thank you.

Yeah, sure, cousin. Let me take one. The first question on the, how much of the shipments we can expect to see back in Q4. I think if you look at our presentation, what we are trying to suggest to you is that clearly the loss is coming from operational issues. We would expect to get it back. Right? We don't agree. We are not expecting some of the operational. Reliability issues who the

Actually, in this case, whether related to reoccur, right? And so that's about 300 kg. And then you have the bottlenecks, which is about 600 that we expect you to get back. So we talked about some of the reasons that floods in Europe that we of course also don't expect it to reoccur. So we would expect that to, we would expect you to see that and then we had some seasonality.

And and some some and you can call it a little bit of weakness in CIS, you, right. I mean and we have about 400 kg 200 in Europe, 200 in CIS, any CIS as what we saw was that with the introduction of the export taxes in Russia, as, you know, we sell sizable volumes from our Kazakhstan operations in Russia and which we saw the the Russian Market.

For some time, trying to understand this change. So the demand was relatively for in the regions where we operate a little bit weak. So I so going forward. Really? I think I would count with the the production losses, the the bottlenecks, and then we will see how to motivate we discussed. We are not really expect that.

At to improving water for. So we are not counting that you with us. So I think I touch on CIS as well. She is really the issues were really more in Kazakhstan, the flat business, the Russian markets and other export Market as well. We also face logistic issues there as we discuss the long business did quite well, Ukraine. And so, what's what's

it, in terms of the

King Capital, so we invested 2.9 billion this water, right? And out of out of the 2.9 about a billion is on account of the high higher volumes, two shipments that we could not ship, we produce but we didn't we didn't shoot. So so that's I guess that becomes a good reference. I think our Focus really in terms of working capital is to make sure that by the end of the year.

Here. We keep our rotation days is stable. I mean, as you read as you recall, we put a lot of efforts in 2020 to make sure that we could really get to efficiency. So we efficient in, we achieve that and this year. I think it's going pretty well as well. Most of the Investments that you see 3D on account of Crisis, was only now in quarter three that you have this extra volumes.

That we would expect that you to Reba.

Perfect, that helps a lot. Maybe one quick question on Asus and your your coal operations there because we have seen some lower volume. Historically in Kazakhstan, at least in 2019 and 2020 with regard to the Cost Plus production. Given by the coal prices are, did you also see an improvement in your call volumes over there?

Well, I think the operations call Operations. They have been relatively stable cousin and and part of the coal that we produce, there goes to our operations in Ukraine. So, of course we have been trying to optimize the production as much as possible that has been the drive, but that is not not so much any significant change to

Okay. Just want to double-check. Perfect. Thank you very much.

Thanks Gustin, as so. I think we have maybe a couple of questions left and we'll take the first from Grant at Bloomberg intelligence.

Thanks everyone. My my questions have been answered. Thank you very much.

No problem grabs. So we will move to actually it's all. So we're going to move to Andruw Jones at UBS. And then I think we may have one follow-up after that. Yep. She's got. Just firstly on on India when we talked about that very much. Can you just give us a bit of an update as to what you're thinking in terms of the timing of any potential expansions and where your thoughts are that in that respect in the

Obviously, building up a lot of, a lot of cash, get them because in prices, I would guess that you probably about people, wanting to pull the trigger sooner rather than later. So a bit more detail on that will be useful. And it also just to a clarification point on I guess karstens previous question, just for shipments in the fourth quarter. I mean what I heard was that, you know, you lost about 300,000 tonnes in NAFTA about was about

Thousand in Europe. And she is.

You know, each is that essentially volume, that is lost that you'll not only get back but that you know that volume shifts into 4 q. Can you give us like us a ballpark for what shipments should be in total for the fourth quarter. Thank you.

Intro. So, first one point, when the India I think, as I said, I think the company continues to perform extremely well as you can see strong ebitda performance. It has been the case now, the entire year, so it's strong performance from from our Indian JV. There is a lot going on, on the ground in terms of getting ready for the announcements of the expansion and we have been very vocal about it. We want to develop the business grow the business, we

Clear Ambitions to First D. Bottlenecked existing flows, get you is eight point six million tons, and then take it to 14. I think we are getting. We should be making a formal announcements relatively soon and then we will be able to update you in terms of capex and timing but I think that, of course, very high focus of the organization to, to get that ready.

More recently. We completed the second or the third pellet plant. So we are now, we have capacity now to produce 20 million tons. We made some progress also with our integration into, I don't know. So a lot going on there, very positive developments and I'm sure we'll be discussing much more detailed, very, very soon on the, on the, on the Project's there.

On your second question. I am not going to be providing very specific guidance in terms of Shifting. So I think what we and I hope it's clear to everybody that we expect to do better. I think what the decline that we saw in him Q3. Clearly, several components and we talk about each one of them. Again. We expect a production, bottlenecks will reverse.

Then we will see an improvement in in all of our Region's actually, right? And so that's that would stop there and drill because otherwise I will need to give you the number.

Okay. Thanks. Thanks.

Thanks very much, Daniel. Yeah, I just was looking at the decarbonization plans that you guys have announced and I suppose one thing to think more broadly or longer term around the 25 and 20 30 targets. Now that you've actually announced some agreements with government of Canada and Belgium in Flanders as well. Do you think that a 50% split of

Of capex between kind of.

Mystery and government support is still a reasonable number to to to go forth. And I suppose link to that is that's what holding up the kind of finalization of the Fasco and Ghent just you know exactly who's going to pay for how much thanks.

You want to take this one?

Yeah, thanks. So. Yeah, it's a good question Patrick and I think you know everything that we put in our climate action report in the summer. It's still valid. So within that we talked about our plans to 2030 how much we needed to invest to achieve those plans and our expectation of how much we were asking in terms of public support for those plans to to make them.

Viable in the current environment and and that's still very much stands. So I think what we've obviously announced over the past quarter and is some very positive developments, you know, it's clear that we have some good plans and some good projects. The fact that we were able to announce the for example, the project at Dofasco, where we you know, we're going to fully move away from coal and move to

Dri and electric bass Technologies. The fact that we could announce that alongside the government that that's clearly a very positive development showing the support that we have there and but all of these things just just take the sort of final things to to tie down and one of those things is obviously working with the provincial government as well to to get the support from the Ontario government.

The, the very positive development that we've had in in Ghent for decarbonizing the plant there again, we announced that that is being supported by the government. But that needs to be obviously approved at the EC level before before that kind of gets formalized and we can move forwards. And so yeah, I think we stick by everything that we said in our report in the

Summer, we're making progress. We've got, we're clearly, we feel leading the industry in terms of developing the plans developing our processes, all of the everything on the product side, including the green steel certificates. We're announcing projects. We're working on the various different work streams. You know, we're being Partners in some very important initiatives, not just within the sector,

Ready, but Global initiatives on decarbonization. And so, yeah, I think this is a very positive thing for us and we look forward to updating your further in the coming months.

Yeah, I think maybe my mistake is expecting governments to move at the same speed as, as you got. So yeah. Thanks very much.

Thank you. Thank you. Our last question. Jen. We know, so don't know if you have any closing remarks.

No, I just wanted to thank everyone for taking the time to join. I'll call and see you guys speak to you soon. Thank you.

Thanks everybody.