Ladies and gentlemen, thank you for standing by and welcome to the United States Steel Corporation third quarter 2009 earnings conference call and webcast. At this time, all participants are in a listen-only mode and later we will conduct the question-and-answer session with instructions being given at that time. (Operator Instructions). I would now like to turn the conference over to your host, Manager, Investor Relations, Mr. Dan Lesnak. Please go ahead, sir.

Good afternoon, and thank you for participating in United States Steel Corporation's quarter 2009 earnings conference call webcast. We'll start the call from brief introductory remarks from U.S. Steel Chairman and CEO John Surma. Next, I'll provide some additional details through the third quarter, then Gretchen Haggerty, U.S. Steel's Executive Vice President and CFO will comment on the outlook for the fourth quarter 2009. Following our prepared remarks, we'll be happy to take any questions. Before we begin, however, I must caution you that today's conference call contains forward-looking statements and that future results may differ materially from statements or projections made on today's call. For your convenience 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 in our quarterly reports on Form 10-Q in accordance with the Safe Harbor provision. Now, (inaudible) here is U.S. Steel Chairman and CEO John Surma.

Earlier today for the third quarter, we reported a loss of $303 million or $2.11 per diluted share, an improvement from the second quarter. Our European operations returned to profitability, a significant achievement and our tubular business made good progress in a difficult market. Before continuing, I want to comment briefly on safety which continues to be our number one priority, regardless of operating conditions. Year-to-date, both our global OSHA reportable case rate and our days away from work case rate have improved compared to our performance in 2008 and that's also a significant achievement considering the challenges of the current business cycle. We thank our employees for their shared commitment to this most important of our objectives. Now turning to the business, we continue to face difficult operating conditions in the third quarter as evidenced by a domestic steel industry utilization rate of 54% for the period as was reported by AISI. We experienced some improvement in order rates earlier in the quarter and we currently have more of our facilities operating and more of our people back to work. Recently, order rates in our Flat-rolled and European segments have decreased and demand trends remain uncertain as both the U.S. and global economies struggle to recover. We're also entering a seasonally slower period. We anticipate that we'll continue to face challenging conditions until a recovery becomes more apparent and more sustained and that there will likely be ups and downs along the way. We're staying focused on what we can control safety, costs, and taking good care of our customers. Now, let me turn to our results. We reported third quarter of loss from operations of $412 million, net interest and other financial costs in the third quarter of 2009, included a foreign currently gain than increased net income by $24 million or $0.16 per diluted share due to the remeasurement that the U.S. dollar denominated intercompany loan to a European affiliate, and related euro-U.S. dollar derivatives activity. Our North American Flat-rolled segment had an operating loss of $370 million in the third quarter. Our Flat-rolled shipments increased almost 50% to 2.7 million tons, but as a result of lower index based contract prices and increased sales of semi-finished products; our average realized prices decreased $72 to about $605 per net ton. The Flat-rolled results included approximately $165 million continuing employee and other costs associated with our idle facilities as compared to $285 million of those costs in the second quarter. We also had approximately $65 billion in facility restart costs at Granite City, Great Lakes and Hamilton. Also in conjunction with increased steel production, we increased our operating levels and our raw materials operations during the third quarter. We're currently making steel at six of our seven North American steelmaking locations. The exception being Lake Erie Works where our labor agreement has expired and we have not yet reached a successive agreement. In addition, downstream finishing facilities at our plants are operating as needed to meet our customer orders. We had operating income of $7 million for the third quarter in our European segment; a significant improvement compared to our second quarter loss of $53 million, which as you may recall, included a $34 million gain on the sales of emissions allowances. Shipments were almost $1.3 million net tons, a 24% increase over last quarter. Reported average realized prices increased slightly to $615 per net ton as a decrease on actual Euro based prices was more than offset by favorable currency translation effects. Also, we realized benefits from lower raw materials and energy costs. For our Tubular segment, we had an operating loss of $21 in the third quarter, an improvement from the $88 million loss in the second quarter. Shipments were 151,000 net tons in the third quarter, that’s up 64% from the extremely low second quarter levels. As order rates increased in line with customer demand for alloy and heat treated products, due in part to continuing developments of the shale gas place. We're beginning to see increased activities in our welded pipe facility in East Texas, which will also benefit our flat-rolled operations that supply the substrate for our welded mills. In the third quarter, prices fell 3% to 1,474 per net ton, a substantially lower decrease than the last two quarter as prices maybe, I emphasize, may be stabilizing. Our tubular markets continue to be negatively impacted by high inventory levels in the supply chain caused by high levels of unfairly traded and subsidized tubular imports from China in prior quarters. Our operating rates are still well below historical levels and our tubular results also reflect idle facility carrying costs of about $25 million. Now, I'll turn it back to Dan for some additional details about the quarter's results. Dan?

Thanks, John. Capital spending totaled $117 million in third quarter and currently projects full year capital spending to be approximately $455 million. Depreciation, depletion and amortization totaled $167 million in the third quarter and we currently expect it to be approximately $645 million dollars for the year. Pension and other benefits costs for the quarter totaled $97 million. We made cash payments for pension and other benefits of $262 million which includes a $140 million voluntary contribution to our main domestic defined pension plan. For the full year, we expect our pension and other benefits to cost to be roughly $407 million and we expect cash payments for pension and other benefits to be approximately $675 million which includes the $140 million voluntary contribution. Net interest and other financial costs totaled $25 million in the third quarter and included foreign currency gain of $21 million. Our effective tax benefit rate was approximately 30% for the third quarter and 22% for the first nine months of the year. These are lower than the statutory rate because losses in Canada and Serbia which are jurisdictions where we have recorded a full valuation allowance on deferred tax assets; do not generate tax benefit for accounting purposes. The third quarter tax benefit rate includes the impact of the $23 million catch-up adjustments as a result of a slight increase in the estimated annual effective tax benefit rate. Lastly, the weighted average shares used for EPS purposes for third quarter were $143.4 million shares as the $27.1 million we issued in our public offering in April are now fully reflected in the EPS calculations for the third quarter. Now Gretchen will review some additional information and the outlook for the fourth quarter.

Thank you, Dan, good afternoon. Year-to-date cash flow from operating activities was $118 million and reflected the $140 million voluntary contribution to our pension plan in the third quarter. We continued to reduce inventories in the third quarter with benefits from working capital reductions totaling $1.3 billion for the year-to-date. Our liquidity remains strong as we ended the quarter with $1.5 billion of cash and total liquidity of $2.7 billion. Turning to our outlook, we expect improvement in our overall fourth quarter results mainly as the result of increased demand for Flat-rolled products in North America, driven primarily by automotive markets and continued strength in tin mill markets. However, we expect to report an overall operating loss in the fourth quarter due primarily to continued low operating rates and idled facility carrying costs for our Flat-rolled and Tubular segments. We remain cautious in our outlook for end user demand as customer order rates in our Flat-rolled and European segments have decreased from the third quarter, partly due to seasonal slowdowns, and we will continue to adjust production to meet our customers' demand. Despite these concerns and uncertainties, we believe that the U.S. and global economies are in the early stages of a gradual recovery, which has been aided by global stimulus policies and may be supported by continued improvement in credit markets and inventory restocking." For Flat-rolled, fourth quarter results are expected to improve somewhat from the third quarter due primarily to higher average realized prices and increased shipments. However, we expect to report an operating loss for the fourth quarter primarily due to low operating rates and continued carrying costs for idled facilities. In order to adjust production to meet customer order rates, during the fourth quarter, we expect to idle the number 14 Blast Furnace at our Gary Works for necessary repairs, as well as one of two furnaces at Granite City Works. As a result, we currently expect fourth quarter raw steel capability utilization rates to be in line with third the quarter levels. We expect fourth quarter results for U. S. Steel Europe to be in line with the third quarter as higher average realized prices are offset by higher raw material costs and slightly lower shipments. Due to a planned maintenance outage for one of the three blast furnaces at USSK, we expect raw steel capability utilization rates to be lower than third quarter level. The blast furnace operating configuration in Serbia will be adjusted as required in the fourth quarter to coincide with customer order rates. Now, fourth quarter results for Tubular are expected to be comparable to the third quarter as operating levels, shipments and prices remain around prior quarter levels and we continue to incur carrying costs for idled facilities. Dan? Ready for the questions?

Thank you, Gretchen. [Keely], can you please queue the line for questions?

(Operator Instructions). Our first question will come from the line of Kuni Chen of Banc of America-Merrill Lynch. Please go ahead.

I guess just first off, on the North American utilization rates in your outlook there, basically as you go forward from here, is your view to sort of throttle up and throttle back your number of blast furnaces depending upon your order entry rates or certainly at a below 60% utilization rate? You think you might be closer at this point to contemplating any permanent capacity decisions?

I don't know that we can give you anything definitive there. Kuni it’s a very fair question, but I think as our comments in the release and Gretchen indicated, it's likely that we're going to take two furnaces off sometime during the quarter, depends on how we see the market developing, and we're going to continue to try to match our steel make with the ultimate demand is, but there is just so much uncertainty compounded by the fact this is a seasonally difficult time. Anyway, it's hard to filter out how much of this is seasonal versus how much might be more systemic. So, I think we're continuing to look over our hand, see what we think is the best configuration in the long-term for the company. That depends a lot of course what the long-term for it looks like and I don’t know that we know anymore about that today and the last time we did this, I think we'll have to look at that, as well as what other developments on the supply side in North America might be. So, we'll factor all that in, but we continue to look at our hand but nothing definitive on it yet.

Okay. And just as a follow-up, can you comment on your raw material position here for 2010 at this point, and you know, particularly on met coal.

Sure. Well, again, North America from an iron standpoint there we're self-sufficient and we'll make again, what we need. We've drawn a good bit of inventory down to quite a low level. We think we're okay where we are but we can make more if we need it. So, I think from iron standpoint we're fine. On the met coal side, we have in the books sufficient commitments for next year to make the coke that we expect to need and to be able to make. So, I think we're fine from a volume standpoint. Met coal prices are still being worked on. I don't want to do all that in this environment, but I think in general this year we've been estimating all in delivered for met for North America to be about 160 ton for us. We like to think we'll do better than that next year. Some contracts are already in, give us that hope. Some have callers that would be plus or minus at favorable prices and (inaudible) to be negotiated but we think we'll be like this year maybe a bit better.

Our next question will come from the line of Dave Katz with JPMorgan. Please go ahead.

Hi, I was hoping that you guys could talk a little bit about any pressures you've seen in pricing specifically, carbon Flat-roll pricing.

I'm not sure we can add again, much to what's been in the general TradePress if you just follow the indices. There were a number of price increases that were sought, including by us. We did reasonably well on that through October and some additional price increases have not been as successful, and it would appear at this point that spot market prices are leveling and perhaps retracing a bit, that’s exactly what we're seeing. We think we're going do at least as good as the market as we work through this with our customers, but the broad trends that are observable in the market are no different for us, and we can't really add much to what's already been written about it. This seems that things happen very quickly these days after numerous stories now in the TradePress about spot prices softening in North America. Low and behold, the overnight press tells us that spot prices are increasing in China. Shows they (inaudible) looking things can change. I'm reluctant to draw a straight line from here forward, but if you look back in history this is generally a slower time of the year, and I don't see any reason why it's going to defy the laws of gravity this year.

After aggressively managing down your inventories, you had another decrease this past quarter of about $100 million. Where do you see the inventory levels going over the next quarter or two?

I'll let Gretchen comment; it really depends on the operating configuration. We do have particularly on the raw materials side; inventory is down on quite a low level. We think we can probably keep them in that vicinity even if we do ramp up if I need a little bit more, but not a whole lot. Still inventories are very low everywhere including in our system and if we continue to ramp up, we might need a bit more there. If we are increasing inventories, because business is increasing, that’s probably okay at a reasonable level. If things begin to slow down again, we could probably liquidate a bit more, but I think as Gretchen pointed out, we're taking a billion something out of working capital this year. It's going to be hard to have larger chunks in the next quarter to…

Yeah, no, I think that's fair, John. We still have a little more room to go on inventory, but you know, we've done an awful lot on working capital this year, and it's just going to be a little harder to have a favorable effect in the fourth quarter, I think.

And our next question will come from the line of Brian Yu of Citi. Please go ahead.

With regards to your shipment guidance in the Flat-roll segment, you're expecting flat utilization rates you have shipments up. Would suggest you have some finished product inventory on hand. Can you give a sense of how much that is?

Not really. I think we have in process what we need to fill our book, which was, as we said, stronger a month or two ago as the book slows. Our shipments will catch up with inventory and we'll have less on the ground or in process when we get to the end of the year. So, I think we're just going through sort of a mini cycle almost within the fourth quarter. So, our end process, we've finished are a little bit higher today but we're in the process of working that down through mostly shipments and finishing. So, it would be in the hundreds of thousands of tons I would guess, but it's not a big number, and it would be for inventory. Now, that the order book for whatever reason would begin to strengthen, then in all probability, we would have a little more inventory to support that.

Okay.

And I think too, if I would just add to that is that, similar to in the second quarter where our average utilization rate was 32%, we probably came out of that quarter at a lower rate than the average. Coming out of this quarter, we're coming out at a higher rate than average, but we'll probably move down throughout the fourth quarter as we see seasonal effects. So, we've been building up a little bit later in the third quarter and early in the fourth quarter. So, it will average out over the period of the fourth quarter.

Got it. Okay. And my second question is regarding to the Wabush sale. I know you guys along iron-ore and in North America, in the past you've actually shipped that product to Europe. How are you looking at that from a raw material strategy standpoint?

Well, we view that as an asset that was really surplus to what our needs are to support our North American and operating configuration as it currently stands and material doesn’t particularly fit our slight. Anyway, we were offered, we think or even price for it. We were inclined to sell it, which we did to buys and then I guess, is still being worked out, but it doesn’t really change our position it was surplus from our standpoint, and we have additional reserves in both [mentac] and [keytac] are easily accessible. It can be scaled up to a level that we think is sufficient. So, it was surplus, a reasonable value was a pretty easy decision to sell it.

And next follows the line of Luke Folta of Longbow Research. Please go ahead.

Sorry again, I missed the idle facility cost number for the third quarter, and can you provide what your expectation is for 4Q?

Third quarter number was 165 for the idle facility costs. At this point, we don't have a real number for 4Q until we see how this , its going to book plays out and how the volumes run.

I think we just directionally, the third question if we ran for the entire fourth quarter, everything we're running today it probably would be lower than that. If we begin to take some things off, as we indicated we intend to assuming the (inaudible) book stays where it is, it might be closer or maybe less, really hard to say.

Okay and just on the number 14, how long do you plan to have that down, and if we should see a pick up in order rates in the first quarter and you think you'd have that ready to go?

In the first quarter it will be ready to go, it really depends on how quickly the job goes. We're going to be taking it down sometime next month likely, and there'll be fairly likely period of quenching and crunching and demolition on some of the stuff inside. We expect to have everything we need for the job in sometime in December, we'll start to work on it. We're not going to rush. We'll do it mostly with our own people, mostly on straight time. If it turned out that we thought we needed it in a hurry, we probably would have it done sometime in February, be ready to go mid to late February. That would be just a general schedule. Having said that, we have other firepower that we could handle, whatever market developments we think are within the realm of possibility, and I don't know that the 14 project will anyway inhibit our ability to respond to really anything the market could throw at us in the near term.

Finally on raw material costs in Europe, you're seeing some higher costs there. Can you just give us a feel for that which commodity is that in and kind of magnitude?

Sure. It would be on met coal and coke, which we purchased for Serbia, met coal for Slovakia. All the carbon resources are tight right now in Eastern and Central Europe, I'm not sure, I know exactly why but, a lot was taken off during that. Maybe it's coming back on as quickly. So, I think coal and coke generally are tight in Eastern and Central Europe and iron ore has moved up, well metallics generally, iron ore (inaudible) etcetera, signifying a little bit of tighter. So it'll be on those two commodities as where the pressure will be not and scrap will follow whatever the general market trends are. So, it's really on those two key commodities for us. Don't really have a feel for how much yet because some of this is day-to-day and month-to-month negotiation, but we had a nice benefit from it in the third quarter compared to second. We'll give some of that back in the fourth quarter, I think as Gretchen indicated.

Our next question comes from the line of Michelle Applebaum of Steel Market Intelligence. Please go ahead.

I was pleasantly surprised in the quarter and on the guidance and I wanted to ask you, you said the operating rate would be flat quarter-in-quarter. And obviously, if you were ramping up during the third, to be flat with the fourth, you're ramping down, and I didn't catch that in the press release. So I appreciate your clarification on that. Can we get some numbers on that? What was your operating rate as you ended the September quarter?

Yeah. Just to be clear, I thought in our release, we did say we intend to take the Gary 14 furnace off and one furnace at Granite City. So…

Okay. Well, then I completely missed that.

Okay. Well, so I think those are pretty concrete at this point. I mean, we could change our mind if things cause us to change our mind. We didn’t really give, and probably don’t want to give an exact, you're looking for like an exit rate percentage and I think the AISI percentage most recent week was 63.2% or something like that, if I remember it right. Right now, we're running above that, and if we kept running everything we'll be above that, but if we take a few things off, we will probably be below that. So, that's the reason we gave you an indication that probably would be flat.

Okay. So that's the average of according to the…

Right. Right. Yeah. Average for third quarter versus what we expect average for second quarter to be, and average fourth quarter to be I think…

And as we said Michelle, we are expecting some seasonal effects here, which usually means the last latter part of December. You'll see a pretty significant effect.

And of course, even though we indicated we intend to take those two actions that we mentioned in the release, we reserve the right to change our minds.

If that order book is flexible? My question though is, can you give some indication, are you responding to market condition or is this all maintenance? Maintenance often will be in December so…

Right well, I think you know that the Gary 14 project will involve maintenance, but it also takes care of responding to the market if we felt that there was a strong enough market, we could delay that to running in the lower level for some period of time. So, both Gary 14 even though its required maintenance, the timing of it is certainly relevant to what we expect to see in the market, and Granite City furnace is we've got to do something here eventually, but doesn't have to be next month. We could probably do that later as well, but that’s all market related, our current expectation.

It sounds like your lead times must be pretty short, that you're open to keeping Gary open in December and it's the end of October. Is that a fair assumption?

I don't know. Lead times have come in a bit, but I think for Hot Rolled just on average for us is probably six weeks plus or minus, something like that, maybe five to six, somewhere in that range. (Inaudible) products could be longer. Some of it has moved out recently, but reflecting on automotive demand which is still pretty good. It's not so much that it's a week-to-week thing. We might look a little bit more extensively than that, but we don’t want to build our inventory just for the sake of having it.

And we have our next question from the line of Sal Tharani of Goldman Sachs. Please go ahead.

John, just wanted to get some idea on European business. You have run it very hard, 82%. You expect some slowdown but still much better than the U.S. It has been earning better than the US all along. I just want to know, are you getting market share? Is the business over there better than the U.S.?

Well at least where we were or where we are, we are able to get a pretty good share in the third quarter, Sal. We have configuration where we tend to make some of the wider things in Serbia because of our strict no capability there, and we were on a campaign that laid out some slabs and to have things ready to be available for customers for a period of time. So, we had the firepower ready and our raw materials costs came in pretty well, so we have the position to take some share and ran pretty hard and did pretty well. I think our European operations grew. Management and employees did a fine job, and at least in the area where we were, demand was sufficient to allow us to do that. As in the U.S., there seems to be a bit of a softening now, some seasonal undoubtedly. Hard to tell whether its used to me or not, but at the moment, we expect things to be a little bit slower there for the fourth quarter. And we're going to calibrate our production accordingly. We have one furnace that we'll taking off relatively soon. Remember (inaudible) is due for some significant work in any event, and that will just use Serbia to throttle up and back as we need to meet whatever the demand it. I hope you want more whole time introducing.

No as far as the central and eastern Europe, where you are, the demand is better than you say, Western Europe?

Well, I guess. I mean, because we had the material available maybe sooner than some of our other colleagues in the region did, we were able to take advantage of whatever business there was and our cost structure was good because materials came, we got a good cost structure to begin with. So, we were well positioned there and our folks did a good job of taking advantage of it.

And you mentioned your comments about excess sale slab shipments. Was that out of the U.S. and where do you ship these slabs out to?

The semi-finished shipments would be in North America and they would be to mostly domestic North America sources.

And next we'll go to line of Timna Tanners with UBS. Please go ahead.

I just wanted to see, first of all if you could give us more color on what you're seeing with regard to OCTG inventories, where we don't have a lot of visibility there and want a disclosure. So, I would really appreciate your thoughts on that.

Sure. I think there is a number of sources we look at, some of which are probably the same ones you look at, but they all seem to indicate that inventory has probably peaked sometime earlier in the year and that, in general it would appear that inventories are on their way down. Maybe we're at the three million tons plus or minus OCTG mark now, and maybe that's about a year supply. Those are just feelings that we get based on interpolating some data. But that’s not quite a bit from the peek back in March which was probably almost four million tons, and maybe 16 month supply or two-year supply, if go and calculate it. So, we also talk to our distributor and customers who are in the middle of it and are very important to us, and their trends would follow that same general trends, so, it feels like we're moving in the right direction. Can't tell how quickly we'll move from here, but things are moving back towards the point of equilibrium. There is some disparities in that, I think the inventories on QT and alloy, heat treated alloy or probably in a little bit better shape. We have a lot of imports in heat treated alloy as well but the big bulge of carbon imports continue to be a huge overhang in our carbon orders and shipments are really quite modest right now. So, we're in better shape in total, quite better shape on the heat treated alloy, in some ways to go yet on carbon.

Okay, a year supply sounds like a lot. What's the normal amount? What would be a good amount to have, maybe normally in like three months?

Six months or so.

Yeah, right. Six months would be something we'd be more comfortable with.

Okay, and then logistically speaking, it sounds like there's still changes that you might make regarding which mills are operating. How should we expect to get an update on that? Would you put a release there or should we just be watching the TradePress? What's the best suggestion you have there?

I think we've indicated in our release what we expect to do if we decide to vary a lot from that. We think its material information. We try to convey it some way, but of late at least, a lot of that’s been conveyed by our union colleagues when we professional courtesy, tell them what we're up to. You can usually believe the first sentence after that, the quality goes down a bit, but that seems to come out from time-to-time. These things happen up and down. We're doing game-time decisions every day. So, I'm reluctant to sort of be posting a daily operating schedule for everyone to see, but if there's something really dramatic that signals a major difference, then we'll consider finding someway to get that to you all.

And then final question for me. Just looking to understand on the auto demand that you have highlighted as the main source of increased volume into the fourth quarter. How much of that do you think is incremental and sustainable and how much might be a restocking of the auto channel?

It's a really important question that we don't know the answer to, Timna. I think right now if you just look at what the end use dealer inventories are, you often see those as well as we can, they're still quite low. And they are working those inventories back up to have sufficient number of vehicles on launched to be able to sell from. That probably moves us through the end of the year or close to it. How well that supply chain is maintained and the order rate is maintained really depends on how well they sell. So, I think if you see decent auto sales figures, then we probably have some chance of having a pretty good run with auto. If you see the sales figures starting to slow down, if it goes the way, then we probably have a bit of a slowdown coming.

And our next question comes from the line of Mark Liinamaa of Morgan Stanley. Please go ahead.

And just regard, again, European operations. Can you quantify what, if any, impact you're seeing of export flow coming out of Russia or China into pricing or supply/demand characteristics there? Thanks.

Mark, those are two important things that we're following. I don't know that we have any quantitative data to give you there yet. It's really too soon to tell, but when there is a large flow of exports from China, which we're very much concerned about, we tend to see it first in Southern Europe, that's where it tends to hit in the markets we care about first. And there is some very early anecdotal evidence that that may be a concern, but nothing has really hit heavy so far. That's probably a little bit of time away yet, if it's going to happen. The Russia/Ukraine situation is a different thing. A lot of the semis that we can see were flowing from Russia and Ukraine and Kazakhstan going east into China. That was a positive European market I think for us, that seems to have been because of the disruption in the China market seems to have slowed. Except that begins to come west into Europe, north and west in central Europe. Undoubtedly that'll put some pressure on our markets. We're alert to that. It may be happening right now, but really too soon for us to tell how significant that's going to be.

Thanks and then, just you addressed or mentioned stabilizing prices in China. Is there anything from an industry behavior perspective that you would attribute that to or is it just simple ebb and flow? Thanks.

No. I think the market in the industry and China is so large and so complex I think it defies any simple analysis. I think it just shows that even though inventories are relatively heavy in China we read the absolute amount of inventory what's observable as compared to annual consumption in China is relatively small, and as a result, I think things can change there maybe more quickly than we think they might turn here in North America and Europe.

And next to the line of Mark Parr of KeyBanc Capital Markets.

A couple of questions. You had indicated that the mix was going to be negatively impacted in the third quarter. I was wondering if you could give some idea what the mix of semi finished was relative to the second quarter and how you would see that mix on the fourth quarter as well.

I'll just do this directionally Gretchen maybe you can add more specifics. I think in the third quarter, the total mix of semi finish mix might be 5% of our total, we'll make somewhere in that zone. Perhaps in the fourth quarter, it might be as high as 6%. And the third quarter might have been four or five, might have been one or two maybe in the second quarter somewhere along that line. We'll get details, Mark. If we're way off, we'll let you know but I think generally speaking, that's probably about where he is.

Okay. Any additional color you can give on the magnitude of pricing recovery for the fourth quarter in the domestic Flat-rolled business? Your actual realizations lag a little bit relative to current spot numbers and can you put some parenthesis around or goal posts around what it might be for the fourth quarter?

One way to do that, I don't have the figures just in front of me yet. But if you were to take the average of the [CRU] numbers, we have these calculations go all sorts of different ways. They're a lag quarter, current month, last month, there's a lot of different ways to do it. For example, take the average of the August, September, October [CRU] figures; I think they probably averaged a little less than $500 plus or minus. The similar average in the previous period would have been about 400. So just on average, maybe there was a $100 step up quarter-on-quarter. And then that would flow through and do our spot business either immediately or over the ensuing two quarters or two months or one quarter. So that would be, to say, $100 plus or minus on 40% or less of our business. That gives you some sense of what the spot price effect could be.

That's really helpful.

There's lots of different ways that's done. I'm just giving you a crude example if you want to take a few public numbers and transport them together.

I appreciate that. I had another question related to China. I know you have a lot of windows on the global marketplace that maybe some of us don't have. And I have heard from at least two different places that there seems to have been a varying market acceleration in consolidation activity in the Chinese steel industry, especially with a lot of the smaller mills. I was wondering if there's any commentary you can make that would either confirm that or verify it or if you think that that's really not a fair way of thinking about China and the direction that they're moving?

There's no doubt in my mind that’s the direction that they want to move. I think that's what the senior policy folks have been saying at the recent World Steel Meeting in Beijing, one of the very senior most policy, steel policy officials made that very clear that that is their objective. They expect to have fewer larger mills, more coastal oriented and reduce some of the central area particularly (inaudible) problem some of the smaller less productive facilities that have much higher energy use. And that’s all sensible and that’s exactly what they want to do. But there was also an observation made by this person that, that kind of activity took 30 years to take care of in Europe and 20 years to take care of in North America. And they shouldn't be expected to accomplish that in nine months. So I think there is a clear direction and some of them I'm going to release happening you've seen some of the mergers. The things that have taken place has been largely with the larger companies that are owned by the federal authorities and State Asset Control Commission. And that can be done, I think, much more quickly and efficiently. Actually implementing that at the provincial, local level I think will take some time, which is lined with social issues there but; no doubt in my mind that's the direction but anyone who's expecting hundreds of millions of tons in reduction in short-term, I think that's unrealistic.

Are you concerned that the recent price upside in China may not be sustainable for a couple of months?

As I said, Mark, it's such a big market and so complicated that I'm reluctant to imply any particular knowledge there. I just pointed out that prices moved up just because there was a huge consensus of opinion among everyone who knows and we don’t that they were going to keep going down. All of a sudden, they were worst, I think it's a very unpredictable market. There seems to be a level below which prices probably won't go cause they start getting really on top of what their cash costs are.

Okay. Just one last thing if I could. Is there any way you can help us quantify the magnitude of the extra maintenance expenses for the fourth quarter relative to the third quarter in the North American business?

Maybe a bit more. I'm not sure.

We did have the start up cost phenomenon in the third quarter. I think we gave you a number on that $65 million or so, some of which was plain old start up, some of which was things that we had to do around the facilities that haven’t been done for the last 18 months. We don't necessarily expect that to recur in the fourth quarter. We will have some other outages, but just as we think of major maintenance, my sense is there won't be excluding that start up item won't be a lot of big differences fourth versus third.

Terrific. Thanks very much. Congratulations on the positive at least relative consensus. Look forward to you guys back in the black one of these times soon.

We do, too, Mark. Thank you very much.

Take care.

Our next question is from Charles Bradford with Affiliated Research.

Good afternoon. I don’t know if I missed you in that but did you mention any kind of a LIFO credit?

No, actually, we didn't.

Did you have one?

I think we had a modest credit.

In the fourth quarter, what should we look for in regard to interest expense? We just add the 25 and the 24 from the foreign currency.

Yeah, I think the third quarter interest expense when you take out the net foreign currency gains was $45 million. That's probably a pretty good number to use. Did you give full-year number?

Okay. And what about the tax rate for the fourth quarter or tax credit rate, whatever you want to call it?

Right now, our 22% is the effective rate that we used through the end of September. That's probably a pretty good number to use for estimating.

That was our best guess it would be for the year, if this is a marked change in relative results in the different jurisdictions that would change. But that was our best guess for now.

Can you talk a bit about selling prices? I know a lot of things are indexed but there are lots of ways of indexing. I think you guys use the [CRU] a lot. Other people or some people use cost indexing. What would be more important to you as far as your ongoing business?

Well, we would have more business based on market indices and [CRU] which just be one not used just for shorthand. And at least right now, the way the business has been running, our North American Flat-rolled mix has been about a 60/40 contract versus spot mix. And by contract, we mean something where there's a volume commitment for some period of time and of that 50%, about half would be market related. So that would mean 30% of our total would be market related, [CRU] would be most common, it could be monthly, it could be quarterly, it could be semi-annual. And then the other piece would be some firm and some that would have cost collars on it. And those would both be much more stable, its firm and the cost base would be typically with callers that provide stability within a pretty decent range and what dictates for us what's best is what we work out with our customers. It really allows them to match up their pricing with what their end use requirements are? And we've explored that pretty well in the last couple years. And I think we've arrived with pricing structures which work well for our customers, pretty well for us, allow markets to flow through and doesn't result in a lot of pent up changes don't get resolved. And that causes lots of difficulty. It really answers your question. It’s a long answer, I'm sorry. We really worked it out with our customers based on what's best for them and what meets our expectations.

So people like GM are beginning to tell us they want to change the way things are priced for the next contract. Obviously, I don't expect to you talk about that on this call, but I'm trying to get things into some kind of perspective.

I think in the auto sector, there would, just in general, would still be a fairly stable pricing mechanism in most cases, and it could be firm. It could be cost based. That would be what's most prevalent in the area for us. That's fine with us.

And our next question comes from the line of David Gagliano of Credit Suisse. Please go ahead.

Hi. Thanks for taking me question. Just going back to the commentary about Flat-rolled pricing for a second, you gave us some figures for the Q3 spot pricing, for the 40% of your business. I think you said about $500 per ton as a reasonable assumption for the 40% of your business that was spot. Is that right? First of all, is that right?

I may have shortcutted? I was just trying to give an example of how the [CRU] process works, again if you take the average of the August, September, October sort of mid-month official [CRU] assessment, that would have been around 500 a little bit less than that if you look at that same time series one quarter back, it would have been above 400. That gives an indication of a change of 90 something. We're not necessarily pricing right at that index. We may be above that, in most cases but that would be what the relevant change would be, and in some cases our structure would be ex-percent of that changes what flows through, some would flow through on a delayed basis, so there's different ways to do it. Now we have worked it out with the customer but just as a indication of what the quarter-to-quarter change would be, that's one indication.

Okay.

I'd encourage you look at the change, not the absolute necessarily.

Basically, with a I'm trying to do is back into what the contract price was, average for the quarter. What was the contract price average?

I haven't back into that yet either.

Okay, well, let me ask this question then. Obviously it was a bit higher than spot.

Well, you have to look at mix as well. I'm just giving you a hot-roll prices there, you can look at we have [CRU] contracts that run against coated and cold-rolled as well. So I don’t think you have to look at the total mix.

Okay.

Then we have tin plate prices which are different yet and run to a different structure.

The total price we give is for all of the products together.

Given that we're heading into obviously a number of negotiations, can you share some general comments with regards to your views towards the contract and put in on your Flat-rolled business for 2010?

I think we're going to be satisfied with where we land with our several customers. We do have a lot coming up at the end of the year. Some in the first quarter, some mid-year. But because of the flexibility element that's been put into a lot of these structures. There isn’t the same degree of anxiety each period as we go through. And I think we're arriving at prices that we're going to be satisfied with. The customers are satisfied with. And now much more than two or three or four or five years, the general trend of assessed market prices and you can use any of the assessments because they're all roughly the same and all more or less accurate. That trend is going to be a pretty good indicator generally speaking on the way up we'll be a bit behind it on the way down we'll be a it of ahead of it. But eventually, we're going to be following the trend of what those indices are. And I think if we were just sitting here today and everything stayed exactly as it was, for the business we call contract, all of '09, all of '10, it's probably a push. A little bit up, a little bit down but close to a push.

And our next question will come from the line of John Tumazos of John Tumazos Very Independent Research. Please go ahead.

With the (inaudible) decision for the 14 furnace schedule due to maintenance was it due to market conditions or was it because of a hiccup? And then secondly, should we assume that the level of corporate employment will be roughly steady for the next six months and that most of the rationalization that would be done has already been done in the last 12 months?

Let me take them individually, John. The number 14 decision as I tried to comment earlier. I think we do want to do this repair project to get those furnace back to its full abilities because we think that's the right thing to have in the long-term for the company. We could do it sooner. We could do it a little bit later, but it's a combination of having the materials available to do it in what is seasonally a typically slower period and with the slight order book slowdown. All that together said to us this is probably the right time to do it. If we would see something is a change in the marketplace, we may decide to do it a bit later. So it's a combination of both ability and timing which seems to be convenient. So that's the best I can tell you on that. On the employment side, we still have last number I think I saw was 3750 people are on layoff inside the company. Both management and hourly rated employees, we had brought back a lot that we needed to run the restarted facilities. But we're trying to run those fairly lean organizations, when we are back at it. We've made significant reductions in our management staff in general through early retirements and layoffs. I don't know whether we're at a steady state or not. If business improves, we'll have to bring some people back. I don't think as many as we had to begin with. And if we had continued deterioration in the market there could be additional layoffs. So it really depends on what the market tells us.

And next we go to the line of Bob Richards with [Iron Edge Research]. Please go ahead.

Thanks for taking my call. The idle facility costs, just to clarify, those are incremental due to facility start-up?

No, no, no, Gretchen, why don't you do it?

The start-up costs were the $65 million. That was really a new element in this quarter, you know, related to starting up some of the facilities that had been idle. The idle facility caring costs really are the fixed cost burden of caring facilities that aren't operating. So that was $165 million in the third quarter.

But those are all hitting the bottom line?

Right.

Any further comment on Key Tech, what their short-term plans are there?

No. That's also a game time decision. It depends on what our iron requirements are. We're considering our hand and we could probably respond there quickly, but the fact with the lakes beginning to freeze up and shipping not being available, the later we go, the less likely it is that we'll need any response out of Key Tech in the near term. So game time decisions go watching it but we think given what we expect to be making in the fourth quarter earlier and first quarter we'll probably be okay with what we have.

And we'll go to the line of Brett Levy of Jeffries. Please go ahead.

Can you talk a little bit about the pipe and tube market, if you can break it down into subject, cause it sounds like there is about a years worth of supply. Is there sort of a sub sectors where it's a little bit better, its a little bit worse and then can you talk about when you're hitting a trough?

What was your last part about the trough? Dan did you hear that I'm sorry.

Would you break out a little Brett, what was your last piece?

When do you see pricing hitting a trough?

Well, I mentioned in my prepared remarks that we may be seeing overall bottoming of prices now. It will be different by OCTG, different by alloy, different by carbon, different by line price, but it seems like there might be some bottoming in prices this quarter. Maybe, we are not saying that for sure but it maybe, it sort of does feel that. I think the business conditions in the alloy and heat treat higher application products are metallurgical products better. That's where the development work on the shale plays continues and that's what they need right now. And we've got an excellent supply line there, able to respond quickly at Fairfield and beginning to bring up some of our weld facilities to respond quickly as well. That is in better shape, not good shape, but better shape. Still locked to Chinese inventory content with the carbon OCTG market has the largest inventory overhang that’s where the real tsunami of imports came in the third, fourth and first quarters. So I think that's going to take longer to work through. Line pipe inventories are still on the high side that are moving in the right direction and it seems like we might be getting some better inquiry activity on line pipe. So line pipe may be showing some signs of life. I'm really reluctant to chart a call here, a new direction. I think we're observing the marketplace. But for the real trends to develop, it's going to take a bit more time.

We'll go next to the line of Jeff Cramer of UBS. Please go ahead.

If I could get your comments on the pension contribution, 140 million, I guess where your sources and uses of liquidity going forward, for a amount of sources. But kind of use a liquidity going forward and if you have any outlook on CapEx and further pension, voluntary pension contributions next year?

Yeah. It's probably a little early to be talking about next year's CapEx. You know, we'll be working through our plans for next year and meeting with our board and discussing that. We'll have something to say about that at the end of January. We made the $140 million contribution. That was a voluntary contribution. That's the size of contribution that we've made the last couple of years. That's probably a good rule of thumb, you know, level of contribution for us. It approximates our normal costs, so it's a pretty good thing to fund every year. So, we won't be deciding what we're going to do next year just yet, but that's been a pretty good number just working purposes.

And on the, I guess with regards to cost cutting, I guess you have guys have made out, I guess you have a figure before that lets see how far you've gotten this year, and how much of that you expect could stick over time or versus what could be temporary?

Just in cost cutting in general?

Yes.

It's really a harder question, I think, to answer, but, I can give you an example, I guess, on the SG&A front for instance. If you get our 10-Q, we have disclosed our SG&A for the quarter. If you strip out the amount of that, that relates to pension cost because we had about a $30 million increase in the quarter in pension cost just as an example. Our SG&A, quarter to quarter, third quarter of '08 to third quarter of ’09 is down probably about 20%. So, we have made some significant efforts to reduce cost might be a little bit masked by the increase in the pension cost that we have this year there.

We’ll go to line of Wayne Atwell of Casimir Capital. Please go ahead.

Thanks for all your color on the environment. I have a two part question. The first part is obvious. The first part was, what’s the impact of the weaker dollar been on your business? And the second part is, (inaudible) the dollar to continue to weaken based on deficits in the level of debt. And are you running your business on the basis of continuing the weaker dollar or as you say is that a call you may get the line of scrimmage.

Well, it’s a good question, its one that we launch very carefully, we tend to launch the Dollar, Euro just because we are in those two communities. Its I think a positive for our business for obvious reasons that tend to keep imports in a better position just from a value standpoint because it's a little bit better competitive edge. And then it does favor some of our customers who were big metal users and big exporters and we think that’s a good thing. I don’t think that we are not in favor of chaotic currency situation. That’s not anyone’s interest. But I think a dollar that it’s a little more realistic particularly against the Chinese currency which are to do a lot to rebalance some of the excesses which were in the system and the longer they run, the more dangerous it becomes of having a real currency [route]. So I think a gradual recognition of what the true value is given the excesses we have and all the deficits we have is (inaudible) and its probably a met positive for our business. It doesn’t really effect necessarily what we do but it might give us a view about the future direction of the market which might get influence some of our assessments about capacity and capital, etcetera, etcetera. So that’s about the bus we can tell you right now. But I think your diagnosis is one that we don’t really disagree with.

Thank you. And our last question will come from the line of Sal Tharani with Goldman Sachs. Please go ahead.

Thank you. John the Granite City furnace you are shutting down, was it shut down earlier this year also?

Yeah both furnaces at the Granite City were down for a number of months.

Okay. I just wanted to understand what was the logic of bringing all these things up because you are shutting it down in a few, about less than two months again.

Well, a couple of things. We eventually have to do some work on this furnace anyway. Let me just remind everybody to take it back a bit. In 2008, during most of 2008, the first eight and a half or nine months we ran very hard and didn’t do much work at all because the market was positive and we wanted to make as much as we could. So we didn’t do much furnace work then. And since then we haven’t any because we didn’t run very much and didn’t want to spend money to do it. So we brought some things back on because we had customer orders that we wanted to keep our share, they were important customers and we thought that was the right thing to do. Now, if we need to take something off, we are going to try to do it in a manner that facilitates doing some additional work. Our hope is that it might just be for seasonal purposes when we get back to work more quickly but we just don’t know what the market is going to bring us. So the logic was we wanted to keep our share. We tended not to get ahead of it by the way. We tended to come back perhaps a little bit behind the market. Our supply lines got a little bit stressed. We got to where we were a little behind on the order book but eventually we took care of all of our customers' critical needs. And by doing that we created some real visibility. So we are going to run a little bit longer with our configuration as we retire an order book that we already have. We are hoping that might bring us to a period of possible slowness in the season but that may not work. If things change we will continue to run, if not, we will have to get our facilities in balance with the market.

Have you become better at closing and opening furnaces or shutting down and restarting because you always thought that you'd turn a furnace up or heat a furnace when you think there is a longer term several quarter of demand there?

Well I rather not get good at it because that means we have to do it a lot, we would rather not do it at all. So we can help it but I think we have learnt a lot through this last cycle. Off course we had furnaces that were off and plants that were effectively closed for extended periods and there was a lot of work they had to get done to get them back and running. In this case having one furnace up for may be a short period of time not completely called (inaudible) but just bank that’s a much less invasive process than having to go through we went through early part of the year. So I think we are much of a better at it, I think we can do reasonable job of it but I before I have to do it at all it’s the cards we are right now.

And that was our last question. And I will turn it back to our speakers for any closing remarks.

Thank you Kelly. We appreciate being all with us and we will talk to you again in January. Thank you.

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