Gretchen Haggerty - Chief Financial Officer and Executive Vice President John Surma - Chairman, Chief Executive Officer, Member of Proxy Committee and Member of Executive Management Committee Dan Lesnak -

John Tumazos - Independent Research Kuni Chen - BofA Merrill Lynch Timna Tanners - UBS Investment Bank Anthony Rizzuto - Dahlman Rose & Company, LLC Mark Parr - KeyBanc Capital Markets Inc. Charles Bradford - Bradford Research David Lipschitz - Credit Agricole Securities (USA) Inc. Luke Folta - Longbow Research LLC David Gagliano - Crédit Suisse AG Michelle Applebaum - Michelle Applebaum Research David Katz - CIBC World Markets Brian Yu - Citigroup Inc Sal Tharani - Goldman Sachs Group Inc. Mark Liinamaa - Morgan Stanley Michael Gambardella - JP Morgan Chase & Co

Ladies and gentlemen, thank you for standing by. Welcome to the United States Steel Corp. Second Quarter 2010 Earnings Conference Call and Webcast. [Operator Instructions] I'd now like to turn the conference over to Dan Lesnak, Manager of Investor Relations. Please go ahead.

Thank you, Linda. Good afternoon, and thank you for participating in United States Steel Corp.'s Second Quarter 2010 Earnings Conference Call and Webcast. We'll start the call with some brief introductory remarks from U.S. Steel Chairman and CEO, John Surma. Next, I will provide some additional details for the second quarter. And then Gretchen Haggerty, U.S. Steel Executive Vice President and CFO, will comment on the outlook for the third quarter of 2010. 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, the forward-looking statements and risk factors that could affect those statements are referenced at the end of our release and are included in our most recent annual report on Form 10-K and updated in our quarterly reports on Form 10-Q in accordance with the Safe Harbor provisions. Now to begin the call, here is U.S. Steel Chairman and CEO, John Surma.

Thanks, Dan. Good afternoon, everyone. Thank you all for joining us again. Earlier today, for the second quarter, we reported a quarterly net loss of $25 million or $0.17 per diluted share, a significant improvement from the first quarter, as we return to profitability in our North American Flat-rolled segments, and we had continued improvement in our already profitable European and Tubular segments. As you likely have noted, the net loss included a foreign currency loss that decreased net income by $0.62 per diluted share, which is more fully discussed in our earnings release text. In the second quarter, we had another strong operating performance, as our facilities ran very well, producing good results for each of our reportable segments. However, due to the foreign currency loss and an unusually large tax provision, not all of the benefit from our strong operating performance got to the bottom line. And while we do not normally look back to prior year quarters in these discussions, permit us to note with pleasure that our segment income from operations improved by more than $750 million over the second quarter of 2009 during the depth [ph] (0:04:31.5) of the steel recession. Now turning to our operations. We reported second quarter income from operations of $198 million compared to a $57 million loss from operations last quarter and a $465 million loss from operations in the second quarter of 2009. Our segment income from operations was $241 million or $41 per ton compared with a loss of $13 million or $2 per ton in the first quarter. The $254 million improvement in our quarterly segment operating results from the first quarter was primarily due to a $178 million improvement in our Flat-rolled segments and a $51 million improvement in our Tubular segment. As a result of the significant improvements for the Flat-rolled segment in the second quarter, all of our reportable segments were profitable for the first half of 2010. The improvement in Flat-rolled results for the second quarter was primarily due to the benefit of higher average realized prices and shipments, lower energy cost and increased production volumes. The benefits from these items were partially offset by higher facility repair and maintenance costs and higher costs for purchased coke and scrap. Our Flat-rolled raw steel capability utilization rate increased to 82% in the second quarter, our highest quarterly operating rate since the third quarter of 2008. This reflects another strong operating performance in the second quarter, as our steelmaking facilities that operated for the entire quarter achieved a utilization rate in excess of 90%. With the completion of the restart of operations at Lake Erie Works late in the second quarter, we had all of our facilities operating at quarter end. Shipments increased 14% to 4.1 million net tons, and average realized prices increased to $700 per net ton, an increase of $46 per net ton from the first quarter, primarily due to higher spot and index-based contract prices. Second quarter results included approximately $60 million of repair and maintenance costs at our Lake Erie Works, where we did extensive work on the major operating units in connection with the restart of that facility. Second quarter results for our European segment improved slightly from the first quarter, as an increase in euro-based transaction prices was offset by higher raw materials costs. Reported average realized prices for our European segment were $687 per ton in the second quarter, almost 12% higher than the first quarter average of $614. Average realized euro-based transaction prices were substantially higher in the second quarter; however, the currency translation process offset a portion of the euro-based price increases that we report to you in dollars. Shipments decreased by 9% to 1.4 million tons, primarily due to lower shipments to spot market customers. Second quarter Tubular income from operations of $96 million was more than double first quarter results, as operating rates increased throughout the quarter, in line with increasing rig counts for both oil and gas development. Second quarter Tubular results reflect higher average realized prices and shipments for both seamless and welded products. Average realized prices increased 8% to $1,496 per ton, the highest level since the second quarter of 2009. Shipments increased for the fourth consecutive quarter to 433,000 tons, a 40% improvement over the first quarter. Now before turning the call over to Dan, I have one more item I'd like to cover. We frequently comment in this form on our safety performance, as it is one of our core values and a constant focus in everything we do. Although our second quarter safety performance reflects continuous improvement in our key measures, we are not off to a good start in the third quarter. We had a very serious incident at our Clariton coal plant, which resulted in injuries to employees and contractors and a significant injury at the Gary Works highline. We are saddened and deeply troubled by these events. We do not accept excuses like, "accidents happen" or, "it's a dangerous job". It is still our firm belief that zero incidents is achievable and recent events will not deter us from continuing our efforts to achieve this most important goal. We're committed to finding the root cause of these incidents, and we will move swiftly and decisively to take appropriate corrective action. Our thoughts and prayers are with our injured colleagues for a speedy recovery from their injuries. With that, I'll turn the call over to Dan for some additional details about the quarter's results. Dan?

Thank you, John. Capital spending totaled $117 million in the second quarter and we currently estimate the full year capital spending will be approximately $710 million. Depreciation, depletion and amortization totaled $162 million in the quarter and we current expect it to be approximately $660 million for the year. Pension and other benefits for the second quarter totaled $110 million and cash payments for pension and other benefits were $122 million in the quarter. For the full year, we expect our pension and other benefits cost to be roughly $425 million, and we expect cash for pension and other benefits to be approximately $700 million, which includes the $140 million voluntary contribution we made to our main defined benefit pension plan in the first quarter. Net interest and other financial costs totaled $150 million in the second quarter and included a foreign currency loss of $96 million. Excluding foreign currency effects, interest expense for the third quarter is forecasted to be $60 million. Our second quarter 2010 effective tax rate of 150% is unusually high, largely because of losses in Canada and Serbia, which are jurisdictions where we have recorded full valuation allowances on deferred tax assets, do not generate a tax benefit for accounting purposes. The geographical mix of our future pretax results could have a material impact on our reported effective tax rate as it has in the past. Now Gretchen will review some additional information and the outlook for the third quarter.

Thanks, Dan. Our cash balance decreased by $439 million in the second quarter, primarily due to a $515 million increase in working capital, as steel prices and operating rates continued to increase. Our liquidity remained strong, as we ended the quarter with $947 million of cash and total liquidity of approximately $2.5 billion. As Dan indicated, we now anticipate our 2010 capital spending will be approximately $710 million, substantially higher than the $560 million we had mentioned on last quarter's call. The increase is primarily related to an acceleration of our strategic coke projects at Clairton and Gary Works. Turning to our outlook. We expect to report an overall operating profit in the third quarter, as the U.S. and European economies continue to work their way through a gradual and uneven recovery process. Operating results are expected to be below the second quarter, largely due to a decrease in shipping and production volumes for our Flat-rolled segment, reflecting slower order rates, primarily from spot market customers thus far in the quarter, which likely include some normal seasonal variations and the impact of shorter lead times. However, reported carbon Flat-rolled inventory levels, on a months of supply basis, at North American service centers remained below historical averages and end use of demand appears stable. Similar market conditions prevail in Europe. Third quarter 2010 results for Flat-rolled are expected to be near breakeven levels due to lower trade and intersegment shipments and production volumes and increased costs for raw materials and energy. The favorable effect due to the absence of Lake Erie Works repair and maintenance costs is expected to be offset by increased costs, primarily related to planned maintenance work on several blast furnaces and repairs of the transportation system used to deliver materials to the blast furnaces at Gary Works. We expect average realized prices for the third quarter to be in line with the second quarter, as the benefits of a higher value-added mix of shipment and increased prices for both index-based contracts and recently negotiated contracts offset decreases in spot market prices. Third quarter results for USSE are expected to be comparable to the second quarter, as the benefits of higher euro-based transaction prices are offset by increased raw material costs. We expect slightly lower shipments due to reduced order rates from our spot market customers and normal seasonal variations. In response to these lower order rates, we have idled the blast furnace at U.S. Steel Serbia. We also have begun planned maintenance work on a blast furnace at U.S. Steel Košice. Third quarter results for Tubular are expected to improve as compared to the second quarter. The benefits of higher average realized prices and decreased costs for steel substrate are expected to be only partially offset by the impact of lower carbon OCTG and welded line pipe shipments. The results for Other Businesses are expected to be lower in the third quarter, due primarily to the second quarter impact of a land sale by our real estate operations. That concludes the outlook. Dan?

Thank you, Gretchen. Linda, can you please queue the line for questions?

[Operator Instructions] And we'll begin with the line of Michelle Applebaum with Steel Markets. Michelle Applebaum - Michelle Applebaum Research: Just noticed the land sale. How much was that in the quarter? On the Other Businesses?

It is probably most of the income related to the Other Businesses.

It was $16 million, $17 million, $18 million, somewhere in that zone. Michelle Applebaum - Michelle Applebaum Research: Okay. And can you talk about what your operating rate is right now? And do you have any plans to change that domestically right now?

Well, I don't know exactly what it is right now, Michelle. You saw what we did through the quarter. We ran it, I think, at 82%. We did have an operational issue at Gary, where we have four blast furnaces. As it happens, we have one of those furnaces down at Gary already for maintenance, and that project is underway. The other three were interrupted for a short while, but they're all back up and operational now. So I think the AISI figure, I just saw a little while ago, came out and the industry figure was 72% or 73% or 74%, something like that. I think we're probably, today, operating in excess of that but probably below where we operated for the second quarter. Just in terms of looking out further, if market trends that we talked about in our release would stay as they are, we probably would be in that range somewhere, perhaps above AISI figures but below what we did in the second quarter. We could go up to the same level. We'll have plenty of firepower, we could go up to a higher level by some if there was a market need to do that. We hope there is, but we're prepared to really go either way. In terms of the rest of our sort of operating configuration for the quarter, there's some commercial knowledge in that, and I'm not sure we want to say much more than that. Michelle Applebaum - Michelle Applebaum Research: Okay. Can I ask what the economic backdrop is of what you're saying? Well a lot of people are saying this is seasonal, but they're saying there's no automotive cutback and my experience in life is that most of the domestic Flat-rolled seasonality is automotive in the summer. So I was wondering about that.

It's not clear to us what is happening in the market, Michelle, to be honest. I'll give you our take on it. I think our view is that the customers' groups and markets that we're into where our materials going pretty far into the end use market. You just mentioned one market that's very important to us. Demand there appears to be stable. There is some seasonal issues as there are shutdowns for vacations or changeovers or whatever, maintenance or otherwise, and they have largely gone as we expected. And I think those customer groups and markets we expect do reasonably well with for the quarter because the demand there appears to be very stable. Those sectors that are more in the inventory carrying mode distribution, service center and processing, converters et cetera, there, the mood is much more cautious. There's a bit of a pause, has been for some time. I think that's been pretty well documented. And we're not sure what that means because if the end-use demand that we see in the other markets remains stable, it applies probably that there's some still pretty good demand out there. Inventories are not particularly high on a days supply basis. I think we pointed out in our release. And lead times are relatively short, which abets that process of not ordering until the last minute. That all could mean that there's some better order rates ahead in the third quarter or it may be later than that. We just don't know. That's the environment we find ourselves in. Michelle Applebaum - Michelle Applebaum Research: You can't share [ph] (0:19:20.0) anything about the economy at all, which I think is fair. That's what you're saying.

We don't, I don't think, have any particularly important insight into the broader economy, other than what we would see through our customers' eyes, and I think there, there's a high degree of uncertainty. There's a recovery underway; it's going to be choppy; and it won't be a straight line, and you can take whatever alphabet you like, but I think it's going to be a choppy recovery and it's going to take some time.

Our next question is from the line of Luke Folta with Longbow Research. Luke Folta - Longbow Research LLC: Can you give us a feel for the magnitude of the decline you're expecting in shipments in North America? Just trying to get a sense of what moves the third quarter number to a breakeven or at level, at or near, I should say. And then also, can you talk about what commodities you're seeing cost inflation on in North America? I'm assuming it's coke, but just to verify.

I'll take the latter one first. Purchased coke is a tight commodity, and we're in that market, so that's one cost increase for us. So that would be one scrap gas, all the rest of them there are just market-based. You can read those pretty much at your leisure. And with respect to other commodities, I guess there's relative stability. Our coal costs will be a little higher in the third quarter than in the second for several reasons. One is we've had to replace some tons that we didn't get at a somewhat higher cost. And then we've got additional facilities running that we didn't originally plan on so we've had to be in the market for a little bit of additional coal and that's come at a somewhat higher cost. So I think those couple would be the major commodities we would look at and the couple we called out, I think, in the release. In terms of shipments, our best guess is not a huge reduction, less than 10% reduction, probably. We did have some shipments in the second quarter that would be, I would describe, occasional, and we happen to be able to secure, which makes our second quarter number look particularly strong versus the first quarter number. If we hadn't had those or they went into the third quarter, the numbers would be relatively flat. So it's not a tremendous difference; it's a few hundred thousand tons, probably. Luke Folta - Longbow Research LLC: Okay. And just secondly, regarding your Tubular business, metal margins have expanded there pretty nicely over the last 12 months or so. And I just want to get your sense of do you think this is kind of structural in nature since the Chinese import restrictions have been put in place? Or is this something that we think could kind of flatten out here?

It's hard to say, Luke. I think it's likely to be a very competitive marketplace. Imports from China have been reduced necessarily based on the trade case. Imports from other regions have increased to some degree. The drilling rig rate remains over 1,500 pretty healthily and movements into oil as well as gas on the unconventional side, very positive from our standpoint. So we're reasonably optimistic, with the gas prices just on the edge, if gas prices stay strong, we're optimistic. If they're not quite so strong, we're less optimistic. I'm not so sure I'd say it's structural. It's still going to be a very competitive market, but it's a much better market for us today than it was last year.

And next, we will go to the line of Kuni Chen with Bank of America. Kuni Chen - BofA Merrill Lynch: I guess can you just give us a little bit more color on the spot market? And then this is just North American Flat-rolled. What percent was spot in the second quarter versus what you see going forward in the third quarter?

There probably would be, if things stay exactly as they are today, some modest change in spot, and spot's not an easy number to talk about. But for us, it's probably about a -- in the second quarter, it was probably about a third of our books, something plus or minus that. And it'll probably be a little less than that, maybe it's only 30% or so in the third quarter, unless the spot market will really come back very strongly. So it'll be off probably a little bit because, among other things, we've picked up some new business in the contract side that will take some of that and put it in a better place. And as we said in our release, the order flow on the spot type of industries intermediate inventory, holding businesses have been a little bit slower so far. We try to make it clear that's so far. We're not really making a prediction as to how it's going to end up. Kuni Chen - BofA Merrill Lynch: Okay. And can you give us a little bit more color behind the CapEx changes? Is some of that motivated by what' happened at Clariton? Or is that completely independent?

No, this was underway quite some time ago, Kuni. I think if you scroll back on the video tape, back into the first and second quarters, we did a bond offering that was designed to allow us to move forward on what we view as an important strategic capital projects without having to pull the lever back and forth as much as we've had to do recently. And a lot of that is aimed at the carbon side. The last question I answered, I mentioned that purchased coked is an expensive item for us. Replacing some of our capacity at Clariton, which will be going out of service for environment reasons in the immediate term, is necessary and then also increasing our capacity and replacing some other capacity at Gary Works to give us additional coke capacity and have to buys less in a very tight market. That's been underway for some time and we're just getting the projects underway to where we want them to be and it's precisely the reason we did the capital raising activity back in March. Gretchen, anything you want to add to that?

No, I think we were just getting a little more defined scope and since we're proceeding expeditiously, particularly on those coke projects, we're just seeing that the spending is going to occur sooner rather than next year, for example.

Next, we will go to the line of Timna Tanners with UBS. Timna Tanners - UBS Investment Bank: Wanted to ask a little bit about Tubular. So two questions really. Wanted to know why the volumes aren't ramping up more, given the really strong signals you've given us for a while on demand. What might be going on into the third quarter to bring volumes down a bit?

We're not expecting a huge ramp down. I just think that markets reached a little bit of equilibrium, that inventories are probably at a decent level and the rig rate is likely to stay maybe more stable instead of ramping up as it has. Imports have come up somewhat, particularly on the carbon grades, and that's making things a little bit more competitive. So it's that just combination of factors. It may be that we're being too conservative but if that's the case, so be it. But I think it's more a sign of stability and maturation of the market and some of the tight conditions and certain grades have prevailed three or six months ago, maybe, are a little more well supplied now. Timna Tanners - UBS Investment Bank: Okay. So along those same lines, we have some new capacity left, I saw, was still starting up in October, about 400,000 tons. Will the market be more -- will have a greater appetite by then? And will they be potentially taking some market share? I mean, how do we think about the size of the market with some of the capacity increases coming up?

That's a valid concern, Timna. It's a very competitive market out there and we're going to compete along with everyone else to keep our share and hopefully to gain some share. I think in the static market, bringing in additional capacity is not an easy thing to digest. We think we can distinguish ourselves with a lot of our customers by having the metallurgy, which is superior, in most cases, because of the steelmaking capacity we have; by providing a very secure source of supply because we've got lots of steel behind our pipe mills; by having good heat treat capacity; and increasingly, by having some of the very important connections that the marketplace, particularly in the unconventional gas [ph] (0:27:15.2), have found very, very suitable for their needs. So we're going to be in there competing as hard as we can, but when the room gets more crowded, it's not as easy to make your way. So we'll just had to compete.

Next, we will go to the line of Brian Yu with Citi. Brian Yu - Citigroup Inc: John, with the repair and the maintenance expenses, can you give us a sense of how much of what you're spending is temporary and likely to go away as you get all these short-term fixes done? And how much would be sustained levels if you were to assume an 80% utilization rate?

Sure. Well, I think the big lump that we had at Lake Erie that was mentioned was $60 million. And then that's quite an unusual matter. We hadn't really done any work there since we acquired the facility, basically, because we ran it really hard in 2008 and then we basically took it out of service. So there was a big catch-up with a lot of work there. If we were just looking at that versus what we would normally do in the third quarter on outages, it would be a reduction. It would be not quite not half, probably, but it would be less than that. In doing the comparison, though, where we guided you to basically an offset, we did add in costs for the Gary Highline matter, a little bit of Clariton, a few other things that are just going to be special for the quarter. So I think in total, we won't see that effect, but I would hope we would see it in the future. Brian Yu - Citigroup Inc: Okay. And then, this is a little bit more detailed question, but in the supplemental information, it's looks like USSE, for a couple quarters now, is showing about $20 million to $25 million in intersegment sales. Is this USSE shipping product to North America?

I don't think so. I'm a bit stumped on that. But that wouldn't be intersegment; that would be in trust [ph] (0:29:13.0), so I'm not sure we would have slabs. We move slabs between operations. Let us take a note on that, and Dan or I or Gretchen will get back to you on that one.

And next, we will go to the line of Brett Levy with Jefferies.

It's actually David Olkavetsky [ph] for Brett. Just had a question on CapEx. Do you have a number in mind for 2011?

CapEx for 2011. No, not really. Gretchen, I think gave, you a view, or Dan or both, a view of what CapEx will be for this year. To the extent we get into a couple of significant projects, they do tend to carry the number to a somewhat higher level. I just might add when we -- I would think equal or higher would be my general observation assuming that business conditions support it. When we look at our CapEx on a per-ton basis, either produced or shipped, we've been on the below-average end of things, and we probably need to just move ourselves back towards average, which we are working on prior to the recession and we're now back on the path again. So I would say we don't look out that far. We have no plans that I could give you an exact number, but probably in the same zone, maybe a little bit higher.

Okay. And then kind of in the same vein as Michelle's question earlier, can you give us an idea regarding the European operating rates, just in terms of kind of where you think they're going to be in 3Q versus 2Q? And more along the lines of kind of like a month-to-month breakdown for 2Q, like has it, let's say, April, $85 million, $87 million and then $91 million, how did that look during 2Q?

[Indiscernible] (0:31:00.6) remember the monthly operating rates. Gretchen, if you do, feel free to comment on it. But I think in the second quarter -- or at the end of the first quarter, we had some problems with one of Serbian furnaces, so we probably improved during the quarter, but that would be just one happenstance issue. We had some work being done on one furnace that got done. I'm not sure that the month-to-month make a lot of difference. I do think that with -- as we said, I think we took a furnace off for business condition reasons in Serbia already, so in all probability, our utilization rate in Europe will be lower in the third quarter that it was in the second quarter. How much? Don't really know until we get to the end of the quarter. The lead times there are also short, although I could say in Europe, it feels like perhaps we've worked our way a little further along on the adjustment process in Europe than in North America, and while we're still not prepared to say there's a turn or that we're getting optimistic again, it feels like there's a little bit more traction in the spot markets in Europe than there are so far in North America. So it'll probably be lower, but until the market tells us how much we have to make, it's really hard to say how much.

Next we will go to the line of Mark Parr with KeyBanc Capital Markets. Mark Parr - KeyBanc Capital Markets Inc.: First, just trying to get a little more color on your outlook commentary for the domestic Flat-rolled business? And just want to get some specific comments. I mean you talked about, "Whether the spot business will be 30% of the mix or 1/3 of the mix." I mean does your commentary skew toward one way or the other, as far as that potential outcome?

No, not really, Mark. I think again what we're observing in the marketplace is that those customer groups that are again heading more toward the final destination show some pretty good stability and used demand there is very good. Order rates are still relatively firm, not much different than they were in the earlier months and quarters of the year. And so we're pleased that there's stability there and we're expecting to have a pretty good run with those customers in those sectors. The spot oriented industries, those that are holding inventory with lead times for hot roll at three weeks, maybe less, maybe more, but let's say around three versus five or six at the end of the prior quarter provides an opportunity for inventory holding, spot-oriented customers to take their time and not buy until they really have to. And I guess those lines haven't crossed yet. They may cross this week, they may cross next month. We just don't know that but if end use demand remains relatively firm, we're a little unsure as to how long the spot industries can go without ordering but maybe we're not there yet. Mark Parr - KeyBanc Capital Markets Inc.: Okay. So I mean if we're looking at volumes down a little bit, say it's down 7% or a couple hundred thousand tons, and pricing is relatively stable and arguably, with a mix that's actually a bit richer in the third quarter than the second quarter, is that fair? It's because of some of your trade business or spot business, those prices have rolled over, but you get a higher mix of higher value business or contract business that arguably would be higher value as well, is that fair?

I think the mix up from a price standpoint, mix will be a little higher value and that's from some of the reasons you describe, but also we'll have I think a little less semi-finished business in the third quarter which has that effect. But to be clear, Mark, that the prices. That doesn't fairly mean the margins weren't really good on the business we're not going to have. So the margins were pretty healthy in the second quarter. So even though our mix may be richer, the margins don't necessarily have to go exactly that same way. Mark Parr - KeyBanc Capital Markets Inc.: Okay. So really what we're looking at is coke -- I mean, if you look at 3Q versus 2Q on the -- if you were good, is there a way you could help us to understand the magnitude of where the cost pressure is coming from? I mean, is coke the biggest issue? And if it is, how long do you think that persists?

It isn't I don't think the biggest issue just looking quarter-to-quarter. And I was there was one simple answer for you, but I think it really goes across a range of topics, several of which you've already hit. Prices will actually be positive I think as you notably said. Volumes are negative. That negative volume, by the way, brings with it negative cost absorption, which means higher per hour labor. I mean the volume has other cost effects with it that are a negative, not just the margin on the tons that we don't have. We have the relatively higher outages offsetting the benefit coming from Lake Erie because of these additional items that I've already mentioned. Mark Parr - KeyBanc Capital Markets Inc.: I figured those two things would basically cancel each other out.

I think that's a fair assessment. But we have some higher spending, higher electricity costs, some higher gas costs and higher outage spending. It's a fairly long list of things that just happen to be going the other direction this particular quarter. Gretchen, anything you want to point out that's different to what I've...

No, I mean, I think to the extent that we cut back our operations to reflect an expectation of lower orders, the spending ends up being higher and that's probably a noteworthy piece.

Again, Mark, we don't have the whole quarter booked at this point. In fact, I went back and took a look at it. Our bookings for August at this point are quite a bit percentage-wise what we expect. They're quite a bit less than they were for May at this time at the end of last quarter, which again is evidence of I think the caution that prevails in the market particularly for the intermediate customers. So we don't know where we're going to end up. We could end up in maybe a better place. We could end up in a worse place, of course, but there's just been some uncertainty there because we're just not seeing the orders yet in the spot businesses.

We will go to the line of Tony Rizzuto with Dahlman Rose. Anthony Rizzuto - Dahlman Rose & Company, LLC: I've got a question on Tubular and I see this morning that a major player in the Marcellus Shale range resources ratcheted up their drilling budget and citing some pretty good margins there. And with the decreased cost for substrate, you did indicate it's a competitive market. We know that. It seems you might be being maybe a bit overly conservative there, John? Am I reading too much into that? I mean, you were a little bit kind of going both ways on that a little bit actually your earlier comments.

Tony, we've never been conservative. Well, perhaps. We're just trying to be careful and make sure that what we're saying is something that we can deliver on. Although the customer you mentioned is a very important customer for us, not to talk about customers specifically. The busier they are, the busier we will be and we think that's good news.

To the line of David Lipschitz with CLSA. David Lipschitz - Credit Agricole Securities (USA) Inc.: You talked about the guidance. What are you expecting in September? You sort of somewhat know what August is I guess with the lead times where they are. Are you using like sort of a flat July, August of what you have and then saying extrapolating that out into September, or looking for a pickup in September?

There might normally be some improvement in September just from a seasonal point of view, but we've got pretty good read on again the end-use customers that we're getting orders quite a ways out for. But because lead times are shorter, like you said, we're not really booked up into August at the level we normally would be because lead times are so short. So we're taking our best educated guess at what the ultimate market requirement's going to be and then we build our forecast off of that. David Lipschitz - Credit Agricole Securities (USA) Inc.: And just a follow-up. Do you think the steel industry brought too much capacity down the line too quickly? Or didn't demand fall more than people have thought?

I can only speak for ourselves. We brought on the capacity we needed to satisfy what our customers asked us to deliver. So we got behind to some degree, not a lot. We wanted to make sure we stayed close with our customers and we picked up some new business. So we brought on the capacity we needed to keep our customers supplied with the kind of deliveries that they expect from us. And if their demand diminishes, them we'll make less and we'll either slow some things down or we'll take a furnace off. We've done both of those so far. So we just try to calibrate to what they tell us they need. David Lipschitz - Credit Agricole Securities (USA) Inc.: So you're saying that from your perspective that demand has slowed. Whether it's seasonal or not, you don't know, but it definitely has slowed.

Well I think again, in our outlook if you read it carefully, we said that order rates have slowed particularly from the spot sector. So I think we didn't make any secret of that. That's correct.

And next we will go to the line of Michael Gambardella with JP Morgan. Michael Gambardella - JP Morgan Chase & Co: John, I think on the last quarter conference call you briefly talked about a strategy you were developing for, I believe, your Canadian operations and using your raw material cost advantage and maybe doing a little bit more on the semi-finished products like slab and hot roll to kind of base load your operations. How is that going and what where your exports in the quarter? And where do you think those will be going forward?

We didn't do a lot of exporting. It was I'd say a de minimis number but again, we have some opportunities, Mike, within our system where we've got, for example, a joint venture in California where that sort of an export for us and our shipments there in the second quarter were pretty firm and we did pretty well there. It replaces something they otherwise would have imported at times like it might have been this quarter. So that was a positive for us. Not a lot of exports otherwise. One of the reasons being that Lake Erie is really our best export location and we didn't have it available until the very end of the quarter. Your first comment is -- your memory's quite correct, we do have a nice business now in semi-finished. We have a long semi-finished position. It happens to be in Canada. We don't always sell just from Canada. We could sell from whatever plant makes the most sense for the customer based on their requirements and the slab width and dimensions and metallurgy, those kind of things. And we've done pretty good slab business in the second quarter. It was our best quarter so far. We'll try to do a little less in the third quarter. We have some volumes which are committed which we expect to be taken and we expect to make it shift. And we have just some occasional spot business which could be export within [ph] after (41:48) usually and some of that we'll probably get as well, but maybe less than in the second quarter. But it's a nice business for us because our costs structure for those additional slabs is relatively competitive.

And next we will go to the line of David Gagliano with Crédit Suisse. David Gagliano - Crédit Suisse AG: First of all, I just want to follow up on the question earlier on the U.S. Flat-rolled expectations for Q3. About how much of the $100 million or so decline in Q3 profit expectations, if you can do this, is strictly due to lower volumes versus higher raw material and energy costs? Can you kind of put it in buckets roughly?

Well I guess if the lower volume impact broadly defined, I'd probably say it's about half of it. Broadly defined. And then yes, including the inter-segment shipments et cetera. Broadly defined, it would we probably half of that number. David Gagliano - Crédit Suisse AG: Okay. Okay, that's helpful. And then my second question, on your European business, I noticed you mentioned you expect higher Euro based prices in Q3 versus Q2. Is that outlook driven by currency hedges that are already in place? Is that driven by mix shift or is it something else?

No, it's just the market I think. Prices moved up in Europe. They needed to because of the raw materials pressures that we were under and that didn't really happen. We didn't get to a decent pricing level until during the course of the second quarter. We expect to be able to attain that level maybe more fully in the third quarter. So I think it's just the movements in the market and being able to get it for the whole quarter versus just part of it in the second quarter. There are no other exotic activities that would have changed that. David Gagliano - Crédit Suisse AG: Perfect. I missed the answer before. What's the contract versus spot mix in Europe in Q3?

It's probably 30% contracts, 70% spot. We're trying to nudge it a little higher on the contract side but it's still pretty heavy on the spot or spot-related monthly indexes those kinds of things.

We will go to the line of Charles Bradford with Affiliated Research. Charles Bradford - Bradford Research: Pretty clearly your retiree benefit expenses are North American related. Could you break it down at all for us between the Flat-rolled and the Tubular?

I would say, Chuck, no, I don't have it broken down that way. But I mean, it's mostly on the Flat-rolled side I would say. There are many more retirees there. The bulk of it is really related to retirees rather than active. So I'd say it's mostly on the Flat-rolled side. We don't really [ph] break it out (44:40).

Yes, it's quite a little on the Tubular side. The only other refinement, Chuck, I'd give you would be that the preponderance of it relates to retirees from facilities that we no longer have and that most of us on this call never had when we operated them. We weren't here. So they're from facilities long gone. Charles Bradford - Bradford Research: Understood. And could you talk a bit about the coke project, the new technology that you're putting in? How does that differ from the more conventional cokemaking? There doesn't seem to be a lot of information out there as to what that technology really involves.

I think there's probably a website. We name the technology in our filings, it's called carbonics and there's a company behind that. They've got maybe a website that has information. I think we're under fairly strict confidentiality rules because we've got an agreement so we can't say too much about it, Chuck. But I'll just tell you this. Among the reasons we find it attractive is that it's maybe a further step down the road from recovery to non-recovery. This is a further step down the road. It is environmentally very suitable to the areas where we want to install it. It can be permitted we think perhaps still with all the requirements but with a little less difficulty because of the nature of the process from an emission standpoint. And importantly, we believe it will be able to be geared up and down and turned on and off without the refractory worries you have with either recovery or non-recovery. So it has a degree of operating flexibility we find very desirable and would have loved to have at this time last year.

And next we will go to the line of John Tumazos with Very Independent Research. John Tumazos - Independent Research: On the currency charge, was it based on the average rate or the June 30 rate period end? And if the euro is it recovered almost 1.3, does that reverse in the third quarter?

Yes, I think it's at the quarter end right which was mostly this relates to euro, the euro dollar relationship sort of $1.22 something like was what we were at the end of the period. So much of that has reversed even during this month.

You can do a broad calculation, $75 million to $80 million something like that, John, I think you're on the right track.

Next we'll go to the line of Mark Liinamaa with Morgan Stanley. Mark Liinamaa - Morgan Stanley: My understanding is that you've entered into some long-term agreements to sell Tubular into some of the shale plays. Is that correct? And can you talk about what the pricing structure might look like in [ph] out (47:34) years and maybe a little bit of commentary on the volumes if possible?

Sure. I'd say we have programs maybe is a term that we use and inside of that there might be a contract form. There might just be some kind of understanding as to how it's going to work out. Pricing could vary from spot to some fixed for a period although not real long, to some index for a period although not real long. So we're just kind of -- this is a new concept for us and we're exploring it. The volumes are significant. They're not small and if you get into OCTG particularly in the sizes that are critical for the unconventional stuff, shale both the liquids and gas in those size rages, heat treat alloy, significant proportions of that, because our product is very desirable and both we and the customers who need it to keep their programs going sleep much better at night knowing they've got a committed source. We've got our capacity committed to a particular customer and it's worked out very, very well so far. With the early stages, a variety of pricing mechanisms, but still not a lot of really long-term committed pricing just because of the volatility we're both seeing. Mark Liinamaa - Morgan Stanley: And was it done mainly at their initiative and, yes, I guess I'll leave it at that.

I think it was a mutually desirable thing for both parties. I think everyone somewhat chastened by our experiences in 2007 and '08. And we preferred to have a much more stable relationship and worry about what our customers needed, when and where and not quite so much about how much on every transaction. So I just think it was something, it was really good for both parties. We're very satisfied. You have to ask them, but the ones I talk to, I think they're pretty pleased as well. And they like by the way knowing we've got 24 million tons of steel behind the Tubular Products we're going to sell to them. If they're working with us, when it comes to a tight steel market, they have nothing to worry about and they put some value on that.

And next we'll go to the line of Sal Tharani with Goldman Sachs. Sal Tharani - Goldman Sachs Group Inc.: John, can you quickly remind us how many furnaces do you have in North America and how many are you running at the moment?

You can add these all up, I guess it's 12. That's the right number.

14.

14. I'm sorry, you can add the Canadians in. I forgot about that. But everything we have is operating today. Just for the record, we have three furnaces at Great Lakes but we only ever operate two just because of the configurations. So we are operating just about everything, everything except the one at Gary Works that I mentioned we have down for some maintenance. We said in our outlook that we have some other maintenance scheduled but I don't want to get into three days at Granite City and four days at -- it's a very fluid situation depending on the market, depending on what we need, where we see the market, what kind of customers, what contractors are ready. We may work on three or four furnaces. We may only work on two and they maybe later in the quarter and some may go over into the fourth quarter. So we're really not sure exactly what the schedule's going to be. Sal Tharani - Goldman Sachs Group Inc.: Okay. And on coke expansion or coke project, there's a big CapEx you had assigned in 2008, then you pulled out of the back because of the downturn and then you're starting to fund that a little bit. I was just wondering have you ever looked at the economics of having somebody else build these plants for you and you just take the off-take like SunCoke?

We have. We have a SunCoke project and we have a contact at Granite City at the Gateway coke battery which is an excellent facility and an excellent agreement. SunCoke's been a good partner and we're taking the coke and it allowed us to avoid having to build a new winter house. It was an excellent project for us. We're very pleased with it. It was their capital. We're paying for that indirectly I'm sure through the coke cost and facility charges. The one at Clairton that you mention though, Sal, is inside of our existing Clairton works and is so integral to the overall facility, I'm not sure that it's feasible to have done that in any other way than doing it ourselves. As additional things come down the road, we take a look at that. That really gets into capital allocation, financing. I'll let Gretchen comment as to whether we find that attractive, whether it's our direct use of credit or indirect, I'll let Gretchen comment.

Yes, I would say generally speaking, I think we've found it to be more economic to do it ourselves from a cost to capital standpoint because there's markups and everything in there. Sometimes for technological reasons or other operational reasons, it makes sense and the Granite City example, it makes perfect sense for us there. The Clairton project we've got a recovery battery there and it makes a lot of sense to do it at Clairton because they have the existing infrastructure to allow you to do that. You probably couldn't do it capital competitively anywhere else but at Clairton where they have those facilities so. But it makes sense at Clairton because of what we have at Clairton.

And then next we will go to the line of David Katz with JP Morgan. David Katz - CIBC World Markets: I was hoping that you could provide an update on the situation with Marathon environmental revenue bonds?

Yes, David. We've refunded more than half of those I'd say. We've got probably about 200 million remaining that we will have to refund or repay by the end of 2011. Some of those, David, we probably can't call them quite as efficiently until really late in that timeframe. But we'll keep chipping away at them as we have been. But I would say we've taken a big chunk of that out and we'll work away what we can between now and then. Otherwise we'll just have to refund them or repay them at the end of 2011. David Katz - CIBC World Markets: Okay. And then with regard to the CapEx plans that you talked about earlier. If you were to see demand pick up let's say September, would that accelerate the expenditure that you expect? And I guess on the opposite side, if demand weren't to pick up, would you perhaps dial back from what you had set out earlier?

I don't know that we would cut that fine a line. I think I'm not sure we could accelerate much effectively in a way. There's only so fast you can do these sort of things and we've got engineering and permitting and contracts that are let for major equipment et cetera. So it takes some time and we're on an accelerated pace, but speeding it up much is going to be difficult and I'm not sure that we would do it just because business conditions are better. By the same token, if there's some slowdown in demand beyond what we see, we have to think about that. We've got to look at our overall financial structure. Gretchen and I will review it and visit on what the overall structure looks like. But one of the reasons we did the long-term financing earlier in the year was to be able to avoid having to go on and off because that's not a good thing for the project or the business.

Yes. It should be costly for the project to do it that way so...

And next we will go back to the line of Michelle Applebaum with [indiscernible] (55:09] Market. Michelle Applebaum - Michelle Applebaum Research: Your stock is down 7.5% so I'm going to ask the right questions. How's that? I've got to do well now, right? Oh that's a pressure. This problem started in April with China tightening because everybody in the world knows China's the marginal exporter, right? And you guys have great insight into China, but it looks like Chinese steel prices have come up in the last few weeks. What's going on in China and how is that impacting us?

I don't know that we know any more about what's happening in China than you do, Michelle, maybe less. So I just know that China's a big country and there's a lot of Chinese folks who live there. And they have great expectations for housing and infrastructure and a better life and I think that's a good thing for them and a good thing for the world of steel. So I think in the long-term, China is going to be a great place to make in consumed steel. You may remember a speech I gave in 2004 when I assailed the Chinese for expanding capacity too much. Had they listened to me, the country would be in real trouble. So I think they're going to be an excellent producer, consumer and I think their overall policy to consume roughly what they produce is probably what they intend, but it's a big and [ph] unweilding (56:31) machine. We haven't seen a lot of effects so far, Michelle. We would see it first in our business in Europe and we haven't seen large Chinese volumes washing up yet in southern Europe, which is where we would see it first. We're vigilant, we're watching for it. We don't see as much of it here in the U.S. We keep an eye on it but so far, we haven't seen great effects from it that I can recall.

And our final question comes from the line of John Tumazos with Very Independent Research. John Tumazos - Independent Research: Had everything gone smoothly with the Gary high line and quicked right, how much do you think the net effect on second quarter results to the better would have been?

Well, it didn't happen, John, until early July, so it didn't affect the second quarter at all. The effects will be really in the third quarter and sort of they're through by now or essentially through. We're pretty well done with a lot of the work. They have some more work to go but not a whole lot. But it's going to be all things including volume et cetera, it's going to be a $10 million to $20 million kind of price tag for us. John Tumazos - Independent Research: So relative to Lake Erie works, it's small change?

Yes, it's a lot, but not by comparison with that. That's a fair analysis. John Tumazos - Independent Research: And what would be the next largest repair productivity item, Košice maintenance and a Serbian blast furnace down?

Well the Serbian blast furnace down is really a commercial thing. So I know we'll do some maintenance, but it's really not for that purpose. It's really a commercial decision. The work on the furnace in Košice will not be too unlike the work we're doing on the furnace at Gary. I think it's number six which is down now. We do top work. We do some hearth work fix the tap holes, et cetera, et cetera, so I mean it's pretty routine stuff. And they would be probably of comparable size, duration and cost. They could be anywhere from two weeks to a month to do some shock treating depending on what's necessary. So that's the vintage type of repair work we'll do on a number of furnaces throughout the rest of the year. Again, we didn't do any in the first six months. So we ran really hard, didn't do hardly any work at all. And we have some scheduled now for the back part of the year. John Tumazos - Independent Research: Is there any extra maintenance you're going to budget in 2011 or extra effort given that there were a couple surprises this past month on the equipment and safety front?

Fair question, John. I think the things that we need to do will have some cost effect but it probably wouldn't rise to the level that we would notice it in this forum. We're not done with the announcements yet, so I shouldn't be saying this but I think it's going to be things like planning and attention to detail and making sure that we complete everything in the schedule were supposed to so it's -- but it's early for me to say that. So forgive me for not being specific on that part of the question but the things that we'll need to do, my sense would be wouldn't require a lot of money. We will probably be back doing more normal level of maintenance throughout our facilities next year. This year again was a recovery year after a tumultuous shutdown year last year. So we're nowhere near normal and we hope to reach some stage of normalcy late this year, early next year.

And there are no further questions.

Thank you all.

Thank you for participating, and we look forward to talking to you again next quarter. Linda, will you give the replay information please?

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