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

Christopher David Olin Luke Folta - Longbow Research Mark Parr - KeyBanc Capital Markets Inc. Charles Bradford - Bradford Research Justine Fisher - Goldman Sachs Michelle Applebaum - Michelle Applebaum Research 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. Fourth Quarter 2010 Earnings Conference Call and Webcast. [Operator Instructions] With that being said, I'll turn the conference now to the Manager of Investor Relations, Mr. Dan Lesnak. Please go ahead, sir.

Thanks, John. Good afternoon, and thank you for participating in the United States Steel Corp.'s Fourth Quarter 2010 Earnings Conference Call and Webcast. We will 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 fourth quarter and then Gretchen Haggerty, U.S. Steel Executive Vice President and CFO, will comment on the outlook for the first quarter of 2011. 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 on 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, and good afternoon, everyone. Thanks for joining us. Earlier today, we reported a fourth quarter loss of $249 million or $1.74 per share. For the full year 2010, we reported a loss of $482 million or $3.36 per share. While we are by no means pleased with these results, they are a significant improvement over our 2009 results of a loss of $1.4 billion or $10.42 per share, but our company and our industry experienced the very severe effects of the global recession. In 2010, there was improvement in many of the markets that we serve. And as a result, our total shipments increased by almost 50%. Our raw steel capability utilization rates in both North America and Europe were significantly higher than the extremely low levels of 2009 although we still have not recovered to what we consider historically normal levels. We were able to restart our facilities in 2010 and put our people back to work, but the pace of the economic recovery continues to be uncertain, and our markets remain very volatile. We continue to focus on operating our facilities at levels consistent with our customer orders and as efficiently and safely as possible. Speaking of safety, 2010 was a challenging year for us. We improved on two of our key safety measurements, global OSHA reportable case rate and global severity rate. We're disappointed that we did not improve on the third safety measurement, global days away from work case rate. We remain firmly committed to safety as our number one priority, and we continue to work towards our goal of zero injuries. We're also committed to environmental excellence, and we are working to reduce emissions as well as our overall carbon footprint. Since we use a carbon-based industrial process, that's not necessarily easy. But it is something we're focused on, because it makes good business sense. We've implemented a company-wide program with involvement from all levels of the organization, including our union representative employees, to investigate, create and share innovative and best practice solutions to reduce energy intensity per ton of steel and related CO2 emissions. We're also committed to investing in technology to move the steelmaking process in an even more environmentally responsible direction as evidenced by our recent and ongoing projects to renew our coke-making infrastructure, such as the SunCoke non-recovery battery at our Granite City Works and the carbonics facility currently under construction at Gary Works. Both are lower emitting technologies. Also, we're incorporating the best environmental control technology available at the new byproducts recovery coke battery being built at our Clairton plant. Now let me get back to our results. Operating income for our North American Flat-rolled segment improved by over $1.1 billion compared to 2009 as the benefits of higher prices, volumes and utilization rates and lower energy costs were only partially offset by higher raw materials costs and higher spending for facility repairs and maintenance. While we realized similar benefits at our European operations in 2010, the magnitude of raw materials cost increases in Europe substantially offsets these benefits and limited our improvement in operating income to $175 million. Operating income for Tubular increased by almost $300 million in 2010. Shipments increased by 900,000 tons to almost 1.6 million tons. And average realized prices were lower, reflecting higher shipments of carbon-grade material as the excessive inventory of unfairly traded Chinese imports in the supply chain was consumed. For the fourth quarter, our Flat-rolled results were slightly better than the third quarter as lower repair and maintenance spending was offset by lower average realized prices. Publicly reported spot prices bottomed in November when CRU reported $520 per ton for hot rolled. Fourth quarter results were also slightly better than we initially projected, primarily due to higher-than-expected shipments and operating efficiencies. Also our Hamilton Works iron and steelmaking facilities were idled in October, and we incurred approximately $40 million of idle facility carrying costs during the fourth quarter. Fourth quarter results for U.S. Steel Europe were below the third quarter as lower euro-based spot market prices, which also bottomed in the fourth quarter, and lower shipments were only partially offset by lower raw materials costs and a higher mix of value-added contract shipments as we made progress in our long-term strategy to increase value-added product sales in Europe. Tubular results for the fourth quarter were lower than the third quarter results as our program customers and distributors drew down their inventories at year end and imports remain high, resulting in lower shipments and prices, which were partially offset by lower substrate costs as the cost of hot rolled bands, which are priced on a monthly basis, bottomed during the quarter, as I mentioned earlier. We have continued to make progress on some of the significant capital projects we discussed last quarter. Projects to improve our coke self sufficiency remain on schedule, with the PCI projects in Europe set to come online later this year, the carbonics modules at Gary during 2012 and the Clairton C Battery in 2013. For the Tubular segment, construction is well underway on the new heat treat and finishing facility at Lorain that will increase our ability to serve the growing demand from shale developments. We expect to start production at this new facility in the third quarter. Construction has also started on our Innovation and Technology Center in Houston as we continue our efforts to be recognized as a technical solution partner for our Tubular customers. Field trials for our Patriot TC premium connection continue, with the first well successfully completed using this connection in November. And shipments of our CDC, Star semi-premium connection have continued to increase each quarter. Now I'll turn the call over to Dan for some additional information about the quarter's results. Dan?

Thanks, John. Capital spending totaled $250 million in the fourth quarter and was $676 million for the full year. Capital expenditures for 2011 are expected to total approximately $990 million and will remain largely focused on strategic projects, primarily related to coke and coke substitute production, blast furnace coal injection in Europe, tubular heat treatment and finishing facilities, implementation of an enterprise resource planning system, non-discretionary environmental spending and other infrastructure projects. Appreciation, depletion and amortization was $168 million in the fourth quarter and $658 million for the year. We currently expect depreciation to be approximately $665 million in 2011. Pension and other benefits cost for the quarter totaled $107 million, and we made cash payments for pension and other benefits of $35 million. Pension and other benefits cost for the year were $420 million. Company payments for these plans in 2010 were $534 million, which included a voluntary contribution of $104 million to our main defined benefit pension plan. Total cost for pension and other benefits plans are expected to be approximately $590 million in 2011 compared to $428 million in 2010. This increase is primarily related to the amortization of actuarial gains and losses from prior years. Excluding any voluntary contributions to our main defined benefit plan, company payments for these plans in 2011 are expected to be approximately $575 million compared to $394 million in 2010. Our cash payments in 2010 were reduced based on agreements with the United Steelworkers that allowed us to defer 2010 contributions to retiree, health and life insurance trust and use certain prior period contributions to pay 2010 costs. At year-end, our pension plans were underfunded on an accounting basis by approximately $2 billion, and other benefits plans were underfunded by approximately $2.9 billion as compared to an underfunded status of $1.7 billion for pension plans and $2.9 billion for other benefit plans as of December 31, 2009. The change in funded status primarily reflects a decrease in discount rates. Net interest and other official costs totaled $94 million in the fourth quarter and included a foreign currency loss of $39 million. We expect net interest under financial cost to be $55 million for the first quarter of 2011, excluding any foreign currency gain or loss. For the full year 2010, we recorded a tax provision of $97 million on our pre-tax loss of $385 million. In accordance with accounting guidance, the tax provisions don't reflect any tax benefit for pre-tax losses in Canada and Serbia, which are jurisdictions where we have recorded a full valuation allowance on deferred tax assets and for foreign currency losses that are not recognized in any tax jurisdiction. Fourth quarter 2010 results included a $52 million or $0.36 per diluted share unfavorable catch-up adjustment as a result of an increase in the actual annual effective tax rate due to changes in the composition of domestic and foreign earnings. The geographical mix of our future pre-tax results could have a material impact on our reported effective tax rate. Now Gretchen will review some additional information and the outlook for the first quarter.

Thank you, Dan. Our 2010 cash flow from operating activities was negative $379 million, primarily due to an increase in working capital. In 2009, as operating rates and prices fell to extremely low levels, net working capital decreased by approximately $1.5 billion. Although operating rates and prices have not yet returned to pre-2009 level, they have improved significantly, and we've reinvested approximately $750 million in working capital. Our liquidity remains strong as we ended the year with approximately $600 million of cash and total liquidity of $2.1 billion. Now turning to our outlook in the first quarter of 2011. We do expect to report a modest improvement in reportable segment results in comparison to the fourth quarter of 2010. Order rates for most customer groups and publicly recorded spot market pricing began to increase later in the fourth quarter, and we remain cautiously optimistic that global economic conditions will continue to improve in the first quarter. Flat-rolled results for the first quarter of 2011 are expected to improve compared to the fourth quarter of 2010 as the benefit of increased average realized prices, shipments and production volume are expected to be partially offset by higher raw material costs, primarily for scrap and coal. Average realized prices are expected to increase from fourth quarter 2010 as we expect to begin realizing the benefits of increasing spot and some market-based contract prices throughout the first quarters. Increases in some of our index-based contract prices should be realized in the second quarter as higher published market price assessments enter the index calculation. Raw steel capability utilization is expected to increase from the fourth quarter of 2010 as all of our blast furnaces are expected to operate for the majority of the period except for Hamilton Works, which is subject to a labor dispute. First quarter 2011 results for U.S. Steel Europe are expected to improve compared to the fourth quarter of 2010 as benefits of increased shipments and production volumes are expected to be partially offset by higher raw material costs. Our euro-based transaction prices are expected to improve during the quarter. And as in Flat-rolled, increases in some of our index-based contract prices should be realized in the second quarter, as higher published market prices haven't entered the calculations there. Our raw steel capability utilization rate is expected to increase in the first quarter of 2011 as we have restarted a blast furnace at U.S. Steel Serbia that was idled during the fourth quarter, and we expect all five blast furnaces to operate during the first quarter in Europe. We also expect our Tubular operations to remain profitable in the first quarter, and we anticipate that shipments will improve slightly as customer inventory levels appear balanced and end users pursue their 2011 drilling programs. Average realized transaction prices are expected to be in line with the fourth quarter levels as announced price increases begin to take effect throughout the quarter. Overall, compared to the fourth quarter, we expect lower results due to monthly increases for purchased rounds and hot-rolled bands that will not be fully realized in Tubular product prices in the quarter. That's ends the outlook. Dan?

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

[Operator Instructions] And first, from the line of Michael Gambardella with JPMorgan. Michael Gambardella - JP Morgan Chase & Co: Can you -- in terms of the first quarter outlook, can you say if you'll be profitable or not?

Gretchen, you gave the outlook. I'll let you comment on it. I think you did it as we see it.

Well, yes. I mean we gave you a general direction of where we're headed. I don't think the direction we gave you is enough to comment on the fourth quarter though. Michael Gambardella - JP Morgan Chase & Co: I couldn't hear that Gretchen.

We're expecting improvements, but we didn't say that we expect to be profitable. Michael Gambardella - JP Morgan Chase & Co: Can you comment on your coal requirements for 2011? Have you locked those in, and what pricing?

We have, and I'll speak to North America. That's the biggest piece of it, of course. We've locked in our requirements at this point. We've got sufficient contracts to take us through this year. And on the order of 10 million tons probably of met coal, a little bit more when you add in injection coal. And our cost to us -- and I wouldn't compare this to anything you might read publicly, because the way we look at it, it's the mine cost plus delivery at a constant moisture. But on average, I think we were reporting that last year's cost was about $160 million. And it would probably be up this year, a little less than $20 plus or minus, something in that zone.

And next, we go to Luke Folta with Longbow Research. Luke Folta - Longbow Research: The maintenance expense for the quarter you had mentioned was down sequentially in the fourth quarter. Can you give us a sense of what that was and whether or not you expect any nonrecurring or one-off items in the first quarter?

Do you mean explain what the actual numbers were, Luke? Luke Folta - Longbow Research: Yes, there was a decline...

Yes, we had a -- we talked, I think, last quarter about the fact that we had some structural failures, most notably at our Gary Works and a couple of other projects and a few other plants that we we're working on. And we got most of those done in the third quarter, and therefore, a lot of those costs didn't recur in the fourth quarter. Our inspection and repair costs are down to a fairly constant level at this point. And I mean, as we look at them and gather them, they're somewhere between usually $20 million to $30 million a quarter. There's some blurring of distinction between what is normal maintenance and what is a inspection repair cost, but we're nowhere near the $80 million kinds of figure that we talked about in the third quarter.

And I think we said down $40 million. So that's...

Yes, that's probably about where we ended up.

Right. Luke Folta - Longbow Research: So when we look in the Tubular segment, in the first quarter, you had mentioned that it looks like the raw material costs are outpacing the realized pricing. Do you think that's more of a timing issue? Or does it speak to the competitive environment in Tube?

Well, it's probably more timing than anything. Maybe we're too subtle about this, but we, in effect, supply most of the steel substrate ourselves to the Tubular segment. The Flat-rolled segment happens to be the supplier. And we transfer price back on the same -- as best we can do at the same terms and conditions as we do to other customers who are in that line of business. So we try not to distinguish from one and the other. And that hot rolled price movements that we've talked about, Gretchen talked about in our Flat-rolled business, they're getting their piece of that in the first quarter. And the Tubular prices, while we're trying to move those up, haven't quite kept pace. And we also have some programs and negotiated projects that run for a little bit longer before price increases. It looks like -- I think it's compression of the margin with the substrate cost. They're getting it from their big supplier pretty quickly and not getting it back in the marketplace as quickly as we would like, but that is more of a timing issue, I think. There's always stiff competition, of course, but I think that for us, it's more for a timing question. Luke Folta - Longbow Research: Can you give us an update on how you did as far as your negotiations on fixed-price contracts for 2011 and to the extent that there is any increase in the percentage of fixed price that you are seeing versus last year? I'm thinking given your iron ore cost advantages, here domestically -- that maybe you were able to gain some market share in that sense.

There's a couple of questions there. I'll try to get them all and as best I can. They're good questions. We did fine in our contract settlements. I think it depends on where you come from in terms of what the actual change would be, but we had increases in most of them, because the prevailing prices in the marketplace when we did most of that a month or two or three ago now were actually higher than they were in the previous years. So I think we did okay from an overall price standpoint. And you're right, our cost structure does give us a certain degree of confidence that we still have some amount of firm price contracts and some amount of cost-based, cost adjusted, which are fairly sticky and don't have big changes in them typically during the year. And those two, in total, are going to be on the order of 30%, maybe 1/3 at the most of our total book in North America. So we did do okay there. We do have the ability to go firm if we wish if it's the right price, the right contract, the right customer. And it would pick up share, we think so. That remains to be seen and how good it's throughout the rest of year, but we think we performed pretty well and came back strong for our customers in some of those markets. And I think we've been rewarded for it.

Our next question is from Chris Olin with Cleveland Research. Christopher David Olin : I wanted to just ask a quick question on the Tubular side, and I think you had mentioned part of the supply pressure is related to the import. I'm just wondering if you're seeing some direct pressure for some of the domestic capacity start-ups sort of undercutting the market and preventing some of the capture on the margin side?

Well, it's hard to say, Chris. We compete with everybody, and we bumped into all sorts of competition. There is undoubtedly some effect of domestic competition as there is from imports. If you just look at the total share of apparent demand that has been taken by imports in recent quarters, it expanded, I think, in some months over 50%. And that seems to be a little bit out of line with where it should be based upon what demand and what North American capabilities are and what everybody's cost structure is in the world as we know it. So yes, we have stiff risk competition, brutal competition with our domestic competitors, but we would view the imports as more of a problem in this case than anything else.

And we'll go to Timna Tanners with UBS.

Sounds like you're going to be running most everything in the Flat-rolled besides Hamilton in your plans for the near future. Is that fair?

I think so, Timna. I mean, we'll have the occasional relatively brief maintenance outage for one thing or another. But at least in the near term, as far as we can see, in North America, we have all of our fire fighter fired in Hamilton because of the situation. It's not available to us. So we'll be running everything pretty well for the next few months.

I just want to get an update. I know you talked about being short some coke and having to buy that on the open market. Kind of what are the prices looking like there? And what's the time frame for being able to meet more of that on your own again?

Well, I commented on some of that in my remarks. I mean, we have the Granite City. SunCoke battery is already online, and that's helped us. And it's taken the number down that we have to buy. We'll have the Gary carbonics module. It's not available to us this year, but at some point, the next year and then relatively early in 2013, we'll have the Clairton C Battery available to us as well. So it'll be sequencing in over the next several years. The prices are high. And I don't want to give you an exact number, but if you just look in the coke market report or something like that, you'll probably find it. Domestic coke, if you could find, will probably be in the 450-ish. And the balancing and the market takes place out of China, and that's probably 500 or more, 600. I haven't seen it recently. It depends on how many licenses are available. So it's a fairly expensive proposition. The quality is not what we like. The heavy screening loss, low stability, low porosity. So other than that, we really like doing it.

And if I could real quick, Gretchen, I wanted to know if you could give me some color on the balance sheet. The cash on the balance sheet is kind of low relative to where the spend is for the last at least 2 1/2 years. And given the high CapEx budget that you've unveiled today, I'm just wondering if there's some working capital released or something that maybe we haven't modeled.

No, actually, I think the cash balance is okay. I mean, I've looked at the overall liquidity, we have quite a bit available to us with our lines. Our capital -- I guess on the working capital side, Timna, we've been in a bit of a build still with getting ready for the winter and all that kind of stuff. So we'll probably have a little bit more to go on the working capital, but I don't think a material amount. It shouldn't -- we shouldn't be back to the levels where we were before in 2008. So I feel pretty comfortable with where we are from a liquidity standpoint. I think whatever we would have in working capital is going to be manageable from a capital standpoint. We're going ahead with these pretty heavy capital spending projects, making good progress on them because they're important to us, but I feel like we're able to manage doing that.

Our next question is from Mark Parr with KeyBanc Capital Markets. Mark Parr - KeyBanc Capital Markets Inc.: The lockout cost at Hamilton, how persistent is that? Can you give us some color on what you would expect the magnitude of that to be on a go-forward basis?

It's hard to make a real big dent in it, Mark. When you look at the components, the single biggest piece would be fuel and utilities, and that's going to be higher in the colder months. But still, we got to run boilers and pumps, and we have to circulate things to keep the equipment ready and everything in working order. So that's really in power for heat and light, for the things that have to be climate controlled. So it's really hard for us to cut that back. We'll continue to chip away it. It's the single biggest piece. Depreciation, not much you can do about that. We have a certain level of labor necessary for fire watch and those kinds of things. So we'll try to whack it down, and I think our experiences in 2008 and '09 gave us, regrettably, some experience in that. But to try to make it sort of go away while we're still trying to operating things is pretty hard to do. And we're still operating the coke battery, so some are cautious going into that, but it's hard to make it go completely away. We'll continue to work at it, but it's probably going to be in that zone for some time. Mark Parr - KeyBanc Capital Markets Inc.: So that's one of the things that will continue to restrict the profit recovery. Another question I had, in the fourth quarter, the other category -- I think in a lot of years, that fourth quarter gets some benefit from fourth quarter shipments of pellets. And I was just wondering if you could give some color on the fourth quarter and the other operations in terms of some of the pluses and minuses that you experienced.

Mark, I think you're thinking back to when we used to have our pellet operations in Other, and it's now in Flat-rolled. So I don't think that you'd see that there. It's primarily realty...

It's transportation. It's usually our transportation assets and our real estate assets, and those are -- the transportation, typically, are fairly stable, and we just reflect business conditions up or down. Real estate is more transactional. We may sell some properties here or there that are being developed or that are excess, and those happen when they happen. Not much happened in either the third quarter or the fourth quarter as I remember. So my guess is that that would be relatively stable. There was a time, Mark, when because of the seasonal adjustment that Gretchen commented on there were some wicked swings in that category, but that hasn't been the case for a couple of years now.

Yes. Mark Parr - KeyBanc Capital Markets Inc.: I was just curious. You do have a slab or semi-finished component to your mix. I was wondering if you could comment on what that was in 2010 and what you think the mix might be in 2011.

Well, I think if my memory serves me, in total, in 2010, 1.6 million or 1.7 million tons, something like that probably, and we try to make a little bit of a business out of it. It really -- when we have everything running, of course, including Hamilton, which is a plant with a lot of strip -- and we have sort of a normal slab availability that we try to make something out of. We use some, and we'd sell some. We don't have that availability right now, but we'll probably still do some slab business. In 2011, it likely would be at a somewhat lower level, probably won't be at the 1.6 million or 1.7 million. It might be more of 1 million, plus or minus, but that's remains to be seen, how the market plays out. There are times when that's a very attractive thing to do, and we can make slabs in a lot of places. So we don't have Hamilton available. If for some reason it became available, that's a much different story, and we might have a different approach. Mark Parr - KeyBanc Capital Markets Inc.: Anything on the export front you can update us on in terms of your mix of export business?

No, not a whole lot. We have the -- for us, at least, rather than that, we choose the slab market as a better way to go. And if we can find a way to get slabs where we don't see them again, that's even better, and you can take a few guesses on how that would be. But when export markets would be favorable, we might end up shipping a little bit more hot band to the West Coast to our joint venture, because they might take a little more, and our partner might send a little less. And we actually do have some straight out export business that we're going to do. We have done some mining we'll do this year, but for us, it'll be a heavier diet on slabs and a little more going out to the West Coast, probably. That's usually, economically, a better way for us to go.

And next we go to Justine Fisher with Goldman Sachs. Justine Fisher - Goldman Sachs: If you guys did need to raise additional liquidity -- by my numbers, it's certainly not the case. But if that were the case, would you look to use your revolver as opposed to coming back to the bond market?

Well, I mean, I think we obviously have a lot of revolver available to us, and I think that's the easiest thing to do. And it also gives us sort of the greatest flexibility for paying it back later, so I think that's probably a good choice. We do have some environmental bonds that we have to retire or refund on our own credit. It was part of the separation, and we have to do that by the end of the year. And so we'll be looking at doing some tax-exempt financing probably but just as a way of refunding what those existing bonds are. Justine Fisher - Goldman Sachs: And then just on the raw material cost pass through question. Obviously, a lot of the recent price increases in the spot market have been justified by various producers because of higher raw material cost. Have you guys seen any pushback from your customers saying, "Well, clearly you guys don't see as much of a raw material increase, at least on the iron ore front, so we don't necessarily agree to some of these increases?" Or are people pretty much going along with them, because the supply chain's pretty lean?

I don't know. We have very spirited discussions with all of our customers, but I think they understand that steel prices are determined in a very active deep liquid market. And everybody's competing, and we may have a certain advantage. Somebody else may have a different advantage, and we got plenty of disadvantages too. So I think we go straight up with our competitors and try to do the best job for our customers and get the prices to the market. That's a long way of saying I think that our cost is our issue, and the price is determined in the market.

And next, we go to Mark Liinamaa with Morgan Stanley. Mark Liinamaa - Morgan Stanley: Over in Europe, you're going to be running all five furnaces now. Can you talk a little bit about the demand that you're seeing? Is this something you think is going to persist through the year? And then over there, maybe give a quick overview of your raw material situation.

Sure. The demand patterns that have emerged, Mark, are very similar in Europe as they are in North America. And in around the same time, prices sort of bottomed in both places. And around the same time if look at the relevant indices, demand, for us at least, in both North America and Europe seemed to pick up midway through the fourth quarter. It's been pretty broad based, and it's has been pretty well sustained. So as we sit here today, demand is pretty brisk. Order rates are firm across virtually all customer segments, and we are reluctant to look out too far in this world of short mini-cycles. But if you look at the broader economic context, as Gretchen pointed out, we have some cautious optimism that maybe the economies of the world, certainly OECD countries in U.S. and Europe, are heading in better direction. So everything we see today looks okay but, Mark, it'd be, of course, a much, much different picture. In Europe, we're merchant buyers of ferrous material and carbon material, coal and coke both. We're generally on quarterly pricing with our suppliers in Europe. As world prices have moved up, they are well aware of that, and that's a discussion, negotiation we'll go -- we've already set those for this quarter, and they're moving up to some degree. I think, as we said, for the second quarter, we'll have the discussion again and see where things go, but it's very imperative for us to be able to be long-term good customers for our suppliers of raw materials. We need to have a really good conversion margin that gives us a return on our capital, and that's what we're going to shoot for.

Then we'll go to Brian Yu with Citi. Brian Yu - Citigroup Inc: A question for John or Gretchen. I'm trying to reconcile something in my head. I think, John, you mentioned earlier, the met coal cost are going up about sort of $20 per ton, which works out to be roughly $12 per ton of steel and then [indiscernible] (0:38:37) going up about $9 per ton. So it seems to me that the profits should be greater. And is this because that you've got some contract flags coming through form the 4Q into 1Q, where that's pushing down your pricing, that's offsetting some of the spot movements?

Well, there's just one other factor I should mention. You ought to include scrap on your list of things that cost a lot more. And we're not the biggest scrap users in the world, but we use 1 million tons a quarter, whatever it's going to be, and it's gone up quite a bit. So I think on our list of raw materials increases, scrap actually is, quarter-to-quarter, fourth to first, I think it's the largest one, would be scrap. On the commercial side, we do have a significant portion of our book, and it's between 15% and 20%, something like that, North American Flat-rolled. That would be on quarterly contracts based on indexes. And if you look at those indexes, if you take whatever index that you like -- let's take Chicago hot rolled or whatever index you like, and take July, August, September, compare it to October, November, December, it actually went down, which means we actually got a price decrease for some of our volume, and that's the way it works. We held on earlier in the year at a higher level, but when I think the number for the one index service for November was 520, okay? And the Midwest hot rolled, and I think the published number by that same index service in January was 710. So we're going to take a number of things and average them and make that comparison, which looks to us like a much better comparison. And that's not effective till April 1. So there is a lag on some significant portion of our book, and it would be fairly substantial in the second quarter. Brian Yu - Citigroup Inc: And then can you just comment on your order book? Where are you open now? March, April, we've been hearing different things from other companies.

Well, I only know about us, but we're essentially sold out through March in North America or as they're filtering in. But effectively, all of our space is spoken for. And we're just in discussions with customers about April at this point, but that's sort of commercial information. I don't want to give in this forum necessarily, but everything we can make through March is essentially sold. Europe, not quite that far out yet. We usually have a shorter order book there, but Europe is filling up pretty quickly to essentially the same pattern.

Our next question is from Charles Bradford with Bradford Research. Charles Bradford - Bradford Research: Kind of off-the-wall question on labor. Do you know of any plant other than the one in Hamilton where the pension plans have an index feature?

No. No, we don't. The other one -- one we knew about was Lake Erie, and I think that one, we've made some progress on in the last negotiation. And for that matter, Chuck, I don't know of any plants, integrated blast furnace space plants in North America that has a defined benefit pension plan at all at this point. There may be one or two, but I don't know what it would be.

From new hires.

For new hires, yes. I mean, the old one will obviously continue, but for new hires, I don't know of any continuing defined benefit plan in the business anymore. Charles Bradford - Bradford Research: Are there any ongoing negotiations in Canada?

Yes, we're in a collective bargaining situation. We'd prefer to sort of to keep that between us and them. It isn't always necessarily what they do, but we prefer to be a gentleman about it and keep it between us and them. So with respect, Chuck, I'm going to refrain. And when there's something worth reporting, we'll make sure everyone knows about it.

And we'll go to Sal Tharani with Goldman Sachs. Sal Tharani - Goldman Sachs Group Inc.: Just a quick question on pensions first. Are you expecting to do any mandatory pension contribution? Or are you all set on that front?

Are we expecting to do any pension plan? Sal Tharani - Goldman Sachs Group Inc.: Yes. Do you have the mandatory pension contribution in 2011?

No, we don't have that, not mandatory, but we would consider voluntary as we have done in the past, probably on the order of that $140 million we've done in the last couple of years, Sal. But we don't -- we've done enough voluntary funding for long period of time. We've got pretty good cushion buildup. But the $140 million, that’s kind of representive our normal cost, and we like to do that. Sal Tharani - Goldman Sachs Group Inc.: And John, if you look at your pricing outlook, what are you seeing? You are opening April books at the current price, which is being asked about $800-plus? Is that what you are right about getting?

Well, I'd prefer not to get too specific on the commercial terms, Sal. But I would say that we are in the zone of what you read about as being what's in the market today, and we wouldn't be too far off that. In some cases, it might be a bit ahead, depending on the customer and the product, et cetera. But we are right with where you read the market to be, and what you read, I think, is where the market is. Sal Tharani - Goldman Sachs Group Inc.: So you're second quarter, and I think you alluded to the second quarter price realization will be much better than the increase you're going to get in the first quarter. It means that fourth quarter was as first quarter or first quarter was as second quarter will be much higher?

It should be just the way the index adjustments works, Sal. We typically would lag a quarter behind full realization when there's a sharp move like there has been in the spot market. You're absolutely right. Sal Tharani - Goldman Sachs Group Inc.: And the last question will be -- we've talked about it before about unlocking the potential of iron ore. Iron ore has considerably remained high, been down a little bit till late last year but then pulled back up again. I was wondering if you all have given more thought or you have a just nice asset, which you can unlock and use it to either in pig iron or slab. And I know that you alluded a little bit of slab. But have you given more thought on how to explore this, particularly your shore position in Europe, does it make you -- is there any advantage of, at this point, sending it over there over the iron ore?

Yes, there could be. It's a difficult logistics thing, Sal. But in effect, if we would -- right now, let me just comment. Right now, we're going to consume, in our own configuration in North America, everything we can make. So all the pellets we can dig and make, we're going to consume, and that's a great way to capture value, we think. And that'll become more evident, because the business conditions we're moving into now are going to favor our model if we got to where -- through an expansion in our operations in Minnesota or theoretically, if we needed less in our blast furnaces. If we were long and we can capture that value locally, that's better from a transportation cost standpoint than sending it to Europe, but we've done it before. Prices stay high enough, long enough and logistics get worked on, we may decide to do that. For us, the key is that we're using all we can make right now. We're in a process of getting a permit for an expansion, which I think we've talked about publicly in our 10-K from time to time. And that's a pretty big undertaking for us, but it's one we're going to be looking at carefully in the next year or two. And I just say that with pig iron, with DRI, the world of natural gas has changed. And the world of DRI is much different than it was before. It could be done right here as I think you've read about in some other discussions. So it's a really interesting way for us to capture the natural. We have plenty of resource in the ground. We got to get it out and get it processed in a way we can use it. So we're giving that a lot of thought right now. It's a very good subject for us.

Sal, one other thing I just wanted to mention, because I thought that you were asking me about mandatory contribution with regard to our defined benefit plan in the U.S. I think you probably were, and that's what my $140 million answer was for. But I would just, for a complete explanation, that we do have required payments that we make in Canada every year, and that's fully disclosed in our pension footnotes. It's on the order of CAD $55 million plus the inflation, in that same piece of it. So $70 million, $75 million, something like that, okay?

And next, we go to Elliott Glazer [ph] (0:48:18) with du Pasquier.

John, you gave us a very nice description of the Chinese import-export situation in the United States for 2010. Can you give us some indication that Chinese import-export situation in the United States for 2011?

With respect to Flat-rolled?

Yes.

Well, Flat-rolled from China into the U.S. has been fairly muted. We have some crate orders, and I think the Chinese exports have been consumed much closer to home, better for them, probably better for the consuming countries as well. So we haven't had much of an influence from China in the U.S. In our business, we would see it more immediately in Southern Europe, where a lot of our product from Slovakia ends up, and we would find that to be the first place we'd see that friction. The same thing prevails in Europe. The Chinese imports have been relatively muted so far just because of the very high cost they have, I think and the fact that their production is being used at home -- the production's been not increasing, by the way. Either used at home or sold, I guess, for better value in a more immediate Asian area. So it hasn't been a big deal recently, fairly muted. We watch it carefully, whether it's Tubular or Flat-rolled. And if we think that our rights are being trampled then we have some recourse, as you know. And as you see, we're pretty successful at it. So for the moment, fairly muted.

How about the same question for India, please?

There's an occasional bit of material from India, some might get galvanized, some larger line or pipe. But India -- I think India's production in 2010 was 70 million tons or some number like that. China's was 650 million tons. So it's a different order of magnitude and just not as much material to move in. The consumption in India has been very strong, so occasional but not nearly as significant as some other regions.

And we have a follow-up from Mark Parr with KeyBanc Capital Markets. Mark Parr - KeyBanc Capital Markets Inc.: I just want to make sure I got this straight because, John, I think you said you were seeing perhaps a bit of an increase in your mix of fixed-price contracts for 2011. If you could just review for us how you see '11 unfolding as far as from fixed-price business and 90-day lag business and spot business, just in general terms?

Sure. I guess, in general, as a rule of thumb -- and it's going to depend just on how the markets work out. But as a general rule of thumb, we're probably going to be on the order of about 30%, some kind of firm-ish contract. Whether that's firm or whether it's a cost based, it's a fairly stickier contract, something on the order of 30% plus or minus at that level. We would have about 40% or so spot. Maybe a little more than that. Maybe it's 42% or 43%. And if my math is right, and I'm not good at numbers anymore, that leaves about 30% for sort of index-based transactions. And of that -- I hate to confuse you Mark. Maybe I'm making this too hard. Of that, about half would be monthly and half would be quarterly. So did that make sense? Or should I do that again?

Our final question will be from Michelle Applebaum with Steel Market Intelligence. Michelle Applebaum - Michelle Applebaum Research: I have two questions for you. One is that -- I'm sorry, Gretchen, please, that you said that you wouldn't answer the question on whether you would be profitable, but you're not saying you won't be profitable? You're saying you don't know. You can't – the knife isn’t that fine here.

I guess I just said we didn't put in the release. So I mean we gave you some direction. But if we felt really confident, I imagine we may have said that. But we did not say that we were going to be profitable in the first quarter. Michelle Applebaum - Michelle Applebaum Research: Then the other question I'm going to ask you is the question that I get probably, I don't know, 30, 40, 50 times a day, which is the operating rate of the industry is about 70%. So what's going on with these kinds of vertical price increases?

I'll just give you a reflection. I think the number the other night was 72%, up a little bit, I think it 72% in the most recent figures. So I mean, that doesn't change your question, but it was up just a tad, at least on iron side. Michelle Applebaum - Michelle Applebaum Research: I'll ask it again, 72%?

Yes. I guess, Michelle, just an observation on that, and I'm speaking mostly from our perspective from the Flat-rolled side. The statistics assume a certain level of capacity. But if you would do a little bit of analysis and try to consider what is actually operating or subject to operating, we know that one of our facilities is not and there are -- I know from reading material that you and others published that several others aren't too. If you sort of back it out of the base and then you look at the production, it yields a much higher number than that. I mean our number, by the way, has been well above that number last year and it is right now as well that, maybe because of our markets or otherwise, but we've been a little bit above it. If you take some of the facilities that aren't operating out, you generally yield a much more robust capacity number. And that doesn't -- I'm not saying that explains whatever price mechanism you described there, but it's a much different analysis when you look at what's actually operating versus what the production is. Michelle Applebaum - Michelle Applebaum Research: So then the question they ask me is what happens when this other stuff turns on. Or is it not turn on-able? Is it not that quick, like a point or something like that? Is some of it non-economic?

I can't answer those questions, Michelle. We can't, I think. In our experience in all this, it's not easy to turn it on. But I mean if you -- I think it's important also to recognize the cost of the incremental ton today is really different. And based on buy, we would think, you would think, we would all think that the incremental ton would be a more competitive ton from a cost standpoint, because you've covered all your fixed costs. But for us at least, at some point, the incremental ton means we need to buy more coke, and we probably need to buy ferrous material. And in today's world, the incremental ton is often more expensive. So bringing on things that don't have an existing raw material source, you need to look at what that incremental cost is and what the current price structure is and how long is that going to last to cover the start-up cost. It's a much different analysis than might have been done just a few years ago. So I think that maybe needs to be considered in how quickly things start up. I can only speak for ourselves. If we have the ability to start something up, which we don't today. But if we did, that's the calculation we would do, and we would do what would seem best in the circumstances.

And I'll turn it back to the presenters for any closing comments.

All right. Well, thanks, appreciate everybody being with us today. And we'll talk to you again next quarter. Thank you.

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