Dan Lesnak - GM of IR Mario Longhi - President and CEO David Burritt - EVP and CFO

Evan Kurtz - Morgan Stanley David Gagliano - BMO Capital Markets Matthew Korn - Barclays Tony Rizzuto - Cowen and Company Gordon Johnson - Axiom Capital Michael Gambardella - JP Morgan Timna Tanners - Bank of America Justin Fisher - Goldman Sachs Jorge Beristain - Deutsche Bank Matthew Fields - Bank of America Merrill Lynch Charles Bradford - Bradford Research Phil Gibbs - KeyBanc Capital Markets Garret Nelson - BB&T Capital Markets Nick Germosic - Stifels Lee McMillan - Clarksons

Ladies and gentlemen, thank you for standing by. Welcome to the United States Steel Corporation 2016 First Quarter Earnings Conference Call and Webcast. At this all participants are in a listen-only mode, later we’ll conduct a question-and-answer session instructions will be given at that time. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Dan Lesnak. Please go ahead.

Thank you, Greg. Good morning everyone and thank you for participating with us this morning. On the call with me today will be U.S. Steel President and CEO, Mario Longhi; and Executive Vice President and CFO, Dave Burritt. As we noted in press release announcing this call, we provide the format of the call. We posted our slide presentation and our prepared remarks under the investor section of website when we released our earnings after the market closed yesterday to provide everyone with a better opportunity to prepare for the call. We'll not be repeating presentation and remarks for this morning's call. We’ll begin with some brief introductory comments from Mario and then proceed directly to the question-and-answer session. Before we begin, 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 in the slide deck posted on our website and 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 start the call, I will turn it over to our CEO, Mario Longhi.

Good morning, everyone and thank you for joining us today. We continue to make progress in our transformation efforts. This is thanks in large part to our employees' commitment to change through the Carnegie way. While we have been facing difficult conditions for some time, our employees have remained focus on addressing the things they control and their accomplishment have been impressive and significantly improved our business model and increased our earnings power. The same can be said about our employees, when it comes to safety. Long injury free streaks at the plant level are becoming the norm rather than the exception and we keep fighting that extra level of efforts and desire to get better every year and that remains the case this year. Our focus has been and will remain on the long-term health and stability of this company, no matter what market conditions. The transformation of this scale often requires difficult, but necessary choices. And we understand the impact of some of these decisions have on all of our stakeholders, especially our employees and their families. We are continued our fight against and fair trade around the world. And fairly traded steel imports remain at high levels and we believe that market distorting practices by foreign governments and the steel companies are driving the current import level, not market demand. These illegal foreign practices have been devastating our industry, our employees and some of our communities. Last year, we successfully advocated for the passage of the Level Playing Field Act in the trade adjustment assistance bill. This represents the first time in decade that U.S. trade laws were revised and clarified to align with the original congressional intent. The interpretation and enforcement of these new laws has already been reflected in preliminary determinations in the three major trade cases we elected to pursue with other steel companies in 2015. Yesterday, we announced another step in our efforts to have the rule of law enforced. We filed a complaint with the U.S. international trade commission to initiate an investigation under section (337) of Tariff act of 1930 against the largest Chinese steel producers and their distributors. The 337 complaint alleges illegal unfair methods of competition and seeks the exclusion of all unfairly traded Chinese steel products from the U.S. market. I would like to emphasize that the remedy under section (337) is not a tariff, it is an exclusion of products from the U.S. market. Our complaint alleges three clauses of action, the illegal conspiracy to fix prices, the theft of trade secrets and the circumvention of trade duties by false labeling. We have said that we will use every tool available to fight for fair trade and with the yesterday’s filing we continue to the work we have pursued through Carnegie way [ph] and anti-dumping cases and pushing for increased enforcement of existing laws. Since this spending litigation we are not going to provide any further comments of these specifics of our complaint at this time.

Thank you, Mario. I would like point out that we have added a section to the Q&A document we posted on our website last night regarding section 337 and that the ITC website also have the Q&A document covering these investigations and I will suggest thereby spend some time to review those. I think that will be very helpful for you. So at this time Greg, would you please streamline the questions.

Thank you. [Operator Instructions] Your first question comes from the line of Evan Kurtz from Morgan Stanley. Please go ahead.

Hi, good morning, guys.

Good morning, Evan.

Good morning, Evan.

My first question just on the guidance, prices are moving so quickly right now. And I just wanted that you can help us kind of nail down, where HRC prices were when you kind of formulated the 400 at current market conditions is it value at today's price something about that way or is it couple of weeks ago it's pretty significantly different, so any help that will be appreciated.

It's based on conditions actually yesterday because a release from yesterday. So it’s based on all the market conditions you could observe out there yesterday.

Okay. Great. And then a question on the iron ore, I know, you have a bunch of capacity offline and I know in the past you’ve kind hinted that you might be looking to sell some third-party iron ore, I know the middle contracts coming up at the end of this year, is that something that you’re pursuing at this point?

Something that we would certainly be opened too if the - the real opportunity came about, it’s not that we haven’t done that in the past. But we certainly do have additional capacity if there is an opportunity to make best use it, we would.

But no active discussions or anything at this point?

We won’t comment on any specific customer or supplier activity. We never do.

Okay. Maybe just one on Gary, there has been a lot of news recently about unplanned outages and it sounds like everything is back to normal there, but just wanted to get a full updated of how operations are moving on there?

Operations are normal, they are stable. Europe has concluded a couple of planned maintenance that they needed to do. We had a little bit of an issue, Gary over back, but all furnaces are back and running and the downstream lines are shape. Everything is going okay.

The only thing I would add, is that we do have number 8 is actually on a scheduled maintenance outage right now. But 14 is back up and running, we had some minor repairs there.

Your next question comes from the line of David Gagliano from BMO Capital Markets. Please go ahead.

Great. Thanks for taking my questions and actually thank you for the details on both the slides and the supplemental. I think it's really helpful and I think that's always kind of cut to the chase in this call. So, thanks again for putting in all that effort.

Thank you, David.

Cutting for the chase, couple of numbers questions. First of all, can you talk a little bit about what's behind the expected shift from a pension expense to a pension benefit and also am I reading correctly that the $400 million EBITDA guide includes the expected pension benefit of $60 million.

It does include that big and what happens - and actually these all can be detailed in the Q that explains it, but it's little bit complicated. But what I would find obvious to help you with the monitoring and total pension of expense for year will be 93. So we do have a $60 million credit below the segment line. So within the segment you would actually need to pick up 153 in expense.

Okay and I'm sorry, can you, what's behind the shift from what's historically been an expense and now it's shifting to benefit, what....

It has to do with performance of the plan assets. It has to do with discount rates.

Okay, got it.

And other changes that we make.

Alright. So then just one quick follow up, this may actually be related, I'm not sure. But on the income statement for the first quarter there is $45 million benefit for earnings from invest, that number had historically been running closer to $9 maybe $10 million on a quarterly basis. So I'm wondering what's behind the big jump this quarter and what's in the assumptions moving forward for that particular number embedded in the full year guidance. Thanks.

The big piece that drove that number in the first quarter was actually from our mining JV interest. There were some product sales out the JV's that are driving that number. So I don't know you would assumed those are run rates. But they were still in the first quarter that were behind that number.

Okay. What's embedded in the expectations for the year for that?

We gave our projections based on the total corporate outlook. They are not going specific at lined the focus on.

Okay. Alright. Thanks very much.

Sure.

Your next question comes from the line of Matthew Korn from Barclays. Please go ahead.

Good morning, Matthew.

.:

Well, we've always been very clear, for you to achieve market economy status you have to fulfill some obligations and you have to have performed consistently over the past period of time, which indicate that we are talking about here I see no evidence that has happened. So it should be a very simple assessment based on the factual reference that China would not be entitled to that period.

Alright, got it. Let me switch over this thing, you addressing if actually some of the speculation on the divestiture of your tubular businesses. I'm not interested whether they run in oil prices up from the bottom year-to-date. Does that develop any optimism that you can see among steel consumer at the energy business? Like for instance where along the same line, where could be the inventories be in your view compared to say six months ago?

Well, we've been diligently addressing the significant downturn that we've seen in the energy business and we continue to do so. We don't sit on expectations when prices were heading down to 25 and oil prices are a little bit above 40, we are still very focused on addressing what we can control, we are still serving our customers well. There have been some orders that they have come in to fill some voids in the product mix that the customers need. But inventories have remained high because the consumption has reduced so much when you are only running about 4th of the number of rigs that we had a little over a year ago and the consumption has significantly dropped. So even though inventories have been come down there is still around 10 months. So it will take a while before this whole situation re-positions and we always said that we would remain open to looking at whatever alternatives that would present themselves, that would meaningfully generate a shareholder value. So we always remain open to looking at those.

Your next question comes from the line of Tony Rizzuto from Cowen and Company. Please go ahead.

Thank you, gentlemen. And thanks for taking my questions. I like the Dave's thoughts about all the detail you provided, very helpful.

Thanks, Tony.

You're welcome. Thank you. The shipment volumes, I have a question about that, with your current configuration the flat-rolled segment and imports declining. Do you expect you'll be able to regain some market share?

Well, we have been supplying the customers with whatever they needed and we have re-position the footprint in order to better adequate to the current market conditions. But we remain also ready to increase our supply and sooner the market from a volume perspective demonstrate some real sustainability. We are not going to hastily moving to bring in more capacity on line unless you see that there is real sustainable increase in the market demand.

Mario, would you need to see trade cases fully play out for that to for you to make that decision to restart as a more market driven in the case of Granite City, et cetera.

No, we don't need to wait for anything. These are parallel situations that we address accordingly.

Okay and the other question I had safety, just I hope I'm not confusing this with any other company. But I think I saw a pretty significant improvement sequentially in year-on-year and is that in many respects Carnegie way and your CM implementation and are we seeing it to acceleration.

No question about it, Tony. I mean if you recall, let me first start the Carnegie way journey. We looked at the platform they had been built on safety and that we expanded significantly on it. Safety is deeply embedded into the Carnegie way processes today. And Carnegie way has now contributed to the way in which our safety methodologies and philosophies get executed on. We've enhanced our ability to get to root cause, analysis in the very same way that we do with any other issue being it reliability issue, a maintenance issue, a quality issue and in a lot of it resides on the more profound engagement of all of our people, making them more capable to come up with problem definitions and drawing solutions that come out of the creation of a great charter that is very well clarified and structured significantly helped us make progress.

Okay. And just a quick follow up on the volume question. Should we expect the seasonal bump in 2Q on sequential link quarter basis and flat-rolled volumes?

I don't know how to clarify anything more than you have clearly told me. What we stay is at the ready whenever being closer to the customers. We will be watching to make sure that we are always there to fulfill whatever their need.

Your next question comes from the line of Gordon Johnson from Axiom Capital. Please go ahead.

Thanks for taking my question.

Good morning, Gordon.

Good morning.

Hi, guys. So I got a question on the guidance since specifically [indiscernible] reported that in the first quarter of this year in aggregated its member mills saw profit fall by 659% which is a record. So the question is given China consumes 50% of the world's steel, copper, aluminum, iron ore, could it be that their ability to stimulate is over now as the companies that consume all these goods, as the cost for these goods go up, it essentially ends their ability to make profit and if that's the case, do you see the recent movement prices as temporary?

No, I think we wouldn't speculate on that. But I think you know that if these regions learn what market economies are, these situation of analysis of value creation should be a permanent factor in how they make decisions. So this is a reason why we look at some of the markets that we are in they have been flooded with imports that we believe are not necessarily traded lawfully, it, you know, if they don't decide they're not going to let market economy rules prevail we have to address whatever rule that we have available to us to make sure that they don’t contaminate markets they do operate by market conditions.

That’s helpful. And I guess, extending on that question, it's come to a light that, there has been two days in the past month where specifically if iron ore future volumes in one day were greater than the total amount of iron ore imported into the China in the whole of 2015. So I guess, just extending on that question, there’s been some speculation that the recent rise in steel prices, iron ore, copper et cetera in China, has been due to speculation in the future's market affecting the stock prices. So, I guess, with respect to the outlook, do you see if that is true in the prices in China were reverse down, do you see risk to the guidance for 2016?

Our outlook is based on conditions as of yesterday. So I think if you think to your point if you think market conditions are going up or down later on the year then you should be adjusted half of the outlook we put together, because it is based solely on conditions as of yesterday. So any change.... rough speckling on future changes in market conditions. But certainly you guys can make those adjustments in your models from the base point.

Okay. That’s helpful and then just one last, with respect to your pellet capacity, could you speak to, is your cost to make pellets in the United States below some of your competitors and maybe you could speak specifically to quest and also what is your current spare capacity of pellets and how long it would take it ramp that capacity up, if indeed you’re going to win some of the contracts. Thank you.

Well. We believe that we are the low cost producer. And, you know, we’ve seen that the cost of past year. So our folks over there have been doing an extremely fine job in improving on the base that was already low. So it's remarkable they've been doing, we're very proud what they've been accomplishing, I don't think they're done, they have to more to do still. And we do have spare capacity as you know, [indiscernible] is pretty much down at this point. But our ability to restart is we can do it very, very quickly. So that’s not an issue if the need is there.

Your next question comes from the line of Michael Gambardella from JP Morgan. Please go ahead.

Good morning, Michael.

Yes. Good morning. I have a question, are you currently or considering doing, what I recall totaling of your iron ore to have it processed from the iron ore into hot-rolled coil and then put through your finishing operations, which you still have, operating for your client setting and so forth, in the way to also not only minimize costs and maximize your returns but also the kind of keep supply discipline at U.S. market?

Well, as I always say Mike, we look at all the potential opportunities they could constitute of business case that wouldn’t make sense for U.S. steel. So, it's something like that would be relevant we would certainly consider.

But, is it something you’re right now?

No, it’s not something we’re doing right now.

Okay. All right. Thanks a lot Mario.

Sure.

Your next question comes from the line of Timna Tanners from Bank of America. Please go ahead.

Hey, good morning, everyone.

Hi, good morning Tim.

Good morning, Timna.

I wanted to ask a couple of things just to clarify, make sure I understand some development slightly. One was in the past, you had talked about if prices were to revert and rebound as they are that you would need to be built working capital. And you also mentioned in the past that some of the cost cuts were temporary, but it seems like you're still going to generate a lot of working capital, cash from working capital and that some of these costs cut seem do not be temporary. So I just wondering if you could help us understand, if that’s the case and what might have changed to create that environment?

Sure, Timna. The working capital changes we’re talking about are really getting inventories in lined with where they need to be. So with respect, the only thing you really enough of that is just big ramp-up in volumes, which the net effect we are very good. But I think working capital change we’re talking about really the inventories. So that’s coming from we control that, as far as cost when we talked about plenty of benefits, those are the sustainable changes as we've done short-term in the past, we call those out of the different category. So the fact is Carnegie way benefits are sustainable improvement, anything else we talk about will be related to temporary up and downs fluctuations in the business, temporary layoff things like that.

Okay. The other thing I wanted to drill down if you could. And I didn’t get chance to compare the slide that shows your contracts versus spot exposure with the last several quarters. But when I look at it, it looks like you have more and more spot or spot based exposure and that’s a big contradiction with what I’m hearing from market sources, which is - that there is not really allowed spot tend available from any of the integrated. So can you clarify are those spot tends just going to the tubular market or is that widely available in the spot market, your current configuration what do you have available and then what does, I know you comment alluded to this, but, I mean, I’m hearing the markets are really, really, tight. I still don’t understand how that equates to the market conditions that you need to restart Granite City? Thanks.

Well, if you look lead times on I believe cold-rolled are up to nine weeks right now. So it’s certainly tight out there and we do have some flexibility. But again as I said we need to see a more sustainable volume demand coming into the market before we would restart it. But we would do it if that was the case no question.

Okay. And then on your configuration, how that’s changed or if that’s the spot tends or tubular or if they are actually available on the spot market?

No, they are across the board. Whatever the customers are looking for any - the main area which market is pretty bad. So on certainly small perceptive spot trends, we're looking for the best one we can get. So it wouldn't be focused on any one particular market, it's just really where the customers needed.

Okay. Thanks.

Your next question comes from the line of Justin Fisher from Goldman Sachs. Please go ahead.

Good morning.

Good morning, Justine.

The first question I have is on the capital structure, I know that in the Q&A and the comments on the slide you guys mentioned that you’re focused obviously on the 2017 maturing the refinancing. But with the value that we’ve seen in the steel market and the value that we've seen in the bond market and even in the equity market, what’s the company waiting for, what is your still waiting for in order to pull the trigger given, what we’ve already seen happened and would the company be willing to use equity to help refinance maturities?

Look, the analysis is very broad that we’ve always said, that we would prepare to do that at that time that is consuming for us not anybody else input would make a difference in that moment and we to pull through that trigger. But we’re ready to do it at the right moment.

Okay. And then the second question is just back onto the sustainability of demand that you guys are looked for in order to ramp capacity, would you - so obviously you got to look at the demand in the U.S., but to what extent do you evaluate demand in China, because I think some people would argue that the reality that we’ve seen in the fair Farris complex globally was initially driven by restocking in China. And so, when you look at that the sustainability of the demand, is it just the U.S. or do you look at the sustainability of the demand in the China as well and how that might follow on to the U.S. market, because even though I think energy has reduced some demand on the hot-rolled type for some straight. My takeaway from steel company comments over the last few quarters, is that demand on the flat-rolled side in the U.S. is not actually really been that bad to begin with?

We always look at the global demand Justine, but we need to put the food factor of the interface within imports, in terms of trade cases. And they will certainly play a meaningful role and how much the overall global demand and the movement of material around the world would impact us, as a domestic market continues to evolve. Many other factors here, as you know it's not been bad, I mean, you look at automotive the white line, they’ve been fairly steady and good. Some of the other ones are not like you go to mining for example and the energy business in general it’s been fairly weak. So, those domestic conditions both here and in Europe are observed with attention, but we do look at what’s happening in the other world and what are the thresholds based on the curtains that we trying to put in place to make sure that the fair trade prevails for the most part.

Okay. Thanks. And would the company consider using equity to side just one of the first questions answered the first question, would company consider equity, in terms of managing the balance sheet?

We would if that was the right decision to make.

Your next question comes from the line of Jorge Beristain from Deutsche Bank. Please go ahead.

Hi, good morning guys. And I agree as well that disclosure that you provided last night extremely helpful and best-in-class by the way.

Thanks.

Thank you. My question is on the base case that you guys are using for HRC Spot, you said earlier that, it’s up to the market to make the determination, can you just give us a sort of number that you will be using as the base case for the HRC spot?

Well I think if you look at what it was prices are generally in the low 500s.

Okay. My second question is just on that the section 337 complaint. I mean it does clearly target China, but broadly speaking Chinese imports have already massively declined and appeared to be a de minimis amount into the U.S. market at this point. So I'm just trying to understand is this more of a psychological filing that you're doing because incrementally it doesn't seem like that there is much more market share to be gain by fully blocking China out of the market if you could comment on that.

Jorge, if you look at the three classes we've alleged. Trade shipping is clearly one of them. And what appears to be coming from China, we think there is a much different number than what is actually really coming from China is just it does trying to be a labeled from other countries. So that's really what that third cause of action is in that case.

That's a great point. Okay and then lastly if maybe for Mario if you could comment a little bit on the layoffs we've seen certainly that the non-unionized employees baring a big brunt of the layoffs recently 25% of headcount reduction. Could you comment what the agreements are with the Unions in terms of sharing of job losses or layoffs or is there a some kind of ring fencing where the unionized works are not going to be expected to share the same amount of headcount reductions.

No, that's not the case. We have achieved an agreement with the union in our contract that's in place. It's working our relationship with them is strong. They have all of our people who have a significant participation in all of our Carnegie way efforts. And what we're doing with support services is basically adequate that structure to the current footprint that we have within the company. So it's just about the balancing the overall structure in the way that it make sense. And it's appropriate. There haven't been layoffs to have it just about everybody, union and non-union. It's not this latest move that you saw even thought it was more concentrated on non-representative. But at the same time, some of the representative people have suffered. Same.

Your next question comes from the line of Matthew Fields from Bank of America Merrill Lynch. Please go ahead.

Hey guys. So just wanted to add Justine's comment that about sort of why wait. I mean it seems that when you talk about bringing capacity back online you keep saying that you're waiting to see if the market is sustainable if the prices are sustainable. I mean the capital markets are with you right now. And it seems like it will be most convenient to do some sort of capital raise when the markets are with you in both steel and the capital markets rather than waiting to see if one is not sustainable. So can you just, I also heard comment about what are you waiting about?

Well I think Matt, I think we've said we know what all our options are. We're watching the markets both the steel market and the capital markets. When we think it make sense for us and the right opportunity there then we will do something. But it's really combination of what's going on in the both the steel markets and the capital markets. And we have a very strong cash liquidity position. So that's how we think about it. But we've explored possibilities we know it's out there.

And don't misunderstand it. We don't agree with you, if you look at the where the market was just the couple of months ago to where it is right now it certainly has changed and then we are constantly on it.

Okay. Well good luck, thanks very much.

Thank you.

Your next question comes from the line of Charles Bradford from Bradford Research. Please go ahead .

Hi, good morning.

Good morning, Chuck.

You had a nice gain apparently on the retirement of debt. I'm assuming that that's showed up in the other financial costs. Can you give us a number for how much that gain was?

Sure. You're right and that's what it is, and it's $2 million and if you know any details, we retire, we got back $90 million in debt or $17 million in cost.

Okay terrific. In the fourth quarter report, you've talked about an impairment on an equity investment. But even in 10-K I couldn't find an explanation as to what that was, can you tell us what equity investment was impaired?

That was one of the eye assets in our real estate portfolio, not a very big one. But it was real estate it was a related in the field business.

Okay, because it was $18 million?

What's that Chuck?

It was $18 million?

Yes, it was. It was part of our remaining real estate portfolio.

Then on the trade side one of the company or country that assumed was Korea on hot rolled. Since you are the big buyer or UPI is the big buyer from Pasco, who pays whatever dumping margins is found in that case?

That seeing we are responsible for its own activity.

Okay. Thank you.

Thanks.

Thanks, Chuck.

Your next question comes from the line of Phil Gibbs from KeyBanc Capital Markets. Please go ahead.

Hi, good morning.

Good morning, Phil.

Mario, can you give us an update on the automotive opportunities for the company and potential new products and just some evolution there with all the substitution going on in the light weighting and how you are thinking about that over the next couple of years?

Actually Phil, we’re very happy and excited with everything that’s happening in automotive. We have several new alternatives they have been given to the OEMs. I mean, if you look at most of the OEMs that we’re working with. The solutions that they’re going for are steel solutions; many of them are our solutions. Our engagement has gone beyond just material, it’s going very heavily towards what we can do with the designing engineers of the OEMs in order to come up with designs that are much more prone to receive some of the material that we are offering, as well as, current material. So we are very comfortable with what is taking place in that realm for us.

You need to add any capabilities within the organization right now to hit some of the targets that the OEMs are looking for over the next couple of years.

I don’t think so. The capability that we had was mostly technical and intellectual capability, because we’ve gone beyond the normal board of relationships where you’re just talking about a material, you’re talking now about a solution and there are plenty of contribution that were making as the design engineers go about crafting that the ultimate shapes and structures of the new vehicle. And our input has been essential for them to really get to the best safest, lightest and more economical solution that they’re looking for.

Okay. Terrific. And speaking of automotive and annual contracts, if those pricing were such largely taken place or should we expect anything incremental here in the second quarter?

I think for the most part they’ve been concluded. There are still some that are in the last stage of conclusion, they shouldn’t take very long for that to be done in full.

Your next question comes from the line of Garret Nelson from BB&T Capital Markets. Please go ahead.

Hi, good morning, everyone.

Good morning.

Just a question about your assumptions and the bridge in getting to positive $400 million of EBITDA for the year, mainly as it pertains to flat road. Is that assume that flat road volumes and price realization will increase every quarter sequentially for the remainder of the year?

We assume things would slow up where the current market conditions are, so to the extent that current market conditions will eventually flow into our adjustable contracts, yes, as far as, volume just demand - if you assume demand button change then that’s our assumption is that the demand stays where it is today, but yes, if we hold flat road, if we hold spot prices flat from day forward, our adjustable contracts will start to pick up some benefit in the next couple of quarters.

Okay. And are you assuming that your adjusted EBITDA will turn positive in the second quarter or maybe you’re not expecting that to happen until the second half?

We have given guidance with the annual. We’re not talking about quarters.

Okay. And finally any update on when you might circle back on the Fairfield AAF project, as your thinking change at all regarding that project with the improved EBITDA and cash generation outlook for this year?

That project is solely dependent upon the turnaround on the energy demand. And right now it’s still very low. We’re concluding the warehousing evolve the equipment everything has finally arrived, so they can care of, we can certainly take it back on whenever the movements right. And we just need to see what happens with that market. Right now, we’re really looking into addressing the very small demand that we're seeing out of the operations and adequate in it to make sure that we address cash flows to the best of our ability.

And remind us of the cost of completing that project and how long it would take?

I think it would probably require between $50 million and $100 million to finish it off. And we certainly could conclude it between six months and a year depending on what the conditions are at the time that we reignite it.

Your next question comes from the line of Nick Germosic from Stifels. Please go ahead.

Hi, good morning. Thanks for taking the question. I was hoping to talk about again the '17 '18 maturities. And just the options that are available to you. How do you think about issuing secured debt in this market when you have other capital options available to you versus keeping that secured debt available to you when all the other capital markets are closed. Do you think you should.... essentially the question is do you think you should save that secured capacity for yourselves when you're back as against the wall and there are no other capital market options available to you?

Hi Nick, I guess we are evaluating all options we wouldn't take any off the table. But one off getting more specific than at this point. But we know all our options are and that certainly one of them. And but we don't hold spectrum. But I think beyond that I don't think we have any addition we'd add to that.

Okay, thanks.

Your next question comes from the line of Lee McMillan from Clarksons. Please go ahead.

Hi everyone, thanks for taking for my question. You've talked a lot about an issue to work with customers to improve quality and delivery performance. I'm just wondering if the feedback from customers is improving significantly since you've been making those changes?

Well the feedback is very good. I don't think we've ever been a transparent and engaged with them when we analyzed the overall of the value chain for them. And that includes not just the delivery performance, but the way in which we do some forecasting which impacts how we do sales and operations planning. So I think the progress is real and the candidness and the feedback feed into the way in which we do our planning for improvement over here. So it's certainly a lot better than I would think.

Okay and then for the $100 million in Carnegie Way this quarter. Where this benefit is showing up? Is that in working capital or is it cost reduction that's showing up in COGS? And then could you break it down year flat rolled Europe and Tubular?

Actually if you look at the slide we have in the deck, it shows the split by segment of the updated Carnegie Way benefits. And the Carnegie way benefits there are P&L benefits. So these are showing up in SE&A, they're showing up in COGS. But the slide we have out there give you a breakdown of what category and what segment are relative.

Okay thanks. Lastly, what level of debt do you think is right for the company?

I mean historically it depends on the market situation. If there is a real opportunity for investment you will go a little harder at it. But on average 30% 35% has been the pretty good place to be.

Your next question comes from the line of Evan Kurtz from Morgan Stanley. Please go ahead.

Great, thanks for taking my follow up. Just a quick one on capital spending. It seems like you're running pretty high above the full year guidance if you run rate. And I saw that there is a big expense this quarter in Tubular which surprise me a little bit. So just wondering are you still feel comfortable with that 350 number and what was the big expense that we saw in the first quarter?

Yeah, we're comfortable with the number. And the big expense was if I mentioned before was the conclusion on the acquisition of all the parts for the year, yes. And then you have another piece of.

And I think the other piece was that we did have that our other businesses, our rail business, we brought some rail cars and that shows up some additional spending there. But that was all in our plan.

Your next question comes from the line of Tony Rizzuto from Cowen & Company. Please go ahead.

Thanks very much. I appreciate also that the ability to ask a follow here. I wasn’t going to ask the 337 question, but I heard you answered one. But does this also seek to include all products containing Chinese steel or is just direct steel?

It's direct steel.

Direct steel.

Okay. So just to confirm this is not seeking to exclude any products that might contain Chinese steel.

No this is Chinese steel directly.

Alright, thanks guys.

Sure.

Your next question comes from the line of Gordon Johnson from Axiom Capital. Please go ahead.

Hey thanks guys. My questions has been asked.

Alright. Thanks, Gordon.

And your final question today comes from the line of Phil Gibbs from KeyBanc Capital Markets. Please go ahead.

Hey, Mario. I just had a question on 35% that you've just mentioned, was that debt-to-cap that you are pointing to.

Yes.

Okay. And then lastly here do you have a view on the Canadian steel market either SR or US steel and whether or not those are viable longer term operations at this point in time, thanks.

Well, Canadian process continues to flow as expected. The market over there is going to be stepped up at the same levels of injuries that you've seen over here. And with we don't have a direct interest at this point in that particular market. We have enough going on between Europe and here. We have plenty of opportunities and then that's why really mainly focusing it.

Alright. We appreciate all of your questions. Mario, do you want to give the final comments before we are done?

Yeah, just before we sign off I want to acknowledge and thank our employees one more time. I know it's been hard for them to see the positives because they've be confronted by a significant challenge after significant challenge. However, certainly would not be where we are today see in the light of the end of the tunnel without them doing what they've been doing very grateful for that and proud of it. So thanks everyone.

Thanks, Mario. Thanks everyone for joining us and we will back with you in July.

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