Good morning, everyone and welcome to the United States Steel Corporation's First Quarter 2019 Earnings Conference Call and Webcast. As a reminder, today's call is being recorded.

Thank you and good morning. On the call with me this morning will be U. S. Steel President and CEO, Dave Burritt; Executive Vice President and CFO, Kevin Bradley; and Sara Greenstein, Senior Vice President of Consumer Solutions. Sara has responsibility for the Mon Valley and the new technology we announced yesterday. After the close of business yesterday, we posted our earnings release and earnings presentation under the Investors section of our website. Yesterday morning we also posted an Investor Presentation highlighting our announcement at the Mon Valley. On today's call we will walk through via webcast, select slides, highlighting our investment and first quarter results. The link to the webcast can be found on the investor section of our website. We also posted this morning's slides to our website. Before we start, let me remind you that some information provided during this call may include forward-looking statements that are based on certain assumptions and are subject to a number of risks and uncertainties as described in our SEC filings and actual future results may vary materially. Forward-looking statements in the press release that we issued yesterday along with other remarks today are made as of today and we undertake no duty to update them as actual events unfold. I would now like to turn the conference call over to U. S. Steel President and CEO, Dave Burritt, who will begin today’s presentation on Slide 4.

Thank you, Kevin. Today is a great day for U.S Steel. I could not be more excited for our employees, for our community, for our customers, and for our current and future stockholders. Before I get into our strong first quarter financial results, I want to take a few moments to provide context for yesterday's state-of-the-art high-tech transformational announcement. We have all seen the headlines. Someone in this call have even said U.S Steel's competitive position has weakened. U.S Steel can't compete with the recently announced capacity additions. We know the competition, we live it, and we welcome it. We don’t fear it, but we respect it. We love to compete. It's our competitive spirit, our unwavering commitment and our relentless focus that has brought us to yesterday's announcement. First, before we get into the materials, I want to talk about some facts. Then I will talk about the future. These are the facts. U.S steel is special and you know this. U.S steel is the most recognizable steel brand in the U.S and the only U.S headquartered steel company that can mine, melt and make steel in USA. That’s the fact. We have world-class safety performance, you all know that. That’s the fact.

Thanks, Dave, and good morning, everyone. Given yesterday's announcement, Page 9 provides a helpful visual of the work we've done on our capital structure over the last two years. We've made great progress reducing our overall debt and shifting our maturity profile. We’ve reshaped our capital structure, having eliminated or refinanced over $1.8 billion in debt. We’ve extended our maturity profile with no significant maturities until 2025 and beyond. In addition, our strong liquidity at $2.5 billion, including cash of $676 million and $1.8 billion of availability on our U.S and European revolving credit facilities, positions the company well for strategic investments like the one we announced yesterday. Turning to Page 10. Let's talk about the investment in Mon Valley. At a $1.2 billion level of investment, we're estimating a return of 15% or higher. You can see the expected cash requirements between today and 2022 with just over $1 billion being required between 2020 and 2021. We're planning to fund the investment from a combination of vendor supported financing and senior unsecured notes. The vendor supported financing will be approximately $250 million and will have flexible drawdown terms to match project cash flow requirements. Slide 11 provides a summary of our recent technology investments. In January, we announced the construction of a new Dynamo Line at our European steel mill. We expect that this $130 million capital investment over the next few years will deliver an annualized run rate EBITDA benefit of $35 million. Full-year EBITDA benefits are expected in 2021. In February, we announced the restart of the Tubular EAF in Fairfield, Alabama. We expect annualized run rate benefits by 2021, up to total approximately $80 million from our $280 million capital investment to complete the EAF. This investment makes our tubular business self-sufficient on round substrate for the seamless pipe mills, resulting in significant cost savings. Yesterday's announcement of the endless casting and rolling line is targeting first quarter in 2022 with a full-year $275 million EBITDA benefit expected in 2023. The combination of these three technology investments totaled approximately $390 million EBITDA expansion over the next 3 to 4 years. Before I turn it back to Dave, let's recap some of the first quarter highlights on Page 12. Total adjusted EBITDA of $285 million was up $30 million over the prior year quarter and up approximately $60 million versus our expectations. Overall, it was a strong first quarter. We gained market share and continue to see opportunities to improve our competitive position.

Thanks, Kevin. Before we turn to the Q&A, we’ve covered a lot today. So I want to take a moment to recap. As Kevin said, we're obviously happy with the first quarter. We have some serious headwinds in Europe that we have to work through. The market is certainly more challenged than anyone anticipated when we entered the year, but overall, we feel good about the business and 2019. Lastly, we have some really exciting news yesterday. We think this unleashes value in so many ways. It's a big-time capability improvement, a big-time cost improvement, and it's a big-time sustainability improvement. It checks all the boxes. Strong strategic rationale, high levels of value creation and our capital structure is well positioned to support this investment. I couldn't be happier for our employees, the community, our customers and the returns this will yield for our long-term stockholders. Kevin, let's move to Q&A.

Thank you, Dave. We have a lot of people in the queue today. So we would appreciate your cooperation to help us get everybody's questions. Greg, can you please queue the line for questions.

Thank you. Your first question comes from the line of Martin Englert from Jefferies. Please go ahead.

Hi. Good morning, everyone.

Good morning.

Good morning.

So for the Mon Valley project you’ve highlighted potential sources of funding of $250 million. I believe you said from vendors and then also unsecured notes as well as cash in the revolver. Can you provide a rough breakdown of the remaining allocation and also remind us of your targeted leverage metrics and what comfortable ranges?

Yes, so we're in good shape and I kind of talked about the timing of the requirements. So, I think overall we would look to fill most of it other than the vendor supported with high-yield. But we're going to be opportunistic, pick the right time, we want to make sure our message here is being absorbed and so we're in no hurry to go out there until the market is right and we need to. But I would say the majority ideally would be high-yield and the vendor supported financing.

And the leverage metrics that you're comfortable with?

Yes, I mean, given where we’re now right with this project and the Dynamo and the EAF, we're still very comfortably within our goal, which is kind of in the BB range. I don't think at any point we would get to more than 3x the total debt through this lift, obviously, subject to market conditions as always. Given where we’re starting from in terms of total and net debt leverage, we feel really good about our ability to pull this off and stay strong.

Okay. Thanks for that. And if I could, one last one, the new Mon Valley project is potentially significant support for the company. Can you discuss from a high level if other similar transformational projects are potentially under consideration?

Well, of course, we're always looking at opportunity. I will say this is such a big transformational project for us. This is one-of-a-kind. We don't see another project like this coming on for anyone anytime soon.

Okay. Thanks for the detail there and congratulations.

Thank you very much.

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

Okay, great. Thanks for taking my questions. I’m sure a lot of people are going to have questions on Mon Valley. So I will try and focus in on just one piece of it. Thanks by the way for the additional information on the longer term targets here. I was wondering if you can give us more details behind the targeted $275 million of EBITDA in 2023, that incremental contribution. For example, what price is that based on? Are they offsetting reductions? Since I -- it looks to me like this is an upgrade to existing downstream production mix that kind of thing. And any other additional detail behind that $275 million would be great. Thank you.

I’m not sure, I fully understood. This is Dave. But the way I interpret your question is, what are driving these EBITDA benefits. There is yield improvement, there is reduced externally purchased energy, there's more efficient staffing, there's improved operational efficiency, there's all those things that are going to be making the business stronger and better. In fact, if you think about this investment, we are already low on the cost curve. This will make us, from a variable cost perspective the -- from our outside in look, the lowest in the United States, and maybe Sara you can provide a little more color on this issue.

Sure. Thanks, Dave. This is Sara Greenstein. When you think about what this icon -- what this iconic investment does, it does a couple of things. It makes the Mon Valley works, one of the lowest cost steel mills in the world, able to profitably compete with both domestic and foreign steel producers, delivering sustainable profits through cycle. The other thing it does is, it enables the Mon Valley work to be the producer of choice for the lighter, wider, stronger and more formidable steel. So the combination of this advanced manufacturing technology when combined with our integrated steelmaking process at the Mon Valley enables us to do what no other North American steel producer can do today. We will be able to produce our proprietary advanced high-strength steel, substrate at the Mon Valley, making the strongest most formable products available to allow our auto customers to continue to lightweight their end products, previously incapable -- when we were previously incapable of doing this at the Valley. We will continue to support our appliance, our construction and our industrial customers from the Valley and provide both our current and future product capabilities for them, if they continue to light weight their products driving innovation and growth for them. But the profitability piece, which was the core of your question, really lies in the fact that we -- as Dave mentioned in an earlier comment, the material solution of choice for these end markets that we seek to serve were simultaneously reducing $35 a ton reduction in overall conversion cost, reducing our overall sustaining CapEx and then all the things that Dave just mentioned, improving yield, lowering energy consumption and greater production efficiency.

Yes. Thanks for that, Sara. I’m just sitting here holding a piece of steel in my hand. It's a sample of the 0.6 millimeter thick hot rolled strip, that's .0236 inches hot rolled, that is a thickness nobody in this market comes close to making today. We are going to unlock solutions for our customers that they’ve never thought possible to allow them to reengineer what they buy. This is clearly breakthrough folks.

And in addition to the investment that we are making at the Valley, our ability to be able to produce the thinner, lighter, wider product, then frees up our Gary facility and all the investments that we’ve recently made in our hot strip mill there to go after this thicker, wider, heavy gauge product, especially focused on the API market.

So the thick and thin of things, we got the thin side and we got the thick, and you know what we’re doing in Gary. $0.5 billion invested in on hot rolling, so we’re building a moat on that side and the mode here on the thin side. So we feel very good about where we are on this journey and over-the-top excited about the possibility. So thanks for the question. Sorry for the very long answer. One more thing, Kevin Bradley.

And just one thing, Dave, it's a great question. You mentioned the commercial fees. Just we model the IRR on this at 15% or higher. We are using our backward looking through cycle CRU. So this is not based on today's market. This is a much more conservative assumption that the market would revert back to. We always look at it on a backward looking. So if you believe there's a new normal or that today’s pricing is better and sustainable, the 15% would be much higher.

Okay. That’s helpful. Thank you. Just my follow-up question here, just curious how much capital is actually been spend at Mon Valley as part of the asset revitalization program so far? And how much additional CapEx at Mon Valley tied specifically to that, the ARP piece?

So this investment that we announced yesterday is in addition to the revitalization investment that we’ve made at the Mon Valley. And all in on ends across the Mon Valley, we will spend a couple hundred million dollars revamping our primary end and in our finishing line.

But think of this as a technological breakthrough. This is not revitalization. This is revolutionizing the way steel is made.

And specifically the hot mill has not received very much capital investment in the last couple of years. So that's part of the question I want to be clear on that as well.

Yes.

The cold mill there is a significant critical -- one of the 13 critical assets we talk about and is receiving capital. And that’s very …

And it's our primary end.

Yes.

Your next question comes from the line of Chris Terry from Deutsche Bank. Please go ahead.

Hi, guys and thanks for taking my questions. Just in terms of the technology given you will be the first in the U.S., can you just talk through your confidence on the reliability and the technology itself? And then just interested -- I know you’ve touched on this in some of the early questions, but why Mon Valley specifically and how long have you been looking at this investment? What’s the decision time line that you’ve been doing the details on this process? Thanks.

Well, this is Dave. Hi. The way we approach this and we look at our strategy, of course we look at our global footprint and make sure that we’re optimizing the value we have, the rigorous capital allocation process and then through that process we find out where the attractive markets are and we focus on those markets where they have sufficient size and they have adequate margins and they’re continuing to grow. And then we look at our capabilities and say how do we fit those capabilities into the markets that we want to pursue. And we looked at our footprint and we looked at the opportunities, it was clear that Mon Valley was the place. We knew we need to be doing some upgrades on the 1938 mill at that time, and this was going to be something that would take this not just to a good level, but to an absolutely great level.

Thank you, David. And if I could just add a bit, the state-of-the-art endless casting and rolling technology while the first of its kind to be introduced in the U.S is active with -- actually in operation and it has been for years in other countries around the world. So this is a proven technology and capability. We are bringing it to the U.S and we are combing it with our lowest cost facility already and the integrated steel making process. And as a result have the ability to make products that no one else in this country can. So it's deploying proven advanced manufacturing technology with our integrated steelmaking process that allows us and positions us to really make a game changing difference in this industry and this country. But why the Mon Valley? Talked about -- I talked about some of these, I think the first and foremost it expand our structural cost advantage at the Valley. We are currently a low cost provider. This moves us even further down the cost curve. It provides us as U.S Steel greater footprint optionality. I mentioned what this allows us to do and focus on now at our Gary works facility. It upgrades a 1938 vintage hot strip mill and takes us from being more limited and what we can do to be the most capable steel producer in terms of thinner, wider, stronger product in this country. And finally it enhances the number of markets that we can and intend and we will serve.

Well said, Sara. You know it and there is obviously going to be a lot more discussions that we have on this. We have models that have built that will bring this to life to you, but if you think about this technology, think about the four processes of steelmaking you got, iron making, steelmaking, hot rolling and then finishing. And where we've been challenged here is typically at our mills. Liquid steel we do exceptionally well. And integrated mills have this great cost advantage from a mine side and from our coke making, because you can use that energy to power the facility. So there's a lot of advantages that we have with liquid steel. Where we've had trouble is providing the extra variety of steel, the extra capability and this now expands our capability and moves us further down the cost curve so that we can be, if not the leader, certainly one of the leaders in the U.S., because we’re clearly in a great cost position when this is finished. So it's really important to understand the benefits of this because it has the conversion cost benefits as we use our state-of-the-art PRO-TEC XG3 steel at Ohio where we will be starting to run coils at the end of this year. So, all of this connects very well with the footprint that we've been working on for quite some time and we're finally able to get it announce to you folks. But it's going to take a while for you to digest it and understand it, and we have some models that we can be taking it through at the appropriate time.

Just a follow-up question on the CapEx. In layering all the asset revitalization program of that 900 mills still to spend at EAF at Fairfield and now Mon Valley. Is there a way to maybe delay this or you saw sentiments -- the time frame to get this in and you think the downstream can handle it.

I’m not sure, I fully understand, you’re breaking up a little bit. But we don’t intend to slow down the asset revitalization. We've always said if we can get the returns faster, we’re going to go after them. So we need to make sure that we get ourselves positioned in -- position well and the revitalization is well underway. We're executing, and so we don't want to move slower. We want to move faster.

Your next question comes from the line of Karl Blunden from Goldman Sachs. Please go ahead.

Hi. Good morning, guys. Thanks for taking the question. I guess on the side of funding here, when you think about funding all of the CapEx and organic investment at Mon Valley, are there any noncore assets in the portfolio that you take at and look at that may help you raise some of the cash there and reduce the debt burden you’re going to take on?

We're always looking at our footprint and you’ve heard me say this so many times. Everything is for sale all the time, but we certainly like our footprint currently and we're basically doing our best to create monetized value from all of our assets and upgrading them and improving them, so that we will be positioned here with this breakthrough investment for a better tomorrow.

Got you. And historically there was some discussion of the European asset. Is the environment now just not conducive to raising capital from that market through asset sales?

Well, I think you know about the Dynamo Line, so that's an important investment for us and that is extraordinarily well run asset and it's been throwing off substantial EBITDA for the -- from well run operations. This is one of those businesses that makes money in the trough. And so it's an ideal asset for us and we will continue to make sure that we manage that well and with the Dynamo Line that also gets us a additional EBITDA.

Okay. And just a quick one, you mentioned unsecured debt in your slides. Wondering if you would be open secured debt as well if that’s needed, given the funding cost?

We are always going to be open to anything the company needs. At the same time, we don't see that as a requirement. So that is not a preference for us. We’d like to stay on secured and that’s our intention.

Thanks for the time.

And maybe that gets into a little bit here of our capital allocation strategy, because what we're -- it's really important people understand this because we’re always looking at throughout the business cycle and the way we manage this and we have these three priorities for cash and it gets into what you’re kind of walking around here on the balance sheet. We had have a strong balance sheet that’s supportive of the company's strategic objective, that's first and foremost, but listen we will do what’s required in order to deliver that. We are investing now -- and second one is investing in operational excellence, investing in technology, investing in innovation that that’s aligned with these critical success factors that we mentioned are moving up the talent curve and moving down the cost curve and then winning in attractive markets we got to take share. And then finally this -- the third priority here is return capital stockholders through a consistent dividend payment and opportunistic stock repurchases. This is what we want to construct here and with these types of improvements that we're making over the last few years. You think about the cleanup of the balance sheet to clean up the operations and taken the operations to a better level are increasing our execution capability and demonstrating that we can perform, now is the right time for this announcement for us to accelerate and set the stage for people that we're -- we will still play some defense, but mostly we're going to be pushing forward to a show that we're a leader now and not somebody that’s having market share taken from us. We are going to be taking it from others.

Your next question comes from the line of Nick Jarmoszuk from Stifel. Please go ahead.

Hi. Good morning. Had a question on the CapEx outlook. We’ve got the Fairfield project, we have the Mon Valley. You provided how that’s going to be spent over -- through '22. The Dynamo Line, you have the ongoing asset revitalization. There's going to be a line for sustaining CapEx. Can you give us a sense for what those various line items are going to be for the next couple of years?

I’m not going to break it down. Let me start by saying that you’ve got the new updated guidance on CapEx moving up to 1.3. That reflects all the projects that we’ve announced. So in total and sustaining capital and all engineering capital. So that’s all in what we know today and what you know today is reflected. Clearly the icon, the project in the Valley etcetera is going to increase that going forward. Next year is our last year of revitalization and so it will be -- you will see the same level coming through. There's going to be some spillover because of payment terms into the following year as well from revitalization. But we’re not going to forecast beyond this year in terms of CapEx. But as I shared earlier, very comfortable with our liquidity, our cash flow position and the balance sheet strength and our ability to handle this lift.

And then regarding the $275 million uplift from the Mon Valley project, so if you are saving $35 per ton and the production is still going to be roughly 2.6 million tons, there I can account for roughly $90 million of EBITDA uplift. Can you talk about the remaining amounts in terms of how to think about the buckets in terms of the thinner gauges, the better pricing in that regard, how we can think about -- or is it lower purchases of energy purchases, better staffing? How can we think about the bridge from the $90 million -- or from 0 to $90 million to $275 million.

So, Nick, you summarized the calculation, the cost reductions appropriately. That is about approximately $90 million of the EBITDA benefits expected as a result of this investment. Additionally, we are sizing the commercial opportunities about 50% of the $275 million. So that’s everything we are looking through for additional mix improvements and all the benefit that Dave and Sara have described here on this call today. And then we’ve some other benefits from the cogeneration facility and just some overall efficiencies throughout the entire Mon Valley footprint. So kind of to summarize, the variable cost is about a third of the improvement with -- a half attributable to commercial benefits. That should give you some good insight into the anatomy of where the EBITDA is coming from on a run rate basis.

Thank you.

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

Yes. Hey, good morning. I wanted to ask a little bit about the quarter, if I could, steer things that way. First off, the decline in prices for the flat-rolled segment was a lot smaller than the spot price, obviously you have annual contracts. But just as you see that kind of environment, should we expect to see kind of the same kind of decline going forward, given the recent spot declines. And on the tubular side, you saw prices go up when the PIPELOGIX price fell about $40 a ton. So can you just provide a little bit more color on kind of the trends you’re seeing in pricing?

Yes. So, Timna, I will talk a little bit first maybe about the 4Q to 1Q change in flat-rolled. I think we saw a really good improvement in our mix. We were able to capture some high-end hot-rolled, I mean some other project business that kept our average selling prices pretty resilient in this spot market environment that we're in. It also reflects the success we had in our annual contracts. So we're pretty happy with where we came in for the first quarter from an average selling price perspective. On the tubular side, we did see some good improvement in pricing, mostly on the seamless side. So really a mix -- nice mix change there with seamless, and which contributed a lot to the commercial uplift in the tubular segment from a 4Q to 1Q perspective.

Okay. Helpful. And then I did ask a little bit about like if that’s -- if either one or both of those are trends that you could see continuing. And then separately can you give us your perspective and the updates you’re seeing on the air quality issues in Clairton? I think I saw last night or this morning come through a lawsuit claiming $50 million in damages. I just wanted to get your response to that. Thanks.

So, Timna, maybe I will take the first question on the trend and then maybe ask Sara to give an overview of where we’re at Clairton. So I think we all have seen the recent move down in spot prices, so we certainly expect that to impact our commercial portfolio. But we remain committed to kind of the mix improvements and going after those markets as described by Sara and Dave. So you can certainly model for the impact of a decreasing price environment here on the business, but overall our strategy remains to make sure that our mix is strong, and then we can generate the right types of average selling prices in different types of through cycle environments. I will now hand it to Sara.

Yes. Thanks, Kevin. And while we don’t know or will we comment on any legal activity as it relates to Clairton. What I will comment on is and I think you all know, we experienced a catastrophic event on December 24 and couldn't be prouder of the people and the team and the community that came together to support us and getting us back up. As of April 4, we restarted the desulfurization process facility at the Clairton plant. We -- as of that date we are desulfurizing a 100% of the coke oven gas that we generate at that plant. And in fact on our January earnings call, we’ve forecasted about a $40 million impact from the fire. And we had about $31 million impact in the quarter, primarily really due to the purchase of natural gas and inefficiencies that we experienced. But we are back up, we are running and that's where we are at.

Your next question comes from the line of Matt Vittorioso from Jefferies. Please go ahead.

Yes, good morning. Thanks for taking my question. Forgive sort of an equity question from a debt guy, but I thought share buybacks were really sort of something you did when you didn't have anything better to do with the cash. If you guys have identified $3 billion of value-add projects, what’s the hurry in getting cash back to shareholders at this time?

Yes, we’re not seeing it as a hurry. When we announced the program last year, what we’re trying to do is make sure we got a balanced capital allocation methodology. So the $300 million over the two year period, we think is an appropriate level and we are kind of committed to it. So we’re going to continue to do that. Agree we’ve got some very high and exciting opportunities, high return exciting opportunities, but we want to make sure we’re balanced as we go through. So for now, we feel good about the program, we are executing against it. We think appropriately and you can expect that to continue.

Okay. And then one quick follow-up as you think about coming to the high-yield unsecured market, you had mentioned sort of a leveraged cap, if you will, of around 3x and you’ve referenced a strong balance sheet a number of times today. I mean, is that your sense that up to a 3x levered balance sheet would sort of maintain that strong balance sheet?

No, I didn’t mean to imply it as a cap. What I was saying is what we’ve announced, we don’t think over the coming years would put us above 3x. So what we’ve said is and we wouldn’t talk with the agencies regularly, under 4x we think is a BB, and that's our medium to long-term goal. And so not implying a cap at 3x, I’m just saying given where we're and what we’ve announced in terms of the investment, I don't think we go above 3x with that.

Your next question comes from the line of John Tumazos from Very Independent Research. Please go ahead.

Thank you very much. Could you give us a little more explanation as to the physical breakthroughs of the new rolling mill. How much wider is it? You already gave us thinness. Forgive me, could you describe the scientific measures of improved ductility or formability that you referred to qualitatively? How much wider was steel be for an automaker, because it's thinner, stronger more ductile? Forgive me for my specificity and enthusiasm, please.

That’s a very detailed question. And I think I will keep it back to the -- is it strategic, we’re going thinner and we’re going thicker on the strategy and we can get you more details on those specifics at another time. But I think today we're talking about what the strategy is and I don’t know if we can get into those details at this point.

Congratulations.

Thank you. What I can tell you just very quickly as you know we can go down to .03 on gauge and we can go as wide as 77 inches.

Thank you.

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

Hey, good morning. Thanks for all the good details this morning. I appreciate it. I have just a question on the guidance for the second quarter. I know European spreads have been weak. Are we -- should we be expecting Europe to on an EBIT basis be in the red in the second quarter similar -- similarly should we expect that for tubular, given a little bit of softness in that market. And do you expect flat-rolled volumes to be higher relative to Q1 in the U.S?

What I would say, we’re not going to give specific quantitative, especially at the segment level. But given my comments, you can expect Europe to be down from Q1. And we do expect shipments in North American flat-rolled to be up in Q2 sequentially if that helps. But we’re going to -- later in the quarter, we are going to come out with more quantitative guidance and give you much more clarity around what to expect.

There's no question, there's pressure in Europe. We see the economic reports and we feel the pressure on margin, no doubt about it. But as you look at this year and where we started this year and where we are right now, we feel is good about the year now as we did then. Now the mix of where things are has been shifting a bit, but the first half will be about the same as what we thought it was at the beginning of the year and we’re going to have a really good 2019. That's where we are.

Thanks. And then just have a follow-up question. I just wanted to be clear, so the $1.2 billion investment on Mon Valley, obviously need to support that with capital. Are we expecting that $1.2 billion to be syndicated right now? Meaning are you going out and raising those funds in the market today or is that going to be staggered through time? Thanks.

Yes, so we went through this a little bit, but the bulk of the requirement is in 2020, 2021. So, again, we're in good shape right now. We can be opportunistic. We want to take the timing. We don’t need to get out too far ahead of it. So when the market is right and we're ready, we will go in, but there's no hurry here for us.

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

Yes, good morning, David and the team and congratulations on the quarter …

Good morning.

… and more importantly, Dave, the project in Mon Valley. My question is, is really around the strategy with Mon Valley and the rest of your projects. A lot of other domestic steel producers have opted to import semi-finished or intermediate steel and then do the downstream finishing in the U.S. With some recent announcements by the administration with exemptions being denied, California Steel, I know don’t do stainless, both gratings and some others, the administration is clearly saying we want domestic industry to invest in the U.S and invest in U.S jobs, like you're doing at Mon Valley. What assurances do you have from the administration that they will be able to maintain that stance? And how do you think they will address trade in terms of transshipping which in my mind is the key to fair trade, eliminating transshipping.

There was a lot in that question. I will just say first on the slab things, we are open for business and so if anybody needs slabs we can certainly provide that. As far as assurances, nobody can give anybody assurances on any of these things, but we’ve enough contacts and enough connection here that we just can't imagine this administration blinking at a time like this. I mean, there's a lot going on and we know it's very heavy. You got to get three different governments to agree on USMCA. You got Canada, you got Mexico, you got the United States, so this is a heavy lift. And also the more important issue is related to China. And China is the one with the excess capacity and to your point until you apply these things everywhere, you’re still going to have some leakage. So we have some leakage of unfair trade that’s happened in Europe right now and that needs to be shored up. And when that gets shored up, we will start seeing a better pricing environment in Europe as well. But as far as assurances, I don't know that anybody could say that. But we feel strongly that the 232 will continue and we’re going to continue to operate our facilities and our business to the best we can within the current environment and also continue to be more nimble, take costs out, so that if it does change, we're still going to be able to generate value. So it's a really a hard question to speculate on, but we’re optimistic that we'll get to the right conclusion with this administration.

I agree. Dave, just want to add a reminder. When we model out our strategy, we absolutely try to look at it from a standpoint of not depending on things that we can't necessarily predict. So our strategy holds up on a through cycle basis on a look back. But agree completely, we feel the strong support from the administration and we expect that to continue.

Yes, that’s a great point. We’re focused on what we can control. The -- we understand this whack a mole thing that you've been talking about for a long time, the Vietnam case and we have had changes with CVD and the whole trade situation. So certainly there are several provisions designed to increase the use of the USMCA original steel and increased trade enforcement coordination among the three countries, and we look forward to getting an agreement there that's in the best interest of all and we think we will. We absolutely think that there will be always some type of appropriate measure, maybe moving more toward quotas than tariffs for the USMCA, but we will have to wait and see. And in any case we are optimistic that it will be a good result.

And the West Coast market is pretty much served for carbon sheet by your joint venture with POSCO, UPI and California Steel, which was recently denied exemption on the slabs they have to import finish. Are you shipping or intend to ship a fair amount of slabs, hot band out to the West Coast, which would move it out of the Midwest market?

We -- go ahead, Kevin.

No, I just -- yes, we have been shifting to our JV UPI for a few years now and that’s continuing this year. So we're -- the primary supplier of substrate to that joint venture today.

Your next question comes from the line of Piyush Sood from Morgan Stanley. Please go ahead.

Hey, guys. Good morning. A lot of questions have been covered. Couple more from me. Once you’ve done with the Mon Valley investment and may be reusing some of that equipment elsewhere, is there a need to do something similar elsewhere down the line in a few years?

Good question. Really what we’re putting in a brand-new technology and what we are -- we will no longer use. It's a 1938 hot strip mill. So I don't imagine that being redeployed anywhere else.

So on the -- you probably get rid of the old equipment, but just wanted to understand if the other operations need a similar upgrade down the line?

Hey, Piyush. Yes, so as Dave described earlier, when we look at our footprint, we look at the markets where we want to participate and then we understand our capability to serve those markets. So with that strategy in mind, that’s what we found particularly compelling about this investment at the Mon Valley. As we evaluate our footprint and the capabilities required to serve the markets we find attractive, we will choose the investment strategy required to kind of satisfy that strategy. So that’s the lens through which we look at these types of projects. And similarly, to Gary hot strip mill. We understood what it's capabilities were, what markets we wanted to serve out of that facility, they’re best positioned to serve those markets. So we will continue to do that type of analysis on our footprint and we will invest in those types of projects that return value.

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

Good morning. Do you have any current blast furnaces offline and or any about to go offline?

No plans right now for us to turn off any blast furnaces today. A lot of -- with the exception of planned outages for revitalization, but there's no plans to take anything offline today.

Yes, I’m not sure I understand. I think you're asking about major outages that we’ve scheduled for the second quarter, because we’ve Mon Valley, the blast furnace number 3, Great Lakes split, B2 furnace and a shorter duration outage at number 14 at Gary. Is that what you’re referring to, because we have no plans to shut down any blast furnaces.

No I was thinking specifically about number 14 and the stave problem.

Okay. So, yes, we did have an outage in Q1.

Yes, which were normal and that’s a high-tech improvement. That’s a whole another discussion that we could have. That was incredible, awesome work. This was rehearsed. The team pulled it together. This is something you guys ought to come visit to see what the people did, this was absolutely remarkable. So, yes, that was an improvement that we made there and then that’s behind us. A big success story for us.

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

Hi, everyone. Don’t want to beat the dead horse on the funding issue, but noted your preference for unsecured bonds for the $1.2 billion. Is it -- are you willing to consider a short-term bond like a five-year issue inside of your current maturities or is it important to be at or beyond 2026?

Yes, we kind of -- we like the runway that we’ve created. So we want to preserve that. So that’s our intension. Again, we are going to be nimble and flexible. We are going to do what’s in the best interest to have an efficient capital structure. So we will look at our options and pick the right option at the right time. But I’m indicating longer term high yield as the likely anchored tenant in the funding strategy for this project.

Okay. And then what was the look back? Are you priced through the cycle that you used for your IRR calculation?

Yes, It's just mathematical, so you can do it yourself. But we are looking, just above 600, that’s kind of a multiyear look back through cycle average for hot-rolled.

Okay, great. And then last one for me. I appreciate the color on Clairton and I know you can't talk about existing litigation, but …

Operator?

Matthew Fields, your line is open.

Hello?

Yes, sorry, Matt. You were off there for a moment. Continue with your question, please.

Oh, yes. Just with regards to Clairton, are you currently fully in compliance with your air emissions permit?

We are.

Right. That’s it for me. Thank you.

Your next question comes from the line of Tyler Kenyon from Cowen. Please go ahead.

Hey, good morning. So appreciate all the color so far, but my first question was just related to the Mon Valley investment. And are you expecting any improvement, reduced bottlenecks or commercial optionality across the rest of your U.S. flat-rolled operations, outside of Mon Valley? And if so, can you talk a bit about those?

Sure. So the answer -- the short answer is yes, we are. And I think you might have heard Dave talk about we are going to be able to go thinner, lighter, wider and thicker, heavier and build moats around the markets that we are seeking to serve in a very differentiated way. So we’ve talked a lot about the investment and the technology investment at the Valley. And then at Gary, through our revitalization efforts have put significant money into our hot strip mill there and downstream assets there that have positioned us to be able to serve the API market, the packaging market in a very differentiated cost competitive way. We are leveraging the best of our footprint with the best technology available to deliver to the market that we will serve and creating moats around those markets as we do so.

And so are all of those benefits captured in your projected EBITDA contribution from the $1.2 billion or could those be in addition to what it is that you weighed out here?

It would be .

Great.

So we’re bumping up on our time here 9:30. So on behalf of the entire leadership team here at U.S. Steel, we do appreciate everybody's strong interest in the company and the investment we made yesterday. And we're certainly available to take any additional questions that you have. And so with that, I'm going to hand it back over to Dave as we wrap up today’s call.

Yes, thanks everybody for your interest in U.S. Steel and as Kevin just said, we know there was a lot to take in on the call today. So obviously we're incredibly excited about this transformative announcement. So for those not able to have their questions answered on the call, our team is available to continue that dialogue. But before I signoff, I do want to recognize our U.S. Steel employees. You finished the first 123 days of 2019 with all-time record safety results as measured by days away from work. Thank you for making safety first not a slogan, but a reality. Your hard work has gotten us to today and our announcement at the Mon Valley. This investment is a sign of our continued confidence in your abilities to deliver high-quality sustainable steel solutions to our customers. Competitive pressures are increasing, but so is your fight and perseverance. We've made good progress so far, but I know our best days are ahead. Let's get back to work with safety and environmental stewardship as our core values.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.