Ternium S.A.

Good morning, ladies and gentlemen. Welcome to Turnium's conference call to discuss the results for the first quarter 2026. We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the company's presentation. After the company's remarks are completed, there will be a question and answer session. At that time, further instructions will be given. We would like to remind you that this conference call is intended exclusively for investors and market analysts. We request that any questions from journalists be dedicated to the media relations through our website in the press section. With this, I would like now to turn the floor over to Mr. Sebastian Marti. You may proceed. Thank you.

Good morning, and thank you for joining us. My name is Sebastián Martí, and I am Turing's Global IR and Compliance Senior Director. Yesterday, we announced our financial results for the first quarter of 2026. Today's call is intended to provide additional context to that presentation. I'm joined by Máximo Bedoya, Turing's Chief Executive Officer, and Pablo Bricio, the company's Chief Financial Officer, who will discuss Turing's operating environment and performance. Following our prepared remarks, we will open up the call to your questions. Before we begin, I would like to remind you that this conference call contains forward-looking information and that actual results may vary from those expressed or implied. Factors that could affect results are contained in our filings with the Securities and Exchange Commission and on page two in today's webcast presentation. You will also find any reference to non-IFRS financial measures reconciled to the most directly comparable IFRS measures in the press release issued yesterday. With that, I'll turn the call over to Mr. Bedoya.

Thank you, Sebastian. Good morning, everyone, and thank you for joining our conference call. W's margin in the first quarter continued on a recovery path reaching 12%. This improvement reflects a combination of factors. An improving market environment in Mexico, a focus on profitability over volume in Brazil, and the continued work of our teams to increase efficiency across our industrial operations. In Mexico, apparent steel consumption fell around 10% in 2025, driven by uncertainty triggered by U.S. trade actions. In 2026, however, we see an improvement. The Mexican government has been actively working to mitigate the negative effects of US trade measures on the Mexican economy by defending the local industry against unfair imports from Asia. These actions not only support the continued development of the Mexican industry, but are closely aligned with the US government's own trade strategy. Plan Mexico is also central to this effort. It promotes industrial development, increased domestic content in manufacturing, and strengthens regional supply chains. In this same line, last week, the steel industry and the Mexican government signed a landmark agreement to prioritize domestically produced steel in all public procurements, a clear sign of the opportunity ahead. Taken together, These policies support our expectation of a recovery in Mexican steel demand. In this context, we expect volumes in Mexico to continue improving in the second quarter, driven mainly by the commercial market. The significant stocking that took place across the value chain in 2025 is now giving way to a normalization of apparent demand. Beyond that, we are seeing early movements in several infrastructure projects, which could add meaningful demand in the coming orders. Turning to our pesquería project in Mexico, the ramp-up curve of the cold rolling mill and the galvanizing line are running ahead of plan. We expect both lines to be operating close to a full capacity by October. The slab facility is also advancing in line with expectation. This project is central to our strategy. It will significantly increase our vertical integration in Mexico, reduce our resilience on externally sourced slabs, and enhance our product capabilities across automotive, industrial, and construction applications. Importantly, as the automotive USMCA rule of origin enters into effect next year, this facility will position Ternium as a key player in meeting a growing demand. In this respect, I am pleased to share that we have been granted a patent in the United States for our new electrical steelmaking process, which will enable us to produce exposed built at scale. This innovation leverages the integration of direct reduction at the same site. In addition, innovations such as virtual stamping solution, which utilizes artificial intelligence to streamline certification process for the automotive industry, enforcing our drive for operational excellence. This commitment continues to be recognized by our customers. In February, we were honored by Ariston Group with the Strategic Ponding Award, the highest recognition for quality and partnership. And in April, Tarnio Mexico received the 2025 John Deere Crop Award and achieved the ponding level, John Deere's highest distinction for cost efficiency. effective, and long-term collaboration. Brazil's steel consumption remains broadly stable, with some sectors showing resilience and others facing more pressure. The automotive industry continues to perform well, with production expected to grow around 4% this year. On the other hand, sectors like agribusiness has been weakened We have seen weaker demand. A key challenge in the quarter was a significant increase in steel imports, up around 30% versus the previous quarter. Imports accelerated ahead of the government's anti-dumping measures on coal-rollet and coal-fit products. This has resulted in elevated inventory levels of imported material in the market, which we expect to normalize by the second half of the year. These trade defenses measure gain traction and inventories level normalized. We expect the CEMINA's market share to improve. However, it is also worth noting that import pressure is not limited to China. Volumes from Southeast Asia, particularly South Korea and Vietnam, have increased significantly, reflecting the rather indirect effects of China oversupply on the region's trade flow. In March... We were honored to welcome President Lula to the official inauguration of the Roberto Roca Technical School located near our Rio de Janeiro plant. The school provides full-funded technical education to young people from the surrounding communities, offering them access to a world-class education. Built with an investment of $50 million, we expect to welcome close to 600 students by next year. In Argentina, a 2024 record, one of the lowest deal consumption levels in two decades, the market began to recover in 2025. However, 2026 did not start as we had expected. Demand is growing unequally. Mining, energy, and agriculture are performing well. Automate remains at reasonable levels. Constructions remain soft. Metal, mechanical, and home appliance sectors are lagging, affected by weak domestic consumption. I bring my remarks to a close. I am pleased to share that Ternium has once again been recognized as a sustainability champion by the World Steel Association. This recognition is granted to companies that innate sustainability into their core strategy, combining environmental management, safety performance, innovation, and responsible community engagements. Looking ahead, We are constructive on our market and our ability to continue improving performance. In Mexico, the combination of normalizing demand, supportive industrial policies, and the ramp-up of our downstream projects position us well for the quarters ahead. In Brazil, as trade defenses measures gain traction and imports inventory normalize, we expect to see a healthy competitive environment. In Argentina, we continue to monitor the recovery closely while maintaining our operational discipline. Across all our operations, our team remains focused on driving efficiency and lowering costs, and we are already seeing the benefits. For all, the recognition we continue to receive from our customers reflects the quality of what we are doing every day. We are confident in Sterling's ability to deliver even stronger performance in the periods ahead. With that, I'd like to move to a review of our quarterly performance. Pablo, please go ahead.

Thanks, Massimo, and thanks, everybody, for participating in our call. So, let's review our operation and financial performance for the first quarter of this year. Starting the webcast presentation, page number three. we can see that the adjusted EBITDA increased sequentially by 21% in the first quarter, in line with our expectations and reflecting margin improvements. Looking ahead, we expect adjusted EBITDA margin to continue increasing, supported by higher revenue per ton, particularly Mexico and Brazil, partially offset by higher cost per ton across our main markets. Let's move to the next slide. Net income for the first quarter of 2026 reached $372 million. This reflects improved operating performance, stronger net financial results, primarily driven by foreign exchange gains in Mexico, Argentina, and Brazil, and positive deferred tax results. The third tax gain amounted to $122 million, driven mainly by current fluctuations in Argentina and Brazil and inflation effects in Argentina. The income in the quarter also included a $48 million loss from the quarterly update of the value of a provision for ongoing litigation related to the acquisition of the participation in UCMinas in 2012. Let's turn to page 5 to review the steel segment performance. Overall, shipments were broadly in line with the previous quarter. In Mexico, volumes increased, supported by solid commercial market activity. This was driven by more effective trade defenses against unfair imports, healthier inventory levels across the value chain, and a seasonal recovery in demand. In Brazil, usiminas prioritize profitability in the face of increased cost volatility, particularly in energy and logistics, resulting in a modest sequential decline in shipments. In the southern region, demands of reflecting weaker industrial activity in Argentina alongside typical seasonal factors, leading to a sequential decrease in shipments. In the head, we expect shipments to trend higher, mainly driven by Mexico and Argentina, as trade measures gain traction in Mexico and demand conditions gradually improve across both markets. Let's turn to page 6 to review the performance of our steel segment. Steel cash operating income improved during the period. driven by higher margins, resulting from realized prices gains, which were partially upset by higher raw material and purchase lab costs. On the next slide, the mining segment reflects a different dynamic. In this case, shipment declined sequentially due to operational disruptions in Brazil caused by an unusual intense rainfall. Finally, let's turn to the cash flow and balance sheet performance on page 8. The company continues to generate strong cash flow from operations, although this quarter we saw an increase in working capital, delivered by an increase in trade reserves, mainly due to higher steel prices and volumes in Mexico. We anticipate that sales will grow in the second quarter of this year, likely requiring a further rise in working capital. Capital expenditures continue to reflect our progress in the expansion of our industrial center in Pesqueria, now mostly focused on the construction of the slab-making facility. Finally, we ended the quarter with a net cash position of $327 million. On top of our capex needs, the cash position declined, including a $315 million payment for requisition of Yushimina shares from Nippon Steel. Parsello said, buy a $150 million loan collection from TechGen, our non-consolidated energy joint venture that supplies power to operations in Mexico. Okay, this concludes our prepared remarks for the first quarter. We will now be happy to take your questions. Thanks, and please proceed with the Q&A session.

We will now begin the question and answer session. To ask a question, please press Raise Hand. To withdraw your question, you can leave the QE by clicking on Put Hand Down. Our first question comes from Mr. Rodolfo Angele from J.P. Morgan. You may proceed.

Hi. Good morning. I think now you can hear me. Yeah. Okay. So, I wanted to just hear your thoughts on two aspects that I think are relevant for Attorney's future performance. So, First, there's been a lot of discussion on USMCA, so if you could share your thoughts on what happens there and what it means in terms of different scenarios for the company's performance. And I also wanted to hear from you a little bit about the expectations for the slab market in terms of pricing outlook for the remaining of the year, especially. And that's all. Thank you.

Thank you, Rodolfo. Let me start with the USMCA question. And as you know, there have been a lot of discussion and talks about USMCA. Look, I believe that there will be a trade, a deal between US and Mexico. And as you know, the U.S. administration, through the USDR and the Mexican government, through the Secretary of Economy, holding meetings. There is a formal meeting on the 25th of May, which is going to start formally the revision of the discussions of the USMCA. Most of that discussion are probably going to be on discussing mainly strictly rule of origin and some other issues that have arised. And I think my thoughts on this is that this is going to take some time. So I am positive there is going to be an agreement. But I don't know exactly the timeline. Probably won't be by the 1st of July and probably would get most of this year. So this is, I mean, my thoughts of what is happening in the USMCA. There is also some discussions going on on the Section 232. As you know, I don't think, my thoughts is, and I always said, There is no, there's an incompatibility between Section 232 and USMCA. It doesn't make sense, makes Mexico subject to 232 in steel, as the US has a steel trade surplus, a very big steel trade surplus with Mexico. I know the Mexican administration has also said stating that there is a priority while the USMCA is negotiated, that there has to be a relief in Steel and Automotive Section 232, and I know they are discussing this during these following weeks. Nevertheless, I think it's important that the Mexican administration, as I said a little bit in my remarks, Rodolfo, has been very proactive in launching initiatives to strengthen the steel consumption in Mexico. While all this is going on, the Plan Mexico, the target measures against unfair competition, the imposition of tariffs for countries that don't have trade agreements with Mexico, all this, I think it's a very active way of the Mexican government to attacked the problems of the Mexican economy while these two things are negotiated. So in the end, I think USMCA, as I said, is going to be renewed, probably with much tougher rule of horizons, which I think is a very good thing. But I'm not that certain of the timing. Probably the timing, it takes a little bit more longer. So I hope with this last large answer, I... I did answer your question also.

Yes, you did. Thank you very much.

The slab market, what do you refer with the slab market?

It's just a market that I think it's more unique overall in terms of how pricing dynamics work. So I just wanted to hear your thoughts on that. What do you see, especially on pricing? What do you expect for the coming quarters?

Prices, as it has been in most of steel products, have been increasing recently. Clearly, the increase in fuel increases the logistics for slabs, and also there has been some increase in iron ore. and in other raw materials, which have made the slab market a little bit more expensive. You know, I mean, from all our production, our buying of slab is not as big as it used to be because most of the slabs come from our turning Brazil facility. But nevertheless, we are buying in the market and we are seeing some increase in that. to compensate probably with increasing in prices in finishing products also.

Thank you very much.

You're welcome, Rolfo.

Our next question comes from Mrs. Tina Tanners from Wells Fargo Securities. You may proceed.

Hello? Hello? Yes, Tina, we can hear you.

Oh, fantastic. Sorry. So I wanted to ask, if I could, about a few things. One is to follow up on the USMCA discussions. The US government is more interested in granting relief on tariffs if there's a construction of production in the US. I'm just wondering if you would expand your US presence. Also wondering along those same lines about hearing about a Mexican dumping case against U.S. galvanized imports. If you could address those.

Timna, we are not thinking in making some production or increased production in the U.S. now. We don't have that as a plan today. And second, there is a dumping case against cold-rolled products. There's no dumping case against galvanized in Mexico. At least in the U.S. There is a dumping case in galvanized against Vietnam and I think other countries.

Okay. I heard that Mexico was working on one against the U.S. I thought that could be positive for your operations. So we'll stay tuned there. Second, can you expand a bit more on the mention of electrical steel, electrical, sorry, EAF capabilities to make exposed automotive and remind us what might be the time frame for doing that?

Yes, for sure. I mean, as you probably remember, the steel shop is going to start the ramp up in... between the last quarter of this year and early next year. As you know, the operation, I mean, the facility is huge. I hope all of you can one day visit it because it's worth visiting the facility. So the ramp-up facility, the ramp-up curb should take at least all 2027. In the meantime, during all this wrap-up, we are going to work with the automotive customers to certify our products. Certification process for all automotive products, not only the exposed material, but also all the other parts of the car needs certification, but we are working very close with all of them because they are very eager to accelerate the certification process, and so we are working already with them on how to accelerate the certification process as much as possible. We have recently increased the capacity of our lab in Pesteria, which we are working certifying all the lab equipment so we can certify part of the process they need in that site. And the, I mean, the capacity that this EIF is going to have to have the capacity of producing exposed material in a sustainable way and in a continuous way is going to be unique because of the process we are doing and all the patents we are developing, especially to decrease all the nitrogen that the EIF usually have. So, this is a unique process that we are developing with our technical people and the supplier of equipment that is Tenova, some sister company of us. So, I mean, the timing should be around next year. Probably by the third and fourth quarter of next year that we are going to supply in a sustainable way to the automotive industry.

So you'd be qualified for 2028 or qualified for 2027?

No, the idea is to qualify everything for 2028. Got it. Okay, great. Thank you.

You're welcome. Our next question comes from Mr. Alfonso Salazar from Scotiabank. Please, Mr. Alfonso, you may proceed.

Sorry. A couple of questions on my end. The first one is regarding the outlook in Argentina. i i want to see if you can give us more color what's going on and what are your expectations for future demand um also try to understand better what's the situation regarding imports in seems to be more problematic than in the past and also um exports from argentina to other latin american countries they want the outlook there because of the same thing you know imports from from to other countries from Asia. The second question is some comments on the decarbonization trends in Latin America. It seems that we always knew that it was going to take a year longer than Europe, but any comments on what is the outcome there as well, these trends of decarbonization and green steel?

Yeah, thank you, Alfonso. Outlook in Argentina, I mean, in the short term, shipments in the second quarter are going to increase because, as you know, the first quarter in Argentina is always a seasonably low quarter. January and February usually are holidays in Argentina. So the demand is quite . Then further down the road, I think some of the sectors present a good opportunity. Mining, oil and gas, and agriculture. They are compensated by others like mechanical goods and like that demand is not very good in the final goods. So it's going to be a little bit better, but we don't expect a huge growth compared to 2025. Imports, although there has been a lot of talks about imports, we are not seeing imports in our products. We have seen some imports in the value change, but these are stable today. I think the problem in our value change is that the demand for the consumption is not very good. So that's the situation we have in Argentina. The carbonization in Latin America, you're saying that the path is lower than in Europe. I think that the pace in Europe has also decreased a lot. I mean, there's a lot of projects that have been announced in Europe that today are not going through. And they continue building up in blasphemy. In Latin America, I can say two things. I think one, there is increasing in Mexico, where you have the opportunity to change from coal to natural gas. So Mexico will continue in the path of having probably the lowest steel production emissions per ton of production of probably the world. And in Brazil, there's more difficulty to change glass furnace. So the decarbonization there is going to go through by small decreases by efficiency, but still working with glass furnace.

Thank you. And for other Latin American countries, demanding other countries that you source from Argentina?

No. The regional countries, I mean, usually they don't have a huge impact in the shipments. We continue to ship to Uruguay, Paraguay. Those are the countries that we ship from Argentina. But the consumption there is marginal. So it's not going to have a huge impact in our shipments.

Thank you.

You're welcome.

Our next question comes from Mr. Marcio Farid from Goldman Sachs. Please, Mr. Marcio, you may proceed.

Good morning. Thanks for the opportunity. Obviously, another follow-up on USMCA and Section 232. I think what's changed maybe this time is that obviously Mexico has put some import barriers to still come into Mexico to try and reduce triangulation as well or rerouting. And I'm just wondering, right, once assuming... you know, section 232 to Mexico is either removed or reduced. Do you think the competitive environment would be different versus where we were, you know, a few years ago?

Come from our turn in Brazil facility. But nevertheless, we are buying in the market and we are seeing some increase in that. It's compensated probably with increasing in prices in finishing products also.

Okay, thank you very much.

You're welcome, Rodolfo.

Our next question comes from Mrs. Timna Tanners from Wells Fargo Securities. You may proceed.

Hello. Hello.

Yes, Simna, we can hear you.

Oh, fantastic. Sorry. So I wanted to ask if I could about a few things. One is to follow up on the USMCA discussions. The US government is more interested in granting relief on tariffs if there's a construction of production in the US. So just wondering if you would expand your US presence. Also wondering along those same lines about hearing about a Mexican dumping case against US galvanized imports. If you could address those.

Timna, we are not thinking in making some production or increased production in the U.S. now. We don't have that as a plan today. And second, there is a dumping case against cold-rolled products. There's no dumping case against galvanized in Mexico. At least to the U.S. There is a dumping case in galvanized against Vietnam and I think other countries.

Okay. I heard that Mexico was working on one against the U.S. I thought that could be positive for your operations. So we'll stay tuned there. Second, can you expand a bit more on the mention of electrical steel, electrical, sorry, EAS capabilities to make exposed automotive and remind us what might be the timeframe for doing that?

Yes, for sure. I mean, as you probably remember, the steel shop is going to start the ramp up in the last quarter of, between the last quarter of this year and early next year. As you know, the operation, it's I mean, the facility is huge. I hope all of you can one day visit it because it's worth visiting the facility. So the ramp-up facility, the ramp-up corp should take at least all 2027. In the meantime, during all this ramp-up, we are going to work with the automotive customers to certify the our products certification process for all automotive products not only the exposed material but also all the other parts of the car needs certification but we are working very close with all of them because they are very eager to accelerate the certification process and so we are working already with them on how to accelerate and this certification process as much as possible. We have recently increased the capacity of our turn-in lab in Pesqueria, which we are working in certifying all the lab equipment so we can certify part of the process they need in that site. And the capacity that this EIF is going to have to have the capacity of producing exposed material in a sustainable way and in a continuous way is going to be unique because of the process we are doing and all the patents we are developing, especially to decrease all the nitrogen that the EIF usually have. So this is a unique process that we are developing with our technical people and the supplier of the equipment, that is Tenova, a sister company of us. So, I mean, the timing should be around next year, probably by the third and fourth quarter of next year, that we are going to supply in a sustainable way to the automotive industry.

So you'd be qualified for 2028 or qualified for 2027?

No, the idea is to qualify everything for 2028.

Got it.

Okay, great. Thank you. You're welcome. Our next question comes from Mr. Alfonso Salazar from Scotia Bank. Please, Mr. Alfonso, you may proceed. Thank you.

Hi. Sorry. A couple of questions on my end. The first one is regarding the outlook in Argentina. I want to see if you can give us more color on what's going on and what are your expectations for future demand. Also, try to understand better what's the situation regarding imports. It seems to be more problematic than in the past. and also um exports from argentina to other latin american countries what is the outlook there because of the same thing you know imports from from to other countries from from asia and the second question is uh some uh comments on on the decarbonization trends in latin america since that we always knew that it was going to take near longer than than europe but any comment on what is the outlook there as well, these trends of decarbonization and green steel.

Thank you, Alfonso. Outlook in Argentina, I mean, in the short term, shipments in the second quarter are are going to increase because, as you know, the first quarter in Argentina is always a seasonably low quarter. January and February usually are holidays in Argentina, so the demand is quite... Then, further down the road, I think, Some of the sectors present a good opportunity. Mining, oil and gas, and agriculture. They are compensated by others like mechanical goods and like electro, electrical and white goods, sorry. that demand is not very good in the final goods. So it's going to be a little bit better, but we don't expect a huge growth compared to 2025. Imports, although there has been a lot of talks about imports, we are not seeing imports in our products. We have seen some imports in the value change, but these are stable today. I think the problem in our value change is that the demand for the consumption is not very good. So that's the situation we have in Argentina. The carbonization in Latin America, you're saying that the path is slower than in Europe. I think that the pace in Europe has also decreased a lot. I mean, there's a lot of project that has been announced in Europe that today are not going through, and they continue to. building up in blast furnace. In Latin America, I can say two things. I think one, there is increasing in Mexico where you have the opportunity to change from coal to natural gas. So Mexico will continue in a path of having probably the lowest steel production emissions per ton of production of probably the world. And in Brazil, there's more difficulty to change blast furnace. So the decarbonization there is going to go through by small decreases by efficiency, but still working with blast furnace.

Thank you. And the outlook for other Latin American countries, demanding other countries that you saw from Argentina?

No, the regional countries, I mean, usually they don't have a huge impact in the shipments. We continue to ship to Uruguay, Paraguay. Those are the countries that we ship from Argentina. But the consumption there is marginal. So it's not going to have a huge impact in our shipments.

Thank you.

You're welcome, Alfonso. Thank you.

Our next question comes from Mr. Marcio Farid from Goldman Sachs. Please, Mr. Marcio, you may proceed.

Good morning. Thanks for the opportunity. Obviously, another follow-up on USMCA and Section 232. I think what's changed maybe this time is that obviously Mexico has put some import barriers to still come into Mexico to try and reduce triangulation as well or rerouting. And I'm just wondering, right, once assuming, you know, Section 232 to Mexico is either removed or reduced, Do you think the competitive environment would be different versus where we were, you know, a few years ago when we did not have those import barriers? And I remember well, I think Mexico imports about 40% of all the steel that you need. So just wondering if you can think about a structural change in terms of the competitive environment between, you know, North America or Mexico and the U.S.? ? And second point, demand was very weak in Mexico last year. I think it was down 10%. Part of the reason was, as you mentioned, restocking, but also weak activity as companies wait for better visibility on their relationship with the U.S. You mentioned restocking has been helping pricing. I'm just wondering if you're seeing demand or activity also recovering, or we need to see a final agreement with the U.S. for investments to really resume in Mexico. Those are my questions. Thank you.

Thank you, Marcio. Yeah, I mean, the first question about the triangulation and the efforts that the Mexican administration is doing to control this. I think there is already a structural change. I think the Mexican administration, way before Trump was elected and all this discussion began, was very focused on increasing the value-added content of all what is produced in Mexico. I mean, Mexico was a huge exporter, but the value-added of those products, the regional content of those products, were not very high. The Plan Mexico, which President Sheinbaum already announced in the campaign, in her campaign, was a plan... for doing exactly this, for changing this dynamic. So all the things that the Mexican administration is doing, as you mentioned, are a way of decreasing the dependency of Asian products, especially those products that Mexico or the region is able to produce. The clear example of that is steel. So I think there is already a structural change, and probably this is gonna be even better. once the 232, as you said, is reduced or removed from the site between Mexico and the U.S. So clearly, you are correct in your assessment. There is a demand. Regarding the second question, Marcio, there is a demand increase in Mexico. It's not as high. We are, well, World Steel has just released We believe that the demand in Mexico is going to grow around 4% in the year, considering that the demand decreased by 10%, as you said, in 2025. It's not a huge increase, but it is an increase, and we are seeing some recovery in demand. I expect that this is going to be higher once the USMCA or where the USMCA is going is more clear. We are seeing this increase, at least in a small space, but we are seeing it today. I hope that answered the question, Marcio. Yes, for sure.

Thank you very much for the details. You're welcome.

Our next question comes from Mr. Rafael Barcelos by Bradesco BBI. Please, Mr. Barcelos, you may proceed.

Good morning. Thanks for taking my questions. So first question, last week the Mexican government signed an agreement which I believe they called as an agreement for the promotion of the Mexican steel industry, right? And so I just wanted to understand, I mean, when do you expect that these measures, you know, will finally translate into, you know, incremental demand for the country? And what else you think the government can promote to incentivize the sector in the short term? And as a second question, in your outlook, you mentioned a bit of the cost pressure that we have seen for all industries. And I understand that still is not an exception. but if you can elaborate a bit more on what we can expect for crossing the third queue, for example, it could be helpful. Thank you.

Thank you, Rahel. The agreement in Mexico, as I said, is an agreement between the government and the steel industry of Mexico to commit that all of the government projects use of steel is used, Mexican steel is used in those infrastructure, main infrastructure. I think it's very important because there was already a commitment to use Mexican steel, but in some cases, especially all this new infrastructure that is coming by Pemex, by CFE, that is the electricity company, that are joint investment between public and private sectors, this is going to be an impact in the demand of steel, especially with all the investment in gas lines, in renewable energy, solar and electricity. And wind, you know, it has a huge consumption of steel. So it is important in that sense. I don't expect the investments to start in the next quarter or the following, but I think that by year end, all this effort that the government is doing will have an impact in demand. Too early to say how much, but it's going to have an impact. The second question, sorry? The cost. Ah, the cost. Okay. I mean, it's going to be an impact in cost, but for ternium, it's not going to be a huge impact. The big impact is going to be in logistic and import of some slabs and some logistic cost in Brazil and probably in Argentina. But probably that is going to compensate, as we said in the outlook, by also the price increases. I think that the real risk, let me say, of the conflict in the Middle East is that if it's not resolved quickly, it could cost more a recession. So we are thinking that that's the real risk for us. We see a little bit increase in cost, but again, more than compensate by the increase in prices of steel having

As a follow-up, sorry, can you just elaborate on what you're seeing as for cost trends in the third QA? And on the price side, I understand that prices are outpacing the cost increase, but can you just help us understand, in your view, what is the main driver for this recent good price momentum that we are seeing in Mexico?

Well, the good momentum, I think, is everywhere. You see in Europe prices increasing. You see in Brazil. You even see in China prices increasing. So I think part of that is motivated by the increase of cost, which is bigger than increase in Southeast Asia and is bigger in Europe than it is in the Americas. So I think that's the motivation, Rafael.

Okay. Thank you.

Our next question comes from Mr. Caio Ribeiro from Bank of America. Please, Mr. Ribeiro, you may proceed.

All right, good morning. Thank you for the opportunity. So I have two questions linked to your investments at Pescaria. So first off, as you complete your upstream investments this year, What are some of the investment avenues that you're contemplating right now? Where does the Musa expansion fit in within your list of priorities? And then secondly, assuming that you don't greenlight another investment right away or a large investment like the Piscadia upstream, downstream investments that you've done in the past years, those CapEx figures, they should drop considerably versus your recent run rate, which together with that earnings increase that you get from your investments should drive significantly high