Arcelormittal SA

Good afternoon and good morning, everybody. Welcome to ArcelorMittal's third quarter analyst and investor call. This is Daniel Feigler from the ArcelorMittal investor relations team. I'm joined on this call today by our CFO, Giannino Cristino. Before I hand over to Giannino, I would like to mention a few housekeeping items. Firstly, I want to refer everybody to the disclaimers that are on slide two of the results presentation that we published on our website this morning. I'd also like to remind everyone that this call is being recorded and it's scheduled to last up to 45 minutes. Finally, if you would like to ask a question, then please do press star one on your telephone keypad and we will answer the questions in the order in which they're received. With that, I would like to hand over the call to Jen Wiener for some opening remarks.

Thank you, Daniel, and thank you and good afternoon, everybody. I will make some very brief remarks before we move to your questions. I have basically three main points to make. Firstly, on the current market situation. So real demand headwinds are being exacerbated by the stocking through the value chain. The stocking impact on apparent demand is very significant, but we know from experience that it won't last. This gives us confidence that the apparent demand conditions will improve once the distorting phase reaches a maturity. My second point is on our response. We are responding effectively by adapting our capacity for quarter four and reducing six costs on the impacted tons. At current spot levels, variable costs, and by that I mean raw materials and energy, on a per ton basis are expected to decline in Q4. The improvements we have made in recent periods are being tested by this difficult market environment, but results should demonstrate that our business is stronger and more resilient. My final point is on the outlook. Significant cash has been allocated to working capital investment in recent quarters. This is now at peak, we believe, and the expected working capital unwind should support free cash flow in a lower EBITDA environment. Our balance sheet strength and expectation of consistently positive free cash flow underpin the continued execution of our strategy to grow and develop the business, to be a safe leader in low-carbon steel, and capture the growth opportunities in faster growing markets. With that brief opening, we are now ready, Daniel, to take the questions.

Great. Thank you, Ginovino. We will take, therefore, the first question, please, from Elaine at Morgan Stanley.

Thanks, Daniel. Hi, Ginovino. Thank you. Two questions from my side. The first one is on the profit bridges for Q4. So besides the price indicators that we can see on our screens, what are the less obvious moving parts that we need to consider if we're thinking about the EBITDA bridges into next quarter? And perhaps an overview by division would be most helpful. That's my first question. Thank you.

Thank you, Ola. Ola, I think as I see quarter four right now, we're going to continue to see to some extent some of the same factors that we saw in quarter three. Probably the most important aspect of the quarter will be the stocking that we expect will continue and probably accelerate. As a result, we will continue to see shipments being at the reduced levels that we saw in quarter three. On a divisional basis, we should be slightly lower in Europe, not really much, but slightly lower in Europe. And in the other divisions, my expectation is that we're going to be relatively flat, which I think it's a good sign. So prices, we know spot prices have declined during the quarter. It will impact our realized prices in quarter four. But more on the positive side, of course, raw materials are also coming down. We saw iron ore prices down. We saw our caulking prices quite significantly down during quarter three. And in Europe, as we know, energy prices have come down quite significantly from peak levels that we saw in August. So that should help profitability, of course, in Q4. And then, of course, we have to see what happens beyond that. It has been very volatile. We have seen, as you know, prices reaching at peak levels. Gas prices more than €350 per megawatt. And during a few days recently, we saw prices as low as €7. So we'll see. But we have a combination of destocking impacting the apparent steel demand. And I would also like to say that in Europe, the real demand up to Q3 has actually been okay, has not really been the problem. The problem has really been the stock that really started in Q3 and we expect accelerates in Q4. I will stop here and see if you have any thoughts.

Thank you. That's my first question. The second question is on working capital and capital returns. If we assume that the current spot prices persist, how much do you think you would be able to release in working capital in Q4 and throughout the balance of next year out of the $10 billion that you built? And if your free cash flow consisted entirely of working capital release next year, would that give you enough confidence to continue your buyback program after May?

Yeah. On working capital, I mean, for sure, our expectation is to release working capital in quarter four, right? And actually in quarter three, looking only at inventories, we have this stock as well. The only reason why you still see an investment in Q3 is because the loss in payables was greater than the reduction in inventories, which is natural when you are at this point of the cycle where we are adjusting production, as you know. adjusting also our procurement purchases. So we have that initial impact on payables. And then moving to quarter four, our expectation is that we will see significant release of working capital. And then in 2023, I think, you know, based on what we know today, looking at all the key leading indicators that we have, I think it's a fair assumption that we're going to also be releasing working capital in 2023. I think it's early days to say, to try to quantify how much. but you know very well. So up to now in the last seven quarters, we have invested $10 billion. So that is there. It's money that is on our balance sheet. And if market conditions remain challenging and we are in an environment of lower prices, then I think it's a fair expectation that the company will release a working capital next year, should provide a good caution to free cash flow, as we have been saying consistently. And our intention is to keep our capital allocation policy. So to the extent that we generate the free cash flow next year, then I think you should expect that the company will just continue applying the policy that so far we see has been very successful.

Thank you.

Thanks, Alain. So we'll move to the next question, please, from Tristan at BNP Paribas. Go ahead, Tristan.

Yes. Hi. Thank you for taking my questions. Maybe the first one, I think, pushing a bit on the guidance. Last time during COVID, we also had volumes falling significantly in a high level of uncertainty. And at the time, you provided some helpful EBITDA guidance range. Is there maybe a range you could share for Q4? Or maybe if you could tell us if you feel comfortable with current consensus for the full year at $14 billion? Thank you.

Yeah, I think, you know, as you know, we don't really provide that quantitative guidance for EBITDA. The circumstances are very, very different. I don't think we can compare what we have today with what we had back in 2020. So I will not be drawn into providing very specific guidance. Sorry for that.

All right. Fair enough. So the second question may be, on the Kazakhstan operations. First, can you give us an update on the situation? I've seen in the release that volumes have picked up. So how is the split between profitability between Ukraine, Kazakhstan, and South Africa in Q3? How do you expect moving that forward? And more of a long-term question, given your focus on sustainability and safety, and especially now given the context in the CIS region, How do you view your operation in Kazakhstan? How strategic are they? And is the objective to invest more there or at some point maybe consider other options? Thank you.

Yeah, so I would say that the Kazakhstan operations did well. We had a good quarter. So we have basically, in terms of the order book, in terms of production, the company was able to... achieve its goals, so we had a good quarter performance from a shipment point of view, profitability point of view, exporting materials from out of Kazakhstan. Ukraine, unfortunately, the situation, even though on the ground nothing has really changed, the assets continue to be safe, our people continue to be safe. As we know, market conditions have deteriorated. We are facing more now blackouts in terms of power availability, but we continue to run the operations at a reduced capacity. Still running one blast furnace at about 20% of the capacity. And South Africa also recovering from some of the labor issues that we faced in quarter two. So I would say that stability in Ukraine, and improvement in Kazakhstan and South Africa. Regarding the strategic importance of Kazakhstan, I think we are investing, we have been investing, and we will continue to invest to bring this facility up to the mark. There are challenges, of course, but we believe that with the energy that the team has put on this, the investments behind, we're going to be able to bring this facility to the level that it has to be. Okay, thank you.

Thanks, Justin. So we'll move to the next question, please, from Miles at UBS. Go ahead, Miles.

Great, thank you. Maybe just a couple of things. First of all, on order books, how weak are they as you look into 2023, you know, what's the best case in terms of the length of this de-stocking as you look at the market today?

It's okay to take into account our forecast for the apparent steel consumption, right? Of course, they are not as high as they were before. but in line with our expectations for parents to consumption that, as we discussed, is going to be, again, weak as a result of the destocking. Now, the duration is really very hard to say when it ends. In our view, it really started in Q3 already. It's visible in Q3, of course, and especially in Europe. So we believe that probably we are going through the worst of the stocking now in quarter four. So I think the teams are hopeful that we can start to see some improvement in terms of at least closing the gap between the apparent still consumption and real demand from quarter one onwards. But again, it's very hard really to be precise on that.

Okay. Maybe just on the iron ore side, a couple of things we could clarify. What's the latest with the Liberia expansion? Now that iron ore prices have fallen, does that become a more marginal project? And then also when we think about Ukraine, I presume there is no temptation to export iron ore while the blast furnaces are down, but I just wanted to double check that that was the case.

You know, in Ukraine, starting with your second question, in Ukraine, we have been operating the mines. So they were stopped during quarter three for some time, more related to help with the cash flows and this stock. The mines are running again, so we are running at about 30%. And this iron ore, what is not being consumed locally, then it's being transferred to our operations in Poland primarily. So that has been the case already now for quite some time. And Liberia, you know, as you can imagine, when we run this project, our long-term assumptions are quite conservative, right? So we never really, we will see what happens, but we don't run our, when we go through the approval process for this project, we have a very conservative assumption. So what we are seeing now in the markets prices, I don't know, coming down, it doesn't really change the prospects for this project. We continue to see it quite strategic for us. We have invested, as you know, heavily on the infrastructure in the past. So it just makes sense to complete this project as fast as we can.

Okay. When is the best case in terms of seeing the new Tums ramp up?

Well, we are on target for the first phase. It's 2020-24, I believe. So Daniel can double-check here for me, but I think it's Q4 of 2024. Thank you. Daniel? We can double-check, Miles. Okay. Thank you, Julian.

Thank you. Sorry, I was just mixing my papers up there. But in the meantime, we'll just move to the next question from Patrick at Bank of America. Please go ahead, Patrick.

Thanks, Daniel. Hi, Genuino. Two questions, please. The first is just about the inventory charges that you've taken out of EBITDA. Can you just talk about the thinking of adjusted EBITDA? Can you just talk about the thinking there? Because it kind of feels then that we're only ever counting positive margin sales in the EBITDA, right? Because we write down inventory, take it out of adjusted EBITDA, put it in as an exceptional item. And then, you know, when you sell it then for recoverable value in the fourth quarter, it's going to come through at, you know, sort of zero margin or maybe slightly positive margin. So is that the right way to treat that amount? And then the second question is just on working capital. I think it's a follow-up from Elaine's question. So, you know, we've spoken about the $10 billion build. I mean, is that all excess or, you know, high working capital because prices and volumes were good? I mean, how much of that $10 billion should we expect to reverse in short? Is it the full $10 billion or is there a portion that's kind of structural? Thanks.

Yeah. Yeah. Patrick, first one on the inventory write-out. I think what we are trying to do, and this is consistent what we have done in the past when the cycles turn, as it is the case now, you know, under IFRS, you have to basically mark your inventories at cost or net realizable values if net realizable value is lower, right? Okay. So at the end of the quarter, when we have this significant change, we go through all of our inventories and basically even raw materials, we convert that into finished goods. And then we look at the prices that we believe we're going to be able to sell. And to the extent that we believe that we're not going to be able to recover the cost of inventories, then we write it down. We have these evaluations. So that's really what happened this quarter. And so it doesn't really belong in the operations of quarter three. And that's why in giving the size, we are showing it separately so that you guys can have a good sense of the true underlying performance of the business during the quarter. And then going forward, you are right. So to the extent that we were right with our assumptions in terms of prices, then the stones, when we sell it, they will have zero contribution to our EBITDA going forward.

I suppose the point is that if we only did this at the end of the year, right, your EBITDA would be $500 million less. But, you know, writing it down now and then excluding it from EBITDA and then selling it at zero margin next quarter, it never goes through EBITDA. if that makes sense. But yeah, I mean, I understand what you're saying in terms of write downs are typically excluded. And just from the working capital, the quantity to expect to reverse?

Well, I think a lot of the investments that were made, they were made as a result of the higher prices, selling prices, raw material prices. And in terms of volumes, Quantities are relatively limited, Patrick. So my expectation is, given where prices are, and my expectation is that we should be able to recover the large majority of the $10 billion as we move into 2023 and beyond.

Got it. Thank you. Those are my questions. Thanks.

Thank you.

Thanks, Patrick. So we'll move now to Tom at Barclays.

Afternoon, guys. Thanks very much for taking our questions. The first one, just as a sort of slight follow-up to Patrick's on the inventory write-downs, I'm slightly surprised that there weren't any taken in, especially the U.S., but to an extent also ASIS in Brazil. given spot prices have been pretty weak in those areas as well. Is that a risk of further write-downs to come in Q4, or were those just not large enough for you to report as an exceptional item, and actually those are included in the EBDA numbers? That's my first question.

I think that's a good question, and I think it shows the change. Because if you look back in previous cycles when we also had to take revaluing inventories, you're right. At that point in time, we had also large amounts of revaluation in NAFTA, primarily because of our U.S. business that, as you know, we sold. If you look at the profitability of the businesses in NAFTA, In Q3, you see that it's different from what we enjoyed in Europe, in Brazil as well. And we have to – I hope it's clear that in Europe, that's really where you have the very high energy costs. So, costs are higher. You don't really have the same issues in some other parts of the world. That's why you really see this being in Europe and not in some other parts of the group. Can we have more? Right now, this is our best estimate, right? So we would need to record more write-downs only to the extent that selling prices continue to move down. So we'll see. But for now, this is our best estimate.

Right. Okay. So there might be some in there, but it's not reported as exceptional. Because if I sort of look at ASUS, for example, I see a similar issue. But in any case, maybe just moving on to the US business. I mean, you mentioned earlier, you see volume stable in all areas except Europe into Q4, which is kind of surprising from my side, if I look at your slides that say U.S. flat apparent steel consumption down 10% year-on-year for H2. And, I mean, your Q3 shipments were still okay, you know, up a little bit year-on-year. So that, by my very rough maths, implies sort of down 15% to 20% decline in NAFTA shipments for Q4, which is obviously not what you were saying earlier. I mean, are you taking market share from other mills?

Yeah. You know, perhaps just to clarify, so when I say relatively stable, I'm saying quarter-on-quarter?

Yeah.

Right? So, quarter-on-quarter, our expectations that shipments in NAFTA should be relatively stable. Just keep in mind that we have different businesses in NAFTA. So, we have our Mexican operations, Canadian operations, right? So, our expectation is relatively stable volumes there. as is also the case in Brazil and also in CIS.

Right. But if I just say stable NAFTA shipments in Q4, that means it's up 4% year-on-year, and you're saying the U.S. will be down 10% in terms of fuel consumption. So is that you taking market share, or are you saying Canada and Mexico is going to be stronger? How do I fit those two statements together?

Yeah, I think that's the case. So our expectation is to do a little bit better in Mexico, Canada. And, yeah, so I would not suggest that we are taking market share, but I think we will be doing better in some other parts of the business.

Okay, thank you. I'll turn it back.

Thanks, Tom. So we'll move to the next question from Rohit at Kepler.

Yes, hi. Good afternoon. Thanks for taking the questions. A couple from my side. The one is on your remarks at the beginning about that there will be maybe early next year a point from where apparent steel demand could trend better when the destocking is complete. When we look at the whole year of 2023 and we think about, you know, a reversal of working capital for stock movements against the decline in real demand. I would like to see what your view is on the moving parts on net imports in Europe. We have been seeing structural decrease in exports of the last decade and also kind of, you know, growth in imports over the last 10 years. So what is your thinking from where we are now, how net imports are most likely trending in 2023? Yeah.

Well, I think that's a good question, Rokos. And as you know, we have seen imports rising in Europe, right? Taking more market share from domestic meals. And probably one of the reasons we were, of course, the selling prices, premiums in Europe were high as a result of the strong demand that we enjoyed for most of the last two years. More recently, we have seen a decline in imports, which pretty much is the function of the arbitrage that existed for importers. They basically disappeared. So when you look at Asian prices and you add all the logistic costs to get the materials into Europe, then I think that the incentive for imports are greatly reduced. So that's what we are seeing right now. So we'll see how it evolves, but that's the dynamics that we are seeing right now.

All right. And linked with that, how shall we think about the impact of energy costs? Would that overall lead to somewhat higher prices in Europe, or shall we assume that if that persists next year and beyond, that industry margins will be overall lower?

Well, I mean, as you know, the energy crisis, call it, it's really an European phenomenon right now, right? So, and the whole industry in Europe is exposed to the same dynamics, some use more than others. And that's why you see the industry as a whole responding. And if you look at the data in September, you can see that there is a significant reduction in production in Europe, so the industry is responding to that. And that's probably also an important factor here because I think the market will start to see more the impact of the cuts going forward. So that should also help in terms of rebalancing supply to demand, right? I don't really want to speculate because, as we were discussing, spot prices for natural gas, at least for some time, were extremely low. When you look at the average prices that we have right now in Q4, prices are, of course, not yet back to far from levels that we had back before the war, but it has come down quite a lot, right? So we'll see what happens next year. But I think this is not specific to any particular company. It's an industry problem. I would even say it's a European problem. And it's something that we believe that governments in Europe will need to address. I think it's extremely important for the industry, not only for the steel industry, but for the entire industry in Europe.

Okay. And, yeah, on Camino, just... If I got that right, what you said before, technically, when during these times of higher energy costs, when you put steel on inventory, it means the higher energy costs are baked into the cost valuation in your books in the end of the day. Correct.

Correct. Yeah, so the evaluation, it's always done well because taking into account everything, fixed costs, everything. So it's the full EBITDA cost.

Okay, great. Thank you. Thanks, Rakesh. So we'll move now to Bastian at Deutsche Bank. Go ahead, Bastian.

Hi, thanks, Daniel, and good afternoon all. I just want to have two quick questions, please. Just first of all, on volumes and also your volume outlook, from what I understand, you take out another blast furnace in France. And if I understand that correctly, that will happen towards the end of the fourth quarter. And that would obviously suggest that you expect to want to be potentially flat or worse. And if I understood you correctly, you're expecting the stocking to ease in the first quarter. So I'm wondering, could you maybe help us to reconcile this? Are there any plans? that you may actually bring back capacity at other places? That would be my first question.

Yeah. Well, I think it's important also to put in perspective, right? So some of the furnaces that we brought down, I think that is a combination here of maintenance that would happen regardless. So that's the case of one of our furnaces in Dunkirk that is down for about six weeks. So that furnace will be back towards the end of – end of the quarter, right? And then some of the other idling finances, it's really as a response to the current very weak apparent demand that we are seeing. And we are also doing it to some extent to control and make sure that we don't end up ourselves with more inventories than what we needed. And the company, as a company, we will retain a lot of flexibility because we can bring back the finances relatively quickly in case our expectation of better financial consumption of demand next year really materialized. We're going to be in a position to do that. I think what is important as a message is that we are also, of course, focus on making sure that we retain our market share. So I would not like in this call that you guys walk away with the idea that we are taking more pain than the rest of the industry. So a lot of focus on making sure that we retain our market share.

Okay, thank you. Thanks for clarifying. Then my second question is on CO2 certificates. If we look at your shipment volumes, they've obviously been training week already, and then, I guess, with your production cuts, you will potentially be left with some excess here to certificates. Just to confirm, did you hold on to any excess allocations here, just given the relevance of those also for, I guess, the next couple of years, or have you been possibly selling some into the market as you used to do at some point over the last couple of years?

But, Sam, what we have been doing, and that was also done last year, so the business, as we know, everybody's short in Europe, right? So companies have different hedging strategies, different hedging books. We have ours. And last year what we did was every quarter, depending on the shortage, we were just going out and buying the certificates for, to cover that shortage. And that's exactly what we continue to do this year. So on a quarterly basis, we measure, we see what is the shortage, we go and buy. So we are not touching on our hedging position. We have been, to some extent, lucky because, as you know, given the volatility with the energy markets and euro prices have come down, We took advantage of that. So I think we are achieving this year relatively good average price for CO2 to cover the shortage of the year. But that's it.

Okay, thank you.

Thanks, Vasian. So we'll move now to the next question from Max at Oddo. Go ahead, Max.

Yeah, good afternoon. So I think the question was, Already partly answered, but some clarification is always helpful. Yes, it seems that you are much more aggressive than your competitors in terms of curtailing capacity. Other big players in Europe have not announced such plans to most ball furnaces. So, yes, isn't there the risk that you, I mean, decline much more significantly in the quarters ahead than competitors? And isn't there the risk, too, that you're late on any potential... upturn in demand and relate to that, how much time would you need to bring back those idle furnaces back into operation if demand picked up? So that would be my third question.

Max, I mean, as I was saying, the organization is, of course, focused on matching production to demand. focus on maintaining our market share, right? And then when you look at the production that for September for Europeans, you can see that on average, September was down by about 17%. And that's what we are guiding also for quarter four in terms of production cut. So I think the industry overall seems to be, again, I cannot speak for the competition, but looking at that, it suggests that the industry is doing the same. There can be different types of announcements. In our case, given the size of the operation footprint, we have the flexibility to bring down an entire furnace and then work on reducing the associated fixed costs. And if you don't have that flexibility, then you can run your tools at the lower levels without necessarily bring it completely down. So I think that's probably what is happening, looking at the data that is available. So I think we're gonna be in a position to continue to service the market timely and again, very much focusing on our market share.

Okay, and just going back to your CAPEX guidance, it has been significantly trimmed down from 4.2 to 3.5 billion dollars, excluding FX that is a 0.5 dollar cut. So, I mean, can you be a bit more specific on the delays you have identified in your presentation, and what's the share of these delays in explaining the the revised guidance, I mean, the downward adjustment, versus some, I mean, voluntary cuts that you're undertaking due to the more difficult background.

Yeah, thank you. Thank you, Max. I think that's a very good question. And I think the first message is that we are not changing or slowing down any of our strategic context. given the, you know, in my opening remarks, I was making the comments on strength of the balance sheet. So the change to our CAPEX forecast or guidance, it's really linked to mostly timing, really. I mean, you talked about the effects. There is an effects component here. That's about 200 million that we have identified. As we know, we have seen significant effect streams during the quarter. So it's more timing. It's really about ability to mobilize contractors. But I think we are gaining speed, and that's why you see our guidance for quarter four. There is an acceleration. We are guiding for about $1.5 billion to be spent in Q4. And then when you look at the second half of 2022, we are giving us an indication that it's probably a good number for 2023. Of course, we are in early stage of our budget cycle, and we will provide more clarity and guidance on 2023 CAPEX as we report results, Q4 results. But I think that's a good reference at the moment. Some of the reduction in strategic APEX, it's really spread out in some projects. In Brazil, we face some delays in Montevade and Serrazu. Again, as I've said, mobilization of contractors primarily, and also in our project in India. But we don't believe that it should cause delays at this point in time. We are assessing that, but we believe that it should be able to catch up.

Okay. That's clear. Thank you.

Thanks, Max. So we'll move to our last question, actually, which is from Moses at J.P. Morgan. Go ahead, Moses.

Hi. Thank you very much for taking my question. A few from me. I want to start with the energy hedges, which you've touched on. So you mentioned you reduced gas consumption 30% year-on-year, but could you give us some color on, I guess, the absolute impact of your energy hedges sequentially, and what are your plans on energy consumption into Q4 and 2023? And to help with that, could you just provide how much of your energy is purchased on spot?

Yeah. Moses, that's a good question. And I think we were, to some extent, lucky. We were, of course, in this rising market in terms of energy prices. I think we acted fast. We locked a good part of our consumption for quarter one, quarter two, to some extent also quarter three. And if you see our deck, you can see that in H1, We basically managed to keep our costs, and we have been talking about it, our costs relatively stable compared to quarter four of 2021. Of course, we could not keep up as prices continue to rise, and you see the $300 million impact in quarter three. But because prices were rising, our ability to continue to hedge as much as we would like for quarter four They were not there and at some point it became risky because prices were very high. So we have not hedged much quarter four, some but not much. As a result, we are benefiting from the very low spot prices that we are seeing. So my expectation is that the average spot prices that you can see on your screen should basically reflect what we have for quarter four. And then quarter one, I would expect the same. The environment is such today that it's hard because you have the commission and the member states in Europe discussing caps. So it's unclear really what kind of measures will be in place. And it just makes it harder for you to go out and lock in prices, knowing also that the forward prices, they remain higher than spot prices today.

Yeah, thank you. And then also, so given your curtailment, so what's been the impact on your fixed and variable costs, and how do you expect that to evolve into Q4? Basically, how much of your fixed costs could become variable into Q4 2023?

Yeah. I think that's one of the key aspects of idling some of the capacity you match production to demand. And then you can also focus on variabilizing your fixed costs as much as possible. We discuss, we don't have the same schemes that we had back in 2020 at the time of COVID, but we do have schemes still available to us in most countries where we operate. So the focus is on working with the unions, working with our employees, to have as much of the fixed costs removed for as long as our finances are down. It's a significant percentage. I'm not going to be specific, but we believe that we can remove a good part of the fixed costs. But when a fixed cost is put on as we bring down capacity, it will be impacted. So fixed cost per ton will increase as we reduce capacity, but still, economically, it's the right decision.

Thanks. And just because you touched on it just then, how are some of your labor agreements progressing in Europe and also in Brazil into 2023? Okay.

Well, I think this is a challenge that everybody will face. As inflation has been high, I think this is going to be a hot topic, not only for us, but for everybody in 2023. And it's going to be a discussion with the unions, with our employees, to find what is the right balance where we attend the needs But we also make sure that the company remains competitive, remains viable. So it's going to be, you know, trying to find that balance. And on top of that, as we have discussed at the beginning of the year, our management game plans that we launch, we continue to track and follow that very closely. We continue to work on productivity. I think the company historically has always been has always done well in working on improving productivity, and I expect us to continue to do that, to mitigate some of the cost inflations that is happening and everybody will need to face.

And are those expectations included in future CapEx assumptions as well?

Well, yes. Yes. I mean, at this point, because we are working on these strategic CapEx now for some time, right, so we have a good idea of costs associated with these projects. We also saw effects bringing down some of these CapEx. So there are some offsetting aspects as well. It's not only everything is negative, so there are also some positive effects as well.

Brilliant. Thank you very much.

Thank you. Great. Thanks, Moses. That was our last question, actually, Jim. We know, so I will hand the call back to you.

Thank you, Daniel, and thank you, everyone, for joining our call today. I think we had a good discussion around how we are responding to the market challenge, but I hope that you take away one message, and this one message is consistency. Consistency in our focus on safety and industry leadership. Consistency in our free cash flow generation and consistency between how we allocate our capital to growing and developing SLO metal while continuously returning capital to our shareholders. Thank you very much.