This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk01: Hello everyone and welcome to the Stelco Holdings Inc. Fourth Quarter and Full Year 2023 Earnings Call. My name is Nadia and I'll be coordinating the call today. If you would like to ask a question, please press star, fill it by one on your telephone keypad. I will now hand over to your host, Trevor Harris, Vice President, Corporate Affairs to begin. Trevor, please go ahead.
spk04: Good morning everyone and welcome to Stelco's Quarterly Earnings Conference Call. Speaking on the call today to discuss our 2023 Fourth Quarter and Full Year results will be Alan Kastenbaum, our Executive Chairman and Chief Executive Officer, and Paul Scherzer, our Chief Financial Officer. Yesterday, after the market closed, we issued a press release overviewing Stelco's financial results for the Fourth Quarter and Full Year of 2023. This press release, along with the company's financial statements and management's discussion and analysis, have been posted on CDAR+, and on our investor relations website at .stelco.com. We have provided a link to the presentation referenced on today's call on our website as well. I would like to inform everyone that comments made on today's call may contain forward-looking statements which involve assumptions which have inherent risks and uncertainties. Actual results may differ materially from statements made today, so do not place undue reliance upon them. Stelco management disclaims any obligation to update forward-looking statements except as required by law. With that in mind, I would ask everyone on today's call to read the legal disclaimers on page two of the accompanying earnings presentation and also refer to the risks and assumptions outlined in Stelco's public disclosures. In particular, the 2023 management's discussion and analysis sections relating to forward-looking information and risks and uncertainties, as well as our filings with securities commissions in Canada. The appendix of our presentation and the non-IFRS performance measures and review of non-IFRS measures of our MD&A provide definitions and reconciliations of the non-IFRS measures that we use today. Please also note that all dollar figures referred to on today's call will be in Canadian dollars unless otherwise noted. Following today's prepared remarks, Alan and Paul will be taking questions. To maximize efficiency, we would ask that all participants who would like to ask a question, please limit themselves to one question and one follow-up before re-queuing. With that, I would now like to turn the call over to Alan. Alan? Thank you, Trevor,
spk05: and good morning, everyone. 2023 proved to be another year where Stelco once again demonstrated its ability due to its lowest cost position on the cost curve to operate successfully even in the presence of challenging market conditions. Accordingly, our business continued to excel and we were able to deliver upon our long-standing commitment to our shareholders. You will recall that with the payment of the special dividend that we announced following the third quarter of 2023, we surpassed $2 billion of capital return to our shareholders since 2017, consisting of approximately $1.2 billion in share repurchases and $900 million in dividends, both of which lead the industry as a percentage of market capitalization. We are extremely proud of this track record of generating cash and returning capital to our valued shareholders and remain dedicated stewards of shareholders' capital. Today, we are building further on that track record with the announcement of a normal course issuer bid that will allow the company to purchase up to 3.3 million common shares, representing more than 6% of the shares outstanding and an almost 20% increase to our ordinary dividend to 50 cents per share per quarter. This is our first increase of our ordinary dividend since bumping to 42 cents per share following Q3 2022 and comes on the heels of us having paid two special dividends in the interim. As I have said many times, we are a company led by shareholders and we will continue to make decisions regarding the deployment of capital in the best interest of the company and its shareholders while at the same time ensuring the fundamentals of our business remain strong and we remain poised for growth. While our fourth quarter results were down over the previous quarter, we do expect to see improved margins in Q1 and Q2 as we begin to realize the higher market pricing that was contracted starting in the fourth quarter of 2023. This, combined with the anticipated stronger market demand, will give Stelco the opportunity to capitalize on the fundamental strengths we have built into our business and provides us with optimism that we will be in position to continue to generate cash and deliver strong results as well as capital returns to our shareholders. In addition, we have been actively evaluating opportunities to grow our company all while staying highly disciplined on value and knowing when to say no. We will remain active but only where valuations are attractive and synergies are significant. Overall, I am excited about our accomplishments and the opportunities that lie ahead for our business. We are entering 2024 on a foundation of strong fundamentals and have every reason to be optimistic about the future of our business and what that will mean for all of our valued partners, from our employees to our customers and our shareholders. Thank you for your time this morning. I will now ask Paul Scherzer to detail some of our financial results.
spk02: Thanks, Alan, and good morning, everyone. Overall, we are pleased with the ability of our business to respond to both the challenges we faced throughout the 2023 fiscal year and to the opportunities presented to us by the market that allowed us to generate positive margins. While our results in the fourth quarter were down over the third quarter, this was largely attributable to a 13% decline in average selling prices quarter over quarter and a scheduled maintenance outage that did have a negative impact on our shipments during the period. While these factors led to a decline in adjusted EBITDA to $51 million and adjusted net income of $9 million in the fourth quarter, the business was able to generate $484 million in adjusted EBITDA for the fiscal year. Of course, we maintained our focus on delivering returns to our shareholders, as Alan has noted, and paid $258 million in dividends throughout 2023. We remain conservative in our approach to liquidity and as such ended the year with $645 million of cash and no borrowings under our revolving credit facility. We intend to continue fulfilling the commitment we have always made to our shareholders and will keep their interests at the core of our business throughout 2024. Our continued success will be based on management's unrelenting focus on our core principles. Since 2017, we have never wavered from our commitment to maintaining a clean balance sheet, driving down our operating costs, and remaining tactically flexible at all points of the market cycle in order to take full advantage of any opportunity presented by the market. Through the collective efforts of our entire team of 2400 people, we will use these strengths to drive results and revenue through to the bottom line. As we enter the first quarter of the new fiscal year, we see opportunity in the market and anticipate a return to shipping volume of approximately 625,000 to 675,000 net tons, as well as an improvement in adjusted EBITDA due to the realization of more favorable pricing that we booked through much of the fourth quarter. The strong fundamentals that guide our business have given us confidence in our ability to deliver results and create value for our shareholders. We are continuing to demonstrate our confidence through another increase in our ordinary dividend by almost 20% in proposing to purchase up to approximately 3.3 million common shares under a normal course issuer bid to be launched next week. With the pending payment of our declared ordinary dividend, we will have surpassed $2.1 billion in capital returned to our shareholders since our IPO in 2017. This is a track record we are extremely proud of and one we will continue to build upon. Overall, we are pleased with what we were able to accomplish throughout 2023 and anticipate a continuation of our successful track record of delivering positive results and strong returns for all of our stakeholders. Thank you for taking the time today to join our call.
spk04: Thank you, Ellen and Paul. That concludes our prepared remarks for today. I would now like to turn the call back over to the operator for questions and answers.
spk01: Operator. Thank you. If you would like to ask a question, please press star fill it by one on your telephone keypad. If you would like to remove your question, please press star fill it by two. When we're preparing to ask your question, please ensure your phone is unmuted locally. And our first question goes to Katja Jankic of BMO Capital Markets. Katja, please go ahead. Your line is open.
spk06: Hi. Thank you for taking my questions. First on the first quarter volume guide. So it implies sequential increase. But when I look on a year over year basis, it's lower. Can you talk a bit about what's driving your expectations for volume to be lower on a year over year basis?
spk05: Katja, are you comparing that to what our projection was a year ago or to actual shipments from a year ago?
spk06: Sorry, actual shipments.
spk05: Right. Well, look, we try to be conservative in our estimates and put out guidance conservative. We clearly hope to exceed that. But I wouldn't necessarily compare the guidance that we give compared to the actual shipments. We always strive for better.
spk06: OK. And Alan, you mentioned in your preferred remarks that margins are expected to improve in first and second quarter. Is it fair to assume that you're already selling into second quarter at the current prices?
spk05: Yes, we are. Business has been going very well since we got into that trough in the fourth quarter. Business has been going very well. And we're well into the second quarter at this point. Completely sold out for Q1, well into the second quarter. So business is looking good.
spk06: Do you provide any more color and how much volume you have already sold for second quarter?
spk05: Yeah, I don't think we're going to do that because obviously competitive reasons. So we're ahead of pace from where we were a year ago.
spk06: Perfect.
spk01: Thank you. Thank you. And the next question goes to Ian Gillies of Skyfall. Ian, please go ahead. Your line is open.
spk09: Morning, everyone. I was just curious, Alan, if you could maybe talk a little bit about as you're thinking about evaluating M&A opportunities. I guess whether you'd like to vertically integrate the business from an iron ore perspective or maybe some other raw material input or add another producing asset or maybe how you're thinking about managing those opportunities.
spk05: You know, good question. And this answer is we really look at both because both of them are integral to our business and whether that means going upstream and not only having iron ore for our own operations, of course we have iron ore from our relationship with Mintac. But if we see an opportunity to increase that, that gives us two opportunities. One, to go and sell up iron ore in the free market. It also gives us opportunities to expand our footprint by owning more iron ore assets. So the answer is really both. Both as a separate business line opportunity as well as something that could feed a future growth. When it comes to other areas of the footprint to go after, we do kind of what I implied in the market and also what historically we've done, which is to look for things that are synergistic with us that we can extract synergies. And that, coming along with that, gives us some limitations in terms of geography and things like that because you want to be able to get some benefits from operating in concert with additional facilities. We were very active last year on a couple of opportunities. We didn't get there. But for us, we are value investors and strategic investors always focused on free cash flow generation. That's the main, main driver for us. So maybe to elaborate on that, that excludes things like major projects and things like that that can consume cash for many years and result in building something that may or may not be the right strategic fit by the time it's built. But does include things that become attractively priced, cash flow generative, highly synergistic to our business.
spk09: That does lead into my second question. As we think about producing assets and whether it be specialty products, EAF and the like, at this point, would you consider yourself somewhat agnostic as long as it delivers the requisite IRR and there's, I guess, certainty over what the capital cost is?
spk05: You know, I'd say some recent developments in the market have, my answer to your question a year ago would have all financial IRR, that's kind of the way I've been brought up, trained, I look for value opportunities and try and extract the values. I do think when you look at the Nippon sale, Nippon purchase of US Steel, whether that happens or not, clearly there were some assets in that package that are attractively valued. And I'm studying that and trying to learn what we can learn from that acquisition and how it was valued as to what we might be able to do here at Stelco to improve, let's say, the appetite for shareholders to come in and find value. If you look at our shares, the way they've been trading, we are sitting at a multiple of somewhat over three times and we sit here and look at that and like, okay, well, this transaction just got done at eight or nine times. And that's a huge gap for a company that's in the same business. And by the way, for a company like Stelco that has outperformed that particular target from an EBITDA multiple quarter after quarter after quarter after quarter. So, you know, I look at it for myself and I'm saying, well, what can I learn from that? And those are things that we're studying. So, you know, I've been kind of brought up in like IRR, cash flow, and that certainly does matter for capital returns, shareholder returns and everything else. But, you know, when we do an IRR calculation, we also have to look at things like total value creation, which would include, you know, a terminal value potentially at some point in the future. And I think we've learned from this transaction is that what we do while it's, I think, very attractive, lowest cost producer, highest margins, nine out of the last or 10 out of the last 13 quarters in the industry, the fact that we generate cash flow, the fact that we've given such a massive amount of capital back to shareholders. I do have to consider things like terminal value and therefore I'm studying with interest some of the things that US Steel has done very, very well. And I give them a tremendous amount of credit. You know, there were some decisions that were questioned, whether it was the buyout of Big River, whether it was, you know, any of the decisions that were taken that might have been criticized. You know, clearly when the thing went out to get looked at, there was a significant amount of interest and tremendous amount of value placed on downstream business and the other activities they were doing. So, you know, we are here, while we're very confident in our business approach, the management at Stelco is highly entrepreneurial, very, very humble and we look and try and study from what others have done successfully. And so that will, in the future, you know, starting already yesterday, and I mean that figuratively, starting, you know, the day after that deal was announced, has given us time to reflect on what we might be able to do better to improve on the multiple that we trade out compared to the very attractive price that was paid for US Steel.
spk09: No, that's a great answer. So thanks very much for that. I'll turn the call back over.
spk01: Thank you. The next question goes to Bill Peterson of JP Morgan. Bill, please go ahead. Your line is open.
spk10: Yeah. Hi. Good morning. Thanks for taking my questions. And Alan, we agree with your assessment on, you know, should be higher multiple and obviously, shareholder returns, free cash regeneration should be valued more. But to my question, you know, you've discussed growing value added output in addition to high strength deal for auto. So I guess how should we think about targeted product or contract mix moving forward? And I guess, can we expect any of this or any of these projects to happen prior to M&A or would you try to, you know, approach this via M&A?
spk05: Yeah, no, I appreciate that question because it enables me to clarify that particular issue that you raised on value added. No, we have the facilities here at Stelco. I'm sitting here right now at Hamilton and we have the facilities to make all of these grades, including auto grades, high strength deals that we could make. We have the ability to go and do all that. So this is a multi-pronged approach. You know, we don't control M&A. We can't force somebody to sell to us. We're certainly not at the way we like to buy. So in addition to that, it's looking at our own operations and see how we can optimize our operations here to try and penetrate markets, provided the margins are better. So, you know, to distinguish what I'm trying to say here, we're not driven by awards and accolades from, you know, big auto manufacturers. That's not what drives us here. We need to get driven here by profitability and I think there's more profitability in our downstream operations than what we're currently doing. So we've initiated a review. It's already underway and, you know, stay tuned. We're not ready to report anything yet, but we do have the facilities right here to do it. It's a question of how we orient our business. You know, we're blessed with the lowest cost in the industry at the hot strip mill and we've been very focused on driving cash flow to that part of the business. But as I mentioned before and to the question that came in before, you know, when you run a business, it's cash flow, presumably additional cash flow by getting the full value of the valuated products, but also understanding that when you think of things like terminal value at some point, you want to be in those businesses because they're valued higher and that's part of the DCF that we run. We try and value this business. So it's both an organic opportunity and inorganic opportunity as we look at those markets. And I don't want to be misquoted and someone saying to me, oh, you guys are plopping into a brand new industry. We are in a studying evaluation stage right now and these are just our thoughts and stay tuned. Maybe in the next quarter, we'll have a bit more meat to put on the bone for you guys to give you more specific direction.
spk10: Yeah, I appreciate that. And maybe taking a step back, if we look at the market environment, spot prices are now 200 plus dollars per ton below the recent peak. Want to get your views on the current state of the steel market, North American steel market as you see it, including, I guess, imports from outside of North America, as well as maybe discipline you may be seeing or maybe lack of discipline maybe from North American competitors. And maybe along with that, if you can touch on how customer inventory levels are looking currently.
spk05: Yeah, so what we've seen here in the last couple of years, if we go back the last three years, we had the boom year in 21 and then when you looked at 22 and 23, they kind of looked like each other. They had one or two very, very spiky quarters and then lower prices. I'll say two things. One, the lows are considerably higher than they used to be. And that has been driven by our original thesis, which was, and this I've talked about for years and it's turned out to have played out well, that this is going to be a scrap driven, scrap price driven business. If you look at the correlation between scrap prices and HRC prices going back already 20 years, when the market was 70 percent integrated and 30 percent EAF, you'll see that it's very, very tight. The only time, very tight in terms of consistency, it's about $250 a ton or so over or $300 a ton over scrap. And the only time that has changed is to the upside where all of a sudden you get steel shortages and the price of steel pops up and that hasn't happened that often. It's happened in 2007, it happened in 2018 and it happened in 2021. But the lows are higher and this plays right into our strategy because we do not see a sustained steel price for, when I say sustained, even for more than a month below a certain level based on where scrap is. And so that is one thing that we look at in terms of pricing. So that's on the low, on the troughs of the market, which is really good for Stelco because as we've demonstrated, we generate cash every quarter no matter what the environment. And we get all the torque to the upside in our business. Now when it comes to pricing, you asked me my view of the market, what I've seen over the last two years, which are a bit more normal years, is that you get these rapid spikes followed by rapid fall. The spikes are probably overstated and the falls are overstated. And what's driving that is very, very definitively customer behavior. So the typical customer has a choice. He can import from overseas. That's about a six-month lead time. That's not very attractive. It's very risky, especially in a volatile pricing environment like you've characterized. And so typically what these bars will do, they'll wait. And what has happened now over the last two years is they wait to the last minute and then they start buying all together. I don't want to say in concert. They're obviously not in concert, but it looks like from our perspective, almost as like holy Moses, we got to go and get our warehouses filled with material because they haven't been operating on a fairly lean inventory basis. So that's what's been happening. So if we go back to last year, that happened. If we go back to this year, December prices were falling. Nobody bought. Inventories dropped all over North America. And then all of a sudden, everyone comes rushing into buy, chasing the market and the price shot up. And now we're going through the same, which is these indicated prices have fallen largely to do, and we predicted this, and we're very, very active in our sales, largely from the beginning of February. And once again, inventories are going down. Now, when you look at the baseline economic activity, it's very good. Building is strong. Oil and gas is strong. Auto has been relatively stable. So all the end markets are there. Imports are going to start dropping because prices are falling as it always does. And my prediction is not only based on what we've already sold to the second quarter. My prediction is that as normally springtime, which is concurrent with home building and general construction and all the other sectors in the economy that I just mentioned are key markets, I think those are going to bounce back yet again, and the buyers will come in rushing in all at once and start bidding up the price. I do think that this year we're going to see another spike, how long that lasts. Recent history is at a gauge. It'll last some period of time, and we'll continue to see this activity and really driven by buyer behavior. So that's our view on the market. Stable economic environment in our key markets. Buyers disappearing for a period of time, concerned about overpaying, followed by a rush of buyer activity coming in, which I think we're on the verge of seeing right now.
spk10: Alan, thanks for sharing the insights.
spk01: Thank you. The next question goes to David Ocampo of CoreMark Securities. David, please go ahead. The line is open.
spk03: Thanks. I just had a follow-up question here regarding the margin profile for Q1 and Q2. Obviously, we're going to get some good pricing, and that causes the margin profile to go up. But if I take a look at your cost per ton this quarter, it was pretty good, especially against the backdrop, against lower shipments and operating average. Just curious how we should be thinking about the cost profile as we head into 2024.
spk05: So we're going to see costs fall as the year progresses. The main driver for that, and there's a number of things that drive our course generally, but the main driver for that will be coal. Coal is something that we monitor. We didn't get it right last year because we had to commit to coal purchases during the height of the, I don't want to say the height of war is still going on in Russian Ukraine, but when things were being reoriented on the energy side, a lot of the coal that was normally going to Met was going towards steam coal, and so that drove up prices. And we didn't expect the war and got caught a little short, and we had to go and buy more expensive coal. That coal is off our floor now, probably still showing its way in some of our coke that we will use in the next month or so. And then we start getting into the new coal inventories that we bought really, really well last summer when coal prices troughed, and we'll start getting the benefit of that in terms of lower costs as we move through the year.
spk03: Okay, that's perfect. And then just a very quick one, lots of discussion on growth, both organic and anergonic. Does that keep you guys with a more conservative balance sheet where you're not really pulling levers on your NCIB as much as you can?
spk05: I know, the NCIB is modest. It's 3.3 million shares. We've been paying every year the last two years, the special dividend, the ordinary dividend, we have the NCIB. The NCIB last year, we were kind of unable to trade in our own stock for most of last year. It's the main reason why it wasn't done very much last year. But we don't have those shackles right now, and even with all these capital return ideas and initiatives, I don't see why we can't do that. One of the things I've learned in the M&A activity we did pursue last year is the incredible access to cheap capital we have. It's pretty remarkable. Without getting too specific, we were able to raise, well, we didn't raise it, but we could have raised well over $4 billion of debt and nearly $3 billion of equity in an incredibly, credibly short period of time. So I think one of the things I learned from that endeavor was how attractive our business is to shareholders, lenders, their confidence in our track record, their knowledge that we're not reckless and that we know how to extract synergies. So I do not think that from two levels. One, we're going to continue to generate cash. You see already, without giving a direct prediction of cash for the end of this quarter, we expect that well before the middle of this year, we'll have higher cash levels than we had before we executed on the special dividend last year. So our confidence in our ability to replenish the cash quickly drives also our confidence on continuing our return to shareholder profile and hence the activation of the NCIB and the increase in the quarterly dividend.
spk03: That's perfect. Thanks so much,
spk01: Alan. Thank you. Next question goes to James McGarrell of RBC Capital Markets. James, please go ahead. Your line is open.
spk07: Thanks for having me on. There was an announcement recently that Canada will require all steel imports into the country to report where the raw steel was first produced or to disclose the country of melting poor. I mean, you also mentioned foreign steel in your MB&A. Any way to quantify the impact foreign steel impacts have on steel pricing so we can potentially size the impact of this if the issue is ever addressed?
spk05: So first of all, this is a major win to the steel industry, this melted and poor standard. And a lot of it is driven back to the agreements that were made as part of the USMCA a few years ago and the related auto parts that required for auto parts producers to identify the origin of the steel to make sure that everything that goes into a North American built vehicle in order to qualify for certain credits is melted and poured in North America. And the US has adapted that and we've been pushing on Canada, when I say we, not just Stelco, but we as the Steel Association, are pushing to get them to do that because A, it's part of the USMCA obligation and B, it's really, really good when it comes to reducing imports because it's inconvenient for customers to have to worry about where their imports are coming. It's much easier to run their business saying, okay, well, a lot of American imports deal, so why should I start keeping separate segments in my inventory? So I believe we're going to have a very, very significant benefit from this. I can tell you that the customers in the US are already changing their behavior due to melted and poured requirements and the fact that Canada stood up and got this done. It's going to help both of our Canadian and US business. And I think significantly reduce the appetite for customers just for some relatively small financial benefit that they may get from imports as compared to the risks. And the risks are as follows, both of which have been identified in this call, one you identified and one a prior call identified, the one that you identified relates to inventory management. And the other one is price. With the volatility in the industry, with the prices going up and then down the way they've been going, you need to manage that volatility. And the last thing buyers like to do is take the risk on a six month lead time and taking a guess of what the price might be at the time of that delivery. So I think this is a major, major accomplishment for the steel industry. Thank you very much, in Canada. Thank you for bringing it up. And I just got the news a couple of days ago myself, so I guess good news travels fast. But that didn't happen by accident. There was a tremendous amount of work done by the CSPA, the Canadian Steel Producers Association, together with the government to get them to recognize not only the prior commitments that the government made, but the necessity for the steel industry to be able to operate without the threat of these imports that might disrupt their business.
spk07: I appreciate that, Coller. And just to follow up on the cash flow statement, so can you provide some color on networking capital investment this year given some of those new coal contracts, CapEx, and any potential payments related to the employee obligation over and above the $40 million that was disclosed in the MD&A?
spk05: Yeah, so a couple of things. In terms of CapEx, you should be thinking similar to last year, somewhere between 1 to 150 type range for CapEx. I can't down the spot. I don't know if Paul can. I'll turn it to him afterwards and answer the networking capital change. I don't think it's going to be massive on relative terms. But the impact to our financial statements based on how we're set up at this point should be quite positive.
spk02: Yeah, in terms of networking capital, James, because of the IMA and the way that works, we don't end up with that much of a hit on that. So we're, frankly, a huge benefit as prices come down. What you see in receivables, as you know, tends to be really just price related since we're shipping relatively close to the same amount on a monthly basis. With respect to the employee benefits, that 40 is what it's going to be. There's no meaningful bonus payments. There's a tiny one based on some of the tax savings, but really nothing special going up this year. So I wouldn't look for any extraordinary cash payments in 2024. I
spk05: also want to clarify something because I noted in one of the analyst reports, there's a blatant error when you talk about pensions. So when we bought this company in 2017, due to prior actions of prior owners, this pension was mismanaged. We agreed when we bought this to pay $400 million towards the pension, and then the pension becomes a defined contribution plan. It's no longer a defined benefit plan. So all we had was an obligation of $400 million. We had until 2034 to pay that off. That's going to be paid off this year and then be gone. So the obligations that we have going forward are more related to OPEB, which is more of a healthcare and other types of 401 type contribution, employee bargained related contribution. So pensions will be, in terms of pension obligation, where you think about it in old line industrial companies, will be completely gone off of our balance sheet. No obligation. So we don't have exposure to change in actuarial calculations, interest rates, stock market changes, none of that. So one of the beauties of Stelco is a really, really clean balance sheet. And this is something that we're very proud of. We had, as I said, until 2034, but because as Paul mentioned and also embedded in your question is are there going to be any larger payments, those payments stop probably later this year. And that's it. And then what we're left with is the regular, no different than salary, actually. Thank you very much. I'll turn the line over.
spk01: Thank you. The next question goes to John Tomazzo of John Tomazzo's Independent Research. John, please go ahead. Your line is open.
spk08: Thank you. Congratulations on all your progress. Please excuse me asking my questions as an American. Is the vitality of the Canadian steel and market different than the US? And are your customers in Canada enjoying stronger volumes or gaining business because the 25% US tariffs might incline some manufacturers to assemble products in Canada as well as many other wonderful benefits of Canada?
spk05: Yeah. So Canadian and US economies are very, very integrated on many, many levels in terms of manufacturing, supply chains. There's been an enormous amount of growth in, you mentioned auto parts, but other parts as well in Canada because of the attraction of operating in Canada. From a cost perspective and access to the full supply chain all over North America, including the United States. So we don't really see any big variances between what we see in the Canadian markets and US markets. They're very similar. They operate really in concert with each other because of the integration of the supply chain. And so I think the data that you see, the economic drivers, supply and demand type factors that you're seeing in the United States are very similar here in Canada.
spk08: Thank you. If I could follow up. I'm a little confused in my own studies because the US third and fourth quarter GDP data was very favorable. But in the last few weeks in America, the crude steel output has been down almost 5% from a year ago. And in the last quarter, the fabricated products for new corn steel dynamics are a big negative comparisons and there's no inventory for Joyce. So it's like a good barometer of current construction conditions. It feels like the strong US dollar and higher interest rates are causing some damage down here. Do you have any interpretation how the US GDP data is so good and the steel volumes are a little slow?
spk05: Well, I mean, it depends on part of steel you're referring to. We're not seeing any drop off in demand resulting from either Canadian or US in either of those markets. As you're pointing out, GDP is strong. You would think some interruption based on interest rates going up, but I think what we've seen economically in both countries is that it's really not had an impact. At the time that I grew up, 5% interest rates were the norm. And that's where we are right now. Actually, when you look at some surprising data, and I'm not surprised by this, you're probably not surprised by this either, 5% is actually pretty cool because people that aren't working and that have savings get to earn income on their money and they have disposable income to go and spend. And 5% interest rates for a mortgage, it's okay. And I think we're seeing that in the market. So we're not seeing any of that impact our steel business. And accordingly, the GDP doesn't seem to be impacted either.
spk01: Thank you. We have no further questions. I'll now hand back to Alan for any closing comments.
spk05: Thank you all again for participating in today's call. And at the end of the last call, someone complained to me that it was only 17 minutes and this one lasted 45 minutes. So we'll try and get it right next time. Thank you very much for your time and your patience. And look forward to any further follow-up or questions.
spk01: Thank you. This now concludes today's call. Thank you all for joining. You may now disconnect your lines.
Disclaimer