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Good afternoon, everybody. This is Daniel Fairclough from the ArcelorMittal Investor Relations team. Thank you, very much for joining us on this call today to discuss the first half 2018 results. At this stage, I would like to inform everyone that this conference call is being recorded and this morning alongside the results we published the presentation with detailed speaker notes together with our Q&A document. So hopefully, you've all had a good chance to review these documents, as our intention today is to have some brief remarks from Mr. Mittal, and then move directly to your questions. [Operator Instructions] So with that, I will hand over to Mr. Mittal for his introductory remarks.
Thank you, Daniel. Good day, everyone. Thank you for joining to this call to discuss ArcelorMittal's results and strategic progress achieved in the first half 2018. I'm joined today by Adit Mittal, present CFO and CEO of our European Segment; Simon Wandke, our Mining Segment CEO; Genuino, our Head of Finance; and Daniel, Head of Investor Relations. I want to start my remarks by commenting on our health and safety performance. Our lost time injury frequency rate for the first half of 2018 showed a 14% improvement on the corresponding period last year. And our rate is considerably below the World Steel Association average of 1x. Nevertheless, we continue to prioritize further reducing the rate with a specific focus on eradicating serious injuries and eliminating fertilities. Our improved financial results best since 2011 have been primarily driven by 2 aspects. Firstly, the ongoing progress we are making with our Action 2020 strategic plan, which is delivering sustainable structural improvement across all business. Secondly, improved global steel demand and steel industry reform. There has been significant supply side rationalization over the past 2 years, which has led to a higher industry capacity utilization rates and higher steel spreads. Nevertheless, the steel industry overcapacity is still a challenge that needs to be fully addressed.Turning to our balance sheet. I'm pleased that we have achieved our financial priority of an investment grade credit rating following the upgrades from all 3 rating agencies this year. Achieving this reflects the significant progress we have made in strengthening our balance sheet and improving our financial results in recent years. Looking ahead to the second half of the year, the signs are positive. Steel demand is growing in each of our core markets and we have to revise our 2018 apparent steel consumption forecast upwards by half of 1% for the U.S. and full percentage point for Europe. Our order books which provide us with good visibility are strong and customer inventory levels are at or below normal levels. Supply side reform and supportive actions against unfair trade provides further support. I'm also confident that we will continue to make progress with our own strategic growth initiatives. In addition to Action 2020, we have several organic and acquisitive growth projects. Including our $1 billion Mexican CapEx project, restart of our cold rolling mill and galvanizing expansion in Brazil. The recent acquisition of Votorantim team in Brazil and our ongoing acquisition of ILVA. These are all exciting opportunities that will help us to deliver further sustainable long-term value creation. Thank you. Now we're happy to take questions.
[Operator Instructions] So we will take the first question, please, from Mike Shillaker at Credit Suisse.
Two questions, and if I may. Firstly, on ILVA, could we get some sense on all your intentions. What is the risk that you are going to have to do materially weaker deal than the one that was initially approved? Is there a point when you are simply just prepared to work away and any kind of more technical issue? How long can the Italian government continue to run the asset? Is there any limits in relation to EU anti-subsidy or similar legislation which imposes a time limit on them running the asset? And could, if they wanted to within that context literally open the process up to a whole new sales process? Is my first question. And then the second question, I [ found you are like ] it's getting really interesting, because it does suggest a robust H2, but you also made a stronger comment that you believe that underlying industry fundamentals are sustainable. Do you [indiscernible] Get $12 billion of EBITDA right now, we could [buy] you that the equity is pricing and something like 6.5 to 7 EBITDA, which is quite a difference. So can you give us your big picture view on global steel fundamentals? I know you've touched on some of them right now including supply-side discipline and similar effects. How do you feel about the cycle in a big picture view in terms of the sustainability and why do you think the cycle is not sustainable than perhaps it was in the previous few years?
Okay, Mike. So it is a lot of echo here. Yes, Michael, thank you for your question. So let's talk about ILVA first. So anything that will give [indiscernible] to the last 5 years, so we believe we have lot to offer to this assets in terms of our turnaround capability, environmental and social capabilities as well. In terms of walkaway, there is a binding agreement in place. The binding agreement is valid. The company has certain funds today, but our understanding is that those funds have a time limit and governed by a confidentiality, so I don't want to be precise. But I don't believe those funds have that much of mileage or run rate. And once those funds run out, you're absolutely right, the government would have to go to parliament to ask for more money and that would trigger a whole question on state aid and subsidies, which as you know in the steel industry in Europe is not allowed. I don't think the time frame allows them to reopen the process. I think, the discussion is really on whether you close the asset or whether you find ArcelorMittal as the new owner. In terms of our capabilities and what is being discussed, I think the issues that are being discussed are in terms of environmental. The new government in Italy clearly wants a stronger environmental plan. We estimated a stronger environmental plan, which has been discussed with key stakeholders. And clearly, they want a union agreement, which was never achieved, so that is still a pending item and we expect to make progress on that during August, September. In terms of EBIT values and stuff like that, the global steel industry has improved as you can see in our results, but which also recognize that ILVA's profitability has not improved significantly, actually has not changed, it's losing money like it was in the past. Actually [overall] shipments are declining. So clearly, the attractiveness of that asset has not really changed, and our plan to improve it industrially, socially and environmentally is -- and are strongly the best one available. And we really allow ILVA to be repositioned as Europe's premier steel facility. In terms of global steel market, I think a lot of the factors are captured in our presentation and in our commentary, but I will just walk you through some of them. I think let's begin with the supply side of things. So there has been supply reform. The supply reform is evidenced most pronounced in China where there has been a structural reduction of capacity and as a result, you see demand supply balance is much better, capacity utilization is much higher. That's structural. That capacity is not coming back. On top of it, China has announced Blue Sky scenario or Blue Sky planning, which implies that the Chinese steel industry, have dramatically reduced their SOx/NOx and dust emissions, which means more CapEx and more OpEx for Chinese facilities, but also means that some of the winter closures that have been impacting the Chinese steel industry could last a bit longer because the Blue Sky scenarios or Blue Sky plan implies that you can't really operationally get facilities, which have much higher SOx\NOx or dust emissions. So the supply story is good in China. Obviously, the story is not complete because they are still exporting steel and there's still some market distorting impacts and therefore, the trade action is relevant on a global basis. So then let's just move on to trade. I think we have structural trade measures in place, which do not exist in the past, I'm not talking about structure, I'm talking about antidumping and anti-subsidy cases. So that was a story that -- of 2017 and somewhat 2018. So this applies to our European business, it applies to our U.S. business, certain actions have also been taken in other geographies. More recently, we have seen 232 in the U.S. as well as safeguarding actions in Europe. 232 and safeguarding you can question the timing and how long they would last, but the antidumping measures and anti-subsidy measures typically last 5 years and typically get extended by another 5 years. So it's another structural shift or change in the global steel industry. The third thing is demand patterns, right? So we're now seeing a demand pickup in our core markets so this is Brazil, CIS, but also in Europe. And clearly as a company, we're well-positioned to cater to that. NAFTA continues to grow, so the demand pattern remains promising and we don't see a significant change in the demand outlook into the medium term. And I think, the last thing that changes or the last thing which is structural is ArcelorMittal. This is the improvements we have made as a company in terms of our footprint whether it is Europe or North America. The improvements we're doing in Brazil, the improvements we've made in the ACIS business, the cost reductions that have taken place in our mining business and I can go on and on and on, but you get a flavor of that. And along with the industrial improvements we have made is strengthening of our financial position. And I think we have the strongest balance sheet since merger. Our net interest costs are now $600 million per annum. So clearly all of those factors support the changed environment that we're seeing today.
Okay. So there also -- there is just a quick follow-up. On H2 given the guidance that you gave, is it reasonable to assume that we would expect H2 normal seasonality versus H1 run rate or would you, given some pricing lags in some of that, actually suggested that it could be better than just normal seasonality in the second half versus first half?
So Michael, I won't give a precise guidance, so I will talk about some of the effects. So the seasonality is normal in terms of volumes. So I think they will be less pronounced. The seasonality in terms of volumes would be less pronounced even in Europe. Primarily, because in Europe in the second quarter we did not perform or ship as much steel due to flooding in Asturias or in Spain as well as the railway strikes that occurred in France. So there's some catch up of shipments that are occurring in the second half and that's why the seasonality is less pronounced. Rest of the market seasonality is similar, there'll be some catch up of shipments in Ukraine as we suffered in the first half of this year. Apart from that, there is some lag effect that we should see in our NAFTA business. Positive lag effect. As you know, 232 started in the second quarter, but the full impact has not yet hit our results. So this is just a quarterly contract. This is just the fact that we have long lead time, so some of that lag will hit [the] quarter. The other lag that is embedded in 232, which is not really a second half phenomenon, but more a going-forward phenomenon is our contract business, right? So do not move to that as you know is an annual business and automotive contracts have not yet reset.
So we'll move to the next question from Alain at Morgan Stanley.
My first question is basically on -- follow-up. On the previous question is on the issues that you have faced during Q2. Clearly your EBITDA includes some negative spare on the flooding in Spain, the strike in France and some operating issues and challenges in Ukraine. Are you able to little bit numbers behind those issues. Just to be able to quantify the financial impact, so that we can reassess the heavy upside in H2. And the second question is on working capital, you have invested $3.1 billion year-to-date. If prices stay on the current levels how much do you think is a realistic release into H2 without being too precise I guess if you can give us a range that will be very helpful.
Sure. So in terms of Europe roughly the impact is about 200,000 tonnes. You have a forecast or you can estimate the profitability and the fixed cost impact of that on our tonnage [and]come with the numerical number. In Ukraine, the number is larger, it's about 600,000 to 800,000 tonnes, but not all of it will be recovered in the second half. Some of those operational issues are going to continue to impact shipments into the second half. But some of it should come back, and in Ukraine the profitability including the fixed cost contribution is not as high as in Europe. So you can take a smaller number in terms of the contribution per tonne and then you can get a fair assessment of what happened in the second quarter. In terms of working capital, look if market conditions remain stable, then expect working capital to be stable as well. So I don't expect overall a release in the second half versus the first half. There could be investment in Q3 and some release in Q4, so quarterly variances but not on half yearly basis.
We will move to the next question from [indiscernible] at Macquarie.
Just a few questions from my side. First on Essar Steel and my question here is twofold. We've seen a fairly high transaction multiples for some of the other Indian assets. Given your strong balance sheet in expansion potential of Essar Steel. Would you consider raising your initial bid materially to win the asset. And within that question, I believe that the slurry pipelines, which are a key element of the iron ore sourcing strategy are majority owned by a third-party. Is your bid predicated on taking full ownership of the pipelines? And the second question is on Brazil, which was particularly strong in Q2. And I would like to ask for some visibility on Q2 versus Q3 bridge that would be very useful, because its volumes will probably stay strong and Votor is sequentially better, but is there a reason to expect that you may get some price cost pressure in Q3 that would potentially offset the positive benefits from Votorantim and shipments?
So thank you for your question. As you know Essar is the live situation. So I think at this point in time to speculate on what we may or may not do is not appropriate. I think ArcelorMittal will pay fair value. Clearly we have a lot of experience. We bring a lot to the table. We have done this before and we know how to balance growth as well as shareholder value creation. In terms of the slurry pipeline, this is not the only slurry pipeline, there are 2 actually. One in [indiscernible] one in Paradip. But it is not as clear as you have mentioned. I think there is still -- is a dispute whether the ownership is actually owned by a third party or owned by Essar steel. So as it is a legal matter I will not get into further detail but clearly, we're cognizant of the opportunities and risks associated with the slurry pipeline. In terms of Brazil, Q2 to Q3. First of all Q2 is good performance, it's not primarily because of Votor, actually Votor contribution is almost nil in our second quarter performance. Votor contribution will actually hit in the fourth quarter and Q2 to Q3 I think the trends we have seen in the second quarter should continue to the third quarter.
And maybe a quick follow-up. Just looking at your business and your growth strategy. Assuming everything goes ahead with ILVA and Essar Steel. Would you consider additional M&A in the next 1 to 2 years or would you rather focus on turning around those newly acquired assets and further reducing your gearing?
So look, we are very focused on continuing to deleverage. And to the extent that we can grow and continue to deleverage that remains our stated strategy. I think apart from ILVA and Essar, I think the interesting announcement we've made this morning is also our expansion of our cold rolling mill complex in Brazil, this is bigger. So we're seeing demand growth come back especially in automotive and other segments of the Brazilian market and hence, are growing our finishing capacity by 700,000 tonnes. This is primarily galvanized, but it is also some core growth as well.
So we'll take the next question please from Seth at Jefferies.
A couple of questions on the U.S. business please in particular to better understand Calvert in the current environment. Given that this is a JV equity account. Can you just remind us how we should consider the role of Calvert, I mean, propelling the Calvert is [indiscernible] higher. And particularly with regards to the slab supply contract. How we should expect this business to be positioned in going forward? And secondly on Calvert, can you just walk us through from the slab supply-side, what the impact is at section 232 tariffs? Again, [from] Mexico whether you're able to pass on for that cost to your JV partner. And then lastly, utilization rate at 88%, I think it was reported, actually it seems a bit low I suppose for slab converter in the U.S. given how strong the market is. Is there further upside for Calvert volumes into H2?
Okay. So let's talk about the big picture on Calvert and then try and narrow it down and begin to answer some of your questions. So Calvert roughly buys about 4 million tonnes of slabs. 1 million tonne comes from Ternium in Brazil, which is an HRC linked pricing so that pricing completely reflects its HRC prices in the U.S. minus a certain dollar amount and this completely reflects the changes in the U.S. marketplace. In terms of -- we also supply slabs coming in from our U.S. facilities and the rest of the slabs come from our other Brazilian facility, which also has a quota arrangement with Calvert. And for our Mexican slabs we do partially a maquila-based transaction where we buy the slabs, but then we export the hot band into Mexico. All those costs and gains accrued to ArcelorMittal, right? So Nippon Steel is an equity partner, they get an equity rate of return based on the utilization rate of Calvert. So the rest of the gains that you see in Calvert are some of it is also captured in our Mexican business as they get higher pricing for the slabs and some of it is captured in our Brazilian business as well. The rest of the gains are embedded in the NAFTA, EBITDA of Calvert. In terms of the utilization rate, you're right, Q2 was slightly lower and that's [the] first half perhaps you're looking at a lower number, but this has to do with a 6-day planned outage that we had. And in Q3 our utilization rate going into the second half should improve. And when we look at the utilization rate, this is a hot strip mill utilization rate. So this doesn't mean that the galvanizing lines and stuff like that are not running full. But to get utilization rates and hot strip mill at 100%, that's unheard of. So that's perhaps the way we report utilization rates versus the actual reality what is happening to that finishing facility. So I think I answered -- yes, so that's on Calvert.
If I can have one follow-up question with regard to the U.S. business. I think you touched on earlier having strong visibility with your order backlog. But given the current strength of U.S. steel prices. Can you just give us any soft commentary what you're hearing from your customers in response to high prices, Is sticker shock beginning to weigh on apparent demand and are you seeing any resumption of import competition for spot sales in the U.S. and what should we expect status quo going into H2?
So if you look at apparent steel demand in the U.S., we are not seeing any change into the second half. Demand elasticity is quite high normally in the steel business. Clearly, on medium term there should be a normalization of that as some supply is brought on in the U.S. steel industry. And there could be certain exemptions granted for Canada and Mexico, so I think, there have been normalization which reflect a more reasonable margin for the U.S. steel industry reflecting their cost position. So at this point in time, in terms of what we're seeing, in terms of the ground reality apparent steel demand is good and we're able to pass on the price increases in our U.S. business.
Does that [gears] up?
Yes.
So we'll move to the next question from Rochus at Kepler.
Most of my questions are answered already. Two small things. The one is, in Brazil, in your flat business that was just 6%, 7% up quarter-on-quarter in the second quarter after this standstill related to decline of nearly 30% in the first quarter such as I was just wondering whether this recovery wasn't more pronounced and shall we expect this to fully [recurred] in the third quarter maybe you can shed a bit light -- a bit more light on that one. The other question is regarding the sale of 50% stake in Macsteel. When are you expecting to book the currency gain and when you expect the cash flow from that?
So in terms of Macsteel, it's a second-half event could be Q3, Q4. And exactly when the cash arrives as when we would book the currency gain. So I will not necessarily factors into Q3, I think it could be Q4 perhaps it happens earlier, but Q4 is real estate target. In terms of [indiscernible] some of that recovery you should see into the second half. So there has been no impairment in our ability to produce steel there.
Okay. And I think the comments you made on the volume loss in the second quarter. The amount of 600,000 tonnes -- 600,000 to 800,000 tonnes, was that a quarterly figure or the first half figure?
Yes, that's the first half number.
Okay. And the 200k Europe is the quarter?
That's right.
So we'll move to the next question from Cedar at Merrill Lynch.
I've just got a question on realized pricing in Brazil. I see in the quarter that you'll get on your realized price which is a benchmark price opened up a little bit and I assume that's because Votor is more exposed to the export market. And so generally realizing a lot of price per tonne. I just want to understand going into the third quarter. Should we expect an incremental increase in your difference between realized pricing and benchmark domestic pricing or would you say that the gap has opened up in Q2 and going forward there is no potential deterioration in mix essentially with more export tonnes?
So I don't really have the number, Cedar, we can come back. I don't see any structural change, so I would think that to the extent that we're exporting more into Q2 that phenomenon will continue into the second half 'til we see a more pronounced recovery in the flat business in Brazil. So the recovery that we have seen into Q2 continues, we're producing more and also we're getting better pricing for export markets such as slabs into the U.S. So I will not forecast any change of that nature into Q3, Q4.
Okay. And then a follow-up question on tax. Can you just give us a bit of color on the difference between cash taxes and income taxes for the full year, I think you had a big deferred tax asset coming through in Q2, but obviously, that's not faltering into your cash tax costs.
So, Cedar, I think another way to look at it is to just focus on our current tax which would provide you with roughly what is our cash taxes. And if you would see our guidance, we have increased our cash taxes for the year by $300 million. That's assuming that our cash tax rate is about 15%. That's the previous guidance we have provided to you and the reason why we come up with $300 million. I just -- I am [planting] the next question which is -- that is just based on consensus EBITDA, change for 2018 versus what it was at the beginning of the year.
Great. Thanks, Cedar. We'll move to Bastian at Deutsche Bank.
I just have one last question left. And that one is from the ILVA remedy. Without getting any details, are you generally happy with the level of interest you've seen as well as with the quality of the bids and also can you give us maybe a bit of color on how the process actually work if there is a scenario where you may have to [indiscernible] about the ILVA deal could potentially fall apart.
Thanks for the question. Yes, there is good interest in all assets. So we see that we have 3 packages. One is our Western European downstream, cold rolled and galv assets. The other is Ostrava, the third is Galati in Romania. And for all 3 packages, we see a lot of interest and that process is moving along nicely. I mean, short answer, no ILVA, no remedy. So if there is ILVA transaction which we expect to close then we expect to do the remedies. But in the unlikely event that we don't succeed in ILVA clearly, there would be no remedies.
Okay. So the conditional sale process?
Sorry. We didn't hear that. Just speak up again please.
So the condition sale process is basically you will, kind of trademark you're the only -- basically you need to sell when -- if the ILVA deal [indiscernible] goes ahead.
Yes, exactly. It would be conditional on the ILVA deal closing.[indiscernible]
Great. Thanks, Bastian, so we'll move to Christian at SocGen.
I only have one question. I think you're highlighting that you're looking at increasing shareholder returns when you reach your net debt target of $6 billion and I think in the statement you have highlighted you now have investment grades on the all the[indiscernible ] remain credit agencies and you're looking at favorable outlook for the sector. When it comes to end of the year or early next year when you're good to make a judgment on dividend payments. Then these at $6 billion net debt need to be achieved or will you make a judgment on the outlook for the subsequent quarters to make a judgment on whether or not the dividend increases?
So thank you for the question. Look our stated policies very clear that we arrive at net debt of $6 billion and then we should have a material increase in returns to shareholders. The reason why the $6 billion is important and it's nice to see that all the rating agencies have upgraded us, but the reason why the $6 billion is important to us because that demonstrates that we would have an investment rating through the cycle. Because what it achieves is that our net debt matches roughly EBITDA. So at any point in the cycle, we will not expect net debt to EBITDA to be in excess of 1x. And that's why the $6 billion number becomes an absolute target. Clearly, these discussions we have with the board on an annual basis and we will have discussions with the board as well. But I think it is safe to expect that dividends would materially increase only when we achieve the $6 billion net debt target.
Great. Thanks, Christian. So we'll move to Phil Gibbs at KeyBanc.
First question was just on the pricing in Europe, it looked to hold up really well sequentially, which defied what we saw at least in the northern European spot market. Was there any contract to resets in the quarter maybe 6 or 12-month deals that help to hold that pricing realization up versus the first quarter?
No significant contract resets in Q2. So usually, this reflects the market reality.
Okay. So you think there's more stable pricing in the European market than the indexes would show?
Yes, I mean our results reflect that. So -- there is no change in terms of the contract being reset in the second quarter. There could be some changes in terms of exports versus reorientation into the domestic markets but our euro prices are up quarter-on-quarter.
And then just in terms of a follow-up. When I think about the Dofasco and your NAFTA business, I know a lot of the Dofasco tonnes going into the U.S. and some of them in the automotive market, and how are you thinking about the business in the short term just with the tariffs into the U.S. from Canada? And how are your customers -- how are you dealing with those situations with your customers?
So our Canadian business at Dofasco is respecting our automotive contracts. So I mean, I know I'm not fully answering your question, but I think that's inappropriate remark from you to make into getting to more detail is inappropriate.
Right, thanks, Phil. So we'll move to Luc at Exane.
Two questions left. So first of all with regards to conditions in the U.S. market. Can you discuss a bit more the spreads and do your comments with regards to the healthiness of the spreads. Also do apply to the U.S. and I'm particularly looking at HRC spread or lack of spread, I would say, relates to more premium products in the U.S. market. How do you judge that sustainable for the H2 of [indiscernible]. That will be my first question.
Yes, so in terms of the spread environment, market environment, demand environment. Our comments apply to the North American market including the U.S. as well. The price change in HR is clearly greater than the price change in cold roll and galv. There is just a function of demand supply balance and the way the 25% impacts more the downstream products. You see what you have to appreciate is that the margins in the U.S. for downstream products were higher than the global margin for downstream product. So if you see some of that correct itself based on how the 25% duties impact those product ranges.
Okay. Second question will be related to the European safeguard. Some of your peers I mean some of the reaction of your peers have been pretty contrasted, some saying that the provision of safeguards and the TRQ system would be efficient to clear import pressure in H2. Some of your peers being less -- let's say optimistic and seeing risks from training. What is your view towards that? And would you -- what would you wish for the definitive measures to be enforced?
Not to make a joke out of it, but I think our peers are right, so the glass is half-full. I think clearly getting safeguard is important, because otherwise, the risk of a surge of imports into Europe is prevalent as exports from Europe -- the U.S. could get redirected to the European marketplace. So getting safeguard duty is -- was critical, it's very good news that it has been achieved, it's provisional today, it needs to be final. Already you saw that in the first half of this year imports were trending higher than the first half of last year. So in that sense absolutely right. Clearly, the fact that it's a 200-day provisional measure and then there's no monthly or quarterly limit can create the risk that you have a surge for a temporary period in this 200-day period. And that risk is present. Today, we have not seen that risk manifest itself, but that risk is present. So I mean but still overall, the glass is half-full. It's an excellent development in Europe to have to safeguard provisional measures put in place, but we clearly need to be focused on achieving final measures.
Thanks, Luc. So I think we've have addressed most people's questions. So we're going to have the opportunity now just to circle back with Bastian at Deutsche Bank.
Just one quick follow-up just on the outlook which you have been providing for the next quarter. So if you just go through the different business, we have less volume seasonality in Europe, but auto contracts also probably recover a little bit. A very high spot margin than we probably going to get some improvement from Brazil because of Votorantim. You mentioned the positive price that can NAFTA and AACIS probably recovering part of the volume loss. Is there anything else on the negative side, which we are missing here because I guess, just adding all of that up kind of struggle to see what other than the seasonality in Europe should be driving any sequential weakness in the third quarter?
So I appreciate the question, but I don't want to get into so much of detail on quarterly performance. I'm happy to talk about some of the impacts we're seeing in the first half of this year versus the second half. So just to recap, I think you captured everything. Europe seasonally will have lower volumes in the second half. I did not really understand your comment on automotive into Europe. Normally the automotive contracts are a Q4 event, which will impact 2019. So in terms of automotive, both in Europe and in NAFTA, we don't see the impact. In terms of NAFTA, we do see some spot market lag benefits into Q3 and Votor is a Q4 event. AACIS, there's some recovery in terms of volumes. So the rest of the -- so those are my remarks or highlights for first half versus second half.
Okay. Sorry, I thought you had some auto contracts in Europe as well, which would roll over at the beginning of July, but probably I'm wrong there.
If they roll over how does it change EBITDA that's what I did not appreciate maybe. So anyway, enough said on this topic. Thank you.
Thanks, so we have one more question Mr. Mittal, which is from Francisco at Banco de Sabadell.
I have a question on raw materials lag onto your cost side. You have spoken about price lag but as steel prices are sticking up so well. And raw materials did go down, the last month I suppose that if you could give a good impulse in your spread -- steel spreads for the second semester. I'm not sure if that's correct and I would like to have a little or more color on that side.
So I think it's a very good question. I think there is some raw material positive like especially when it comes to iron ore. But we also see consumable prices rise. Right? So when I look at consumables, I'm not just talking about the usual culprits which is electrodes, alloys and things like that, but also electricity and energy which is moving upwards in the second half versus the first half. So I don't see the cost being very different first half versus second half.
There has been no other questions. I would like to thank you all for your attention interest. It is clear from the discussion on this call today that we remain on the right path to deliver sustainable long-term value for our shareholders. Our strategy is delivering. The industry backdrop has structurally improved. Our market trends are positive and I believe, ArcelorMittal has never been in a financially stronger position than being here today. We remain committed to providing our customers with the solutions they demand and are focused on capitalizing on the opportunities that will help us to deliver further sustainable long-term value creation for our shareholders. Thank you once again, and I wish you a safe and happy summer. Thank you.