Coke is responsible for sustaining the burden inside the blast furnace in a way that the gases can traffic inside the furnace. And then the chemical reactions can happen. You don’t have pellets touching pellets by and large. You have pellets touching coke. And that structural role inside the furnace is extremely important. We can minimize that. We have been doing that by reducing our coke rate, and we will continue to do that with more HBI and with less coke, but we don’t have a limit yet. This will be the object of several trials as we start using. We know to be a lot less. I don’t know how much.
Carlos De Alba: All right. Great. And just to clarify, sorry. The $9 million investment or less than $9 million the investment in the pipeline is per plant and it is for the inside the fence pipe, right?
Lourenco Goncalves: Yeah. It’s a pipeline that to run from the fence to the furnace.
Carlos De Alba: To the plant furnace. All right. Yeah.
Lourenco Goncalves: Yeah. For a plant of that magnitude? It’s an enormous plant. We are talking miles, so it’s not a small feat. It’s a long pipeline.
Carlos De Alba: All right. Got it. And then …
Lourenco Goncalves: Just a pipeline, it’s not a complex technological facility or anything like that. It’s a pipeline, but it’s a long pipeline and the pipeline that will carry hydrogen. So it has specifications. It’s a pretty, well-defined type of steel that they’re going to be using for that pipeline.
Carlos De Alba: All right. Fair enough. Understood. Thanks for those clarifications. And just for — another question if I may, on the auto price negotiations. So you mentioned October. Any color that you can provide on January, have you started those conversations, or are they going to start only once the auto strike ends? Or given that most of your clients are not Detroit Three, would you start negotiations? Have you started negotiations with the other OEMs? And when would you expect to complete those?
Lourenco Goncalves: No, the negotiations are ongoing, Carlos, and there’s no bearing on what happens with the strike. And by the way, my position with the strike is very clear. This strike has passed the midpoint by a lot. It’s not something that will stay forever. I don’t believe that we are going to have this strike going beyond Q4. These things have a beginning, have a peak and must have an end. Otherwise things go nowhere and it starts to destruct not to build anything. So we are a lot closer to the end than to the beginning of this strike. But it has no bearing in our negotiation. Our negotiation is ongoing, is going extremely well.
Carlos De Alba: All right. Thank you very much.
Lourenco Goncalves: Thank you.
Operator: Thank you. [Operator Instructions] Our next questions come from the line of Timna Tanners with Wolfe Research. Please proceed with your question.
Timna Tanners: Yeah. Hey, good morning guys. I hope you’re well. Wanted to ask a bit more about the Q4 outlook. I know you said the $15 per ton cost savings. Just talk a little bit about some of the auto contracts that kick-in in the October timeframe, but anything further about mix or how to think about some of the other components.
Lourenco Goncalves: Well, Q4, we are going to have a bigger impact on the shipments to automotive than we had so far. Remember the strike started September 15, and it has been picking up steam since then. Now that we are on October 24th, we are now with more than a month. So — and 24 days of the quarter have been affected by the strike. So we’re going to have a difference in mix in Q4 in comparison with Q3 because we are going to be somewhat affected by the fewer shipments to automotive. That said, think about the service center. Service centers have been not buying. They passed Q3 without buying. They were the doctors that can’t touch blood. They can’t touch steel. So now they need to touch steel. They need to buy. That’s why they got a price increase of a hundred bucks.
Check the box, then they got another one of fifth, check the box and there’s more to come and it’s better for them to start buy that they have already started by the way, buying a lot more now because otherwise they’ll buy a lot more in Q1 and it’ll be a lot more expensive. That’s the color I would like to give. Celso wants to say something.
Timna Tanners: Okay. Okay.
Celso Goncalves: No, I was just going to compliment just to round out the conversation, Timna. As we guided, costs are going to be down $15 quarter-over-quarter. And this decrease in cost will help, partially offset the decrease in average selling price. But from a shipment standpoint, we’ll be around that 4 million ton level again in Q4. And then from a mix standpoint, we’ll have less kind of the value added product. But working capital should provide us a nice tailwind from a free cash flow standpoint. So I think the way to look at it is Q4 will be sort of a trough in terms of EBITDA, but we’ll generate a lot of cash, perhaps even more cash than EBITDA during the quarter, which will support our ongoing capital allocation priorities and deleveraging continue to pay down debt. We’ll use some of the cash to pick up some shares if the price remains at these discounted levels. So I think that’s the way to think about Q4.
Timna Tanners: Okay. Great. You answered some of my next question, which is going to be on an update thinking about capital allocation. So I’m not sure if I need to ask that, but any further comments would be great. Anyway. The other question I had was just, I know there’s smaller parts of your mix, but we were kind of surprised to see stainless and electrical volumes down. I assume that stainless since electrical has been sold out and you’ve got more tons there. And also on the plate side, would be great getting an update on those markets, please.
Lourenco Goncalves: Yeah. Look, we are seeing — actually it is a good point, good point. You caught on a very interesting point. The electrical steel situation here in the United States right now is pretty much in flux because you are still in a American market that consumes GOES, not NOES. The consumption of NOES will pick up when the production of electric vehicle speaks up. And this is still in talking mode, but not in execution mode. So we are prepared, and we invested to produce high performance NOES we call MOTOR-MAX. And we are selling, but we are not selling a lot because the biggest producer of electric vehicles in the United States doesn’t produce here in the United States, produce in China, produce in Germany, but doesn’t produce here.
So we don’t sell to them in China, we don’t sell to them in Germany. Maybe one day we will, but they’re not at this point. So we’re waiting for the real Americans to start buying more of our MOTOR-MAX. That’s the NOSE portion. The GOES portion continues to be way under supplied, because we need a lot. But the problem is that our clients have all kinds of problems with hiring people, supply chain issues, the ability to handle the tonnage. We have actually one client that has been able to overcome these things that, everybody else is running behind. So it’s about the downstream of the plant, not about the plant. The plant is able to produce more now because we’re able to move NOSE to Zanesville. So the Butler plant, the plant that produce electrical steel is now able to be totally focused on reoriented electrical steel.
The demand theoretically is there, but the clients need to be able to digest the higher tonnages. It is not on us, it’s on them.
Timna Tanners: Okay. That’s helpful. Thanks very much.
Lourenco Goncalves: Thank you.
Operator: Thank you. Our next question is coming from the line of Bill Peterson with J.P. Morgan. Please proceed with your question.
