Alex Hacking: Okay. Just — but it volume, let’s say, was 16 million tons instead, would you be able to achieve any per ton cost reductions? Or we would see costs more flattish in that kind of scenario?
Celso Goncalves: Yes. So with lower volume, there are things that we could talk we probably have less maintenance expense and things like that. So that would offset the volume impact.
Alex Hacking: Okay, thanks. Appreciate it.
Celso Goncalves: No problem. Thank you.
Operator: Thank you. Our next question is a follow-up from the line of Lucas Pipes with B. Riley Securities. Please proceed with your question.
Lucas Pipes: Thank you very much, operator. Thank you very much for taking my follow-up question. I wanted to ask, first, on the fixed pricing and how that was shaping up for the January contracts kind of on a year-on-year basis? And then also if you could share any expectation for the April tranche.
Lourenco Goncalves: Yes, the last price increase we are transacting at the level that we announced for some cases. And the overall market is still below, so it’s a mixed bag. So we always try one more until we realize that the market has reached a point that we are not going to be able to push anymore. We like higher prices. That’s the best thing for our companies, the best thing for our employees, the best thing for our shareholders. So that’s why we push prices up. We go until we can’t go no more. On the other hand, we don’t see any reason for price to be — of HRC price to be below $1,000 in this marketplace at this very point, with all the fundamentals being, you go around and around and around and come back to one thing, scrap.
So I have already discussed scrap enough. So $1,000 per ton is a good floor. And I would say that at this point, the $1,150 is my talk. So that’s the range that I expect price to transact as far as HRC going forward. As far as the automotive block that goes in April, the biggest client on that block is Toyota. Toyota is an April 1 for us. And we have a great relationship with Toyota. We — they are our largest client in automotive at this point, by a decent margin against the other that we used to be called big three. They are still big, but Toyota is bigger. And the good thing about Toyota is we continue to develop highly sophisticated specs with Toyota, particularly at this point in no-oriented electrical steels, because we really produce no-oriented electrical steels, we don’t just say that we are producing no-oriented electrical steels, and we never sue Toyota like Nippon Steel just did in Japan.
Nippon Steel sued Toyota for — to get a price increase. We’re getting price increase without suing our clients. So if that’s the technology that they would like to bring to the United States. We don’t need that technology. We know how relationships work.
Lucas Pipes: Thank you very much. And in light of the strong volume guidance, what’s a good ratio to use for kind of fixed pricing versus more spot exposed? Thank you.
Lourenco Goncalves: 50-50 is a good number. We are probably in the 45, 55. So we’re close to the 55, I don’t know if Celso has any more color on that.
Celso Goncalves: No, I think that — yes, that’s a good way to think about it.
Lucas Pipes: Thank you. And then going back to the market dynamics, and I appreciate the points on the scrap side. When I do the math on imported steel into the U.S., I arrive at it kind of landed price of $11.50, which is obviously higher than where U.S. HRC is quoted by the major publishing houses. How do you square that? Or how would you frame up the competition from imports today?
Lourenco Goncalves: I’m sorry, I’m not sure if I understood your question, Lucas.
Lucas Pipes: When I do the math, I arrived at an import price. So if you — if someone were to buy steel from abroad today, it’s at a price that’s higher than where I see the U.S. HRC price. And that on the surface makes a little sense given the import requirement given that the U.S. is still short steel. So I wondered if you have a view on that and where imports currently kind of factor into the price discovery.
Lourenco Goncalves: Yes. The biggest thing when we were talking about is still coming from abroad is that, first of all, it’s still coming from abroad by and large, it’s still coming from blast furnace BOF integrated type of mills. The mini mill thing only exists in volume and in importance in the United States. So when you talk about big producers of steel that are able to export no matter if it’s from China or Korea or Japan or Europe, they are super influenced by the price of iron ore. So the old [Indiscernible] that we used to discuss a lot in these calls a few years ago is now above $130. I remember one of my last calls when our award was still important. For us, I said [Indiscernible] should trade no lower than $130, something like that, bingo.
That’s exactly several years later, that’s exactly where we are. So I’m making the same prediction for how hot rolled square today. And we continue to be very attentive to the trade laws of the United States and the enforcement of the trade laws of the United States. Because when things don’t go the way I have just described, the reason is very simple. It’s dumping. And the biggest problem of having foreign ownership in the United States is that you put the box to take care of the hen house. And then we’re going to have a domestic player that will say, no, I don’t think that there’s a problem here. And he’s a domestic player. So we cannot allow that to happen, because that would be weakening the trade laws from the inside. If you can’t enforce having the trade laws, it doesn’t work.
So that’s one of the things why we are so protected in terms of our supply chains and our national security. Because of course, it’s not in the best interest of the country to give away control over these things, particularly steel production in times of war or pre-war that we are in right now.
