Pablo Brizzio: So let me first give you a direct answer and then we will try to deepen on that. We are expecting to see very similar costs coming into the fourth quarter. Why? First of all, because we are not seeing much changes in the price of the different raw materials and the prices of slabs that will go through our financials in the fourth quarter. Though we have finished the relining of the blast furnace in Usiminas, we are not expecting yet to see the impact of that during the fourth quarter and we are expecting to start to see that during the first quarter of next year. So clearly, we are not reflecting the cost of producing our own slabs in Usiminas, but the cost of imported or purchased slabs. So all-in-all, we are not expecting to see much changes in the different parts of Ternium in relationship to cost coming into the fourth quarter and we are expecting to see in the first quarter a decrease in price in the whole Ternium on a consolidated basis.
Maximo Vedoya: The other one was prices? Yes. Sorry, Timna.
Timna Tanners: I was just wondering about the order of magnitude about how to think about the reline, the magnitude of that cost coming up. I heard that it was going to be lower. I’m just wondering if there was any color there.
Pablo Brizzio: Clearly, it will be much lower because as you know, we are at this moment, Usiminas at this moment is purchasing slabs. So the whole margin of buying slab against producing slab will be gained by the company entering into the first quarter of the year. So whatever number you would like to put that, it’s a quite significant number that will be helping Ternium to recover the profitability and to grow a much lower number or a lower number on cost on the cost side, together with other things that we need to consider like the impact of some reduced price on slabs and cost and raw material.
Maximo Vedoya: And the other thing, Timna, is that currently Usiminas is working with two, the other two, blast furnace number 1 and number 2, which are very small and not very efficient. Number 3 is much bigger and much more competitive. So you are going to change at least one of these small glass solids for the big one.
Timna Tanners: Got it. That makes sense. Okay. So then the other part of my question is really to your point on prices. So the price hikes that are being announced now in the U.S. are really more of a first quarter. So for Ternium given it often lags a quarter because of the contract structure. Does that mean these price hikes that are announced now are more of a second quarter story? Or are they also going to be lagging into the first quarter like typical delays?
Maximo Vedoya: Yes, for Ternium, and we are talking about Mexico now. Remember, 40% of our shipments in Mexico are commercial spot markets. So we are seeing from the last two or three weeks an increase in prices. How much of that is going to be in the fourth quarter is not much. But November and December, we are going to have higher prices than September and October. On the other side, the 60% of our shipments are contracts. So you’re clear, we are not going to have any effect on the fourth quarter and prices in the industrial sector in the fourth quarter are going to be lower. But for the first quarter, we are going to see increases. The amount of those increases still depends a little bit on the increases that we are going to receive in the next several weeks. I think, I think everybody thinks that prices at least in the next couple of months are going to continue to improve in the USMCA region. So we are going to see an increase in the first quarter for sure.
Timna Tanners: Makes sense. Okay, if I could squeeze one more in to ask about the demand story. In Mexico, the demand story sounds really good on reshoring of course, and manufacturing. But are you not seeing any impact from higher interest rates? Some of the color in the U.S. is certainly some weaker construction activity and concern over automotive. So any impact from spill over of the higher interest rates that you can point to in the Mexican region?
Maximo Vedoya: Yes, to be honest, we are not seeing that yet. And I put yet because we have been talking for the last couple of conference calls that we were expecting some kind of impact. But still, the money is still very robust in the U.S. to be honest. And we are not seeing a decline on demand that is going for industrial sectors that are also dependent on the U.S. Production of car increased like 7% or 8% in the year. And all the other industrial sectors are guiding in the same line as last year, without any decrease on that. And the commercial market in Mexico is also very strong. Although interest rate has increased also in Mexico, construction is coming back. Inventory in the commercial markets are low. So we are not seeing this effect yet. I think that in some point, we are going to see that. But this is taking much longer, thanks God [Ph] that is what we thought. So for now, we are seeing very robust demand in both markets.
Timna Tanners: Okay, good stuff. Thanks again.
Maximo Vedoya: Thank you.
Operator: Thank you. Your next question comes from the line of Gabriel Simões with Goldman Sachs. Please go ahead.
Gabriel Simões: Hi, thank you for the presentation. Thank you for taking my questions. First question, I would like to piggyback on Tina’s question in the Mexican market. So you mentioned you’re still seeing strong demand for the market as a whole. But I just wanted to understand how much room you see for turning to continue to gain market share from its competitors in the near term. And if you’ve seen the dynamics change in the market, since the implementation of the higher import tariffs, given that gaining share from imports was also one of the goals here with the higher investments in the country. And the second question here would be on dividends. So you announced higher interim dividends this quarter than you did for the same period last year.
And we wanted to better understand how we should think about cash returns going forward, given that you still have a very comfortable cash position at Ternium, but at the same time, sizable investments to make in the Pesquería facility, and potentially higher investments at Usiminas as well. So just wanted to understand how we can factor all these things in to think about cash returns in the future. Thank you.
Maximo Vedoya: Okay, thank you, Gabriel. I’ll start with the first question, and it’s demand in Mexico. I mean, the demand in Mexico as you said is very robust. If you take the nine months of the year, we are at least 7% higher than last year. So it’s a huge increase in demand. Of course, our shipments increase much more for several reasons. First, our market share against imports, of course increase. And also one of our competitors is not producing in the market. So that’s also helpful. Now, on what can we gain more? I think we have still a very huge amount of the market that we can gain. Our problem is how we increase production, because most of our lines today are working at rather full capacity. We have some production in the hot spring meeting to the Busco [Ph] and we are increasing that production.
