Usinas Siderúrgicas de Minas Gerais S.A. (USIM5) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to our Public Annual Meeting with APIMEC Brazil [indiscernible] Finance and our IR VP. Presentation is available on the Usiminas IR website. We also have an interpreter for simultaneous translation. Please choose the sound channel on the icon at the bottom of your Zoom screen. With us today, we have the finance and IR VP Thiago Rodrigues the President of APIMEC, Lucy Sousa. I'm Leonardo Karam. We would like to inform you that any forward-looking statements made during this conference related to the business prospects of the company as well as projections, operating and financial goals related to its growth potential constitute estimates based on the company's management in relation to the future of Usiminas. Those prospects are dependent on the steel industry sector, the scenario of the markets in Brazil and abroad. And therefore, are subject to changes. At first, Thiago will deliver his presentation. Thiago, you have the floor.

Thank you, everyone. It's an honor to be here. again, in the second public meeting of Usiminas. We're going to try to summarize in some slides what 2023 has been to Usiminas. It has been a very challenging year with internal challenges, challenges we are ready to face but also a year with complex external challenges. It's not a year filled with only challenges. We have made headway in different positive progress as we are going to share with you. And we are also going to talk about our prospects for 2024. Before beginning the presentation, we are going to show you an institutional video. [Presentation]

Okay. So we now start the presentation Yes. and this is a challenge we had ahead of us, and this is how we're going to start. The main challenge that we faced at Usiminas as well as all the steel industry, which is the envision of subsidized steel imports. The first 9 months, as we can see in the graph at the top the imports was higher than the whole year of 2022 or 44% above what reported in 2022 in the same 9-month period. And imported steel already accounts for 20% of flat steel in Brazil. It's important to understand that this is not only competitiveness that is at play. Brazilian steel is highly competitive. We export to different markets: United States, Europe, Latin America, Mexico. In other words, we compete in the same ground to many markets in the planet. We cannot compete with subsidized steel that is sold below the cost price. And this situation damages the industry, not only to Brazil. So what do we lose? We lose jobs, production. In the long term, the effects can be even more harmful. The companies in the long term may lose its capacity to invest, may lose its capacity to update from the technological viewpoint and resume production when necessary. And then we see ourselves in a situation of dependent on other countries. And it's such an input, which is solely strategic. So we continue doing a very strong institutional work so that Brazil can have the same import tariffs as those of the United States, Mexico and those countries in the region so that we can have fair competition. In addition to imports, we saw a market which have a stagnant demand. On the next slide, we can observe that the main sectors where Usiminas operates were stagnant or even they suffered some drop in their growth. In the graph below, we can see that Brazil remains in terms of per capita steel consumption in a very similar situation as that reported 4 years ago. On the contrary, China and other countries had an important evolution in the consumption of steel. It shows that the consumption of steel in Brazil is very relevant. When we look at the internal challenges of Usiminas, we can see that the main one as we can see on the next slide, were the major investments we made in Ipatinga unit. We are ending a very important and relevant cycle, 1 of the largest in the history of Usiminas that mobilized the complete company. It changed the production, configuration, cost structure, and we had to stop the main equipment and many employees were involved. It also demanded a lot of funds, not only for the CapEx, but also to the working capital, which stands at very high level since 2022. And this scenario that we have just described impacted the results. we've come in the movement of reducing net income pressurized by prices. And tight margins in the business, also driven by the increase in costs, as I mentioned shortly. We were prepared anyway when we see the financial situation of the company, we understand that the situation is very solid. We did our homework with a financial discipline, which is very stringent. And we are going through this period with the level of leverage which is under control and without commitment of amortizing the debt in short term. So this is the challenge scenario or is the challenging scenario that we have been facing in 2023. Now I'm going to talk about the initial -- internal initiatives that we are having at Usiminas, making us very confident for the future and the competitive of the company. First, focus on safety and the environment. This year, we are allocating more than BRL 700 million in several different actions that bring concrete results. And some of them are strong reduction in the fuel rate and increase in the gases and the steel plants, refurbishment of the steel mill and removal of power. These are all initiatives in order to reduce the GHG and also the reduction of particulates. So BRL 145 million have been invested in 2023 with different initiatives, and we would like to mention the safety devices and the conveyor belts and structural adaptations in the steel mill. The second, we see the situation of the pig iron. In 2023, we started the process of decharacterization of our last ungraded dam, as we can see in the center of this slide. and we no longer operate with dam since 2021. We have already characterized all the upgraded dams. And as we can see, it has been totally decharacterized and returned to nature. A big focus of our management at this point is the management, especially in the operating area with a focus of operating excellence and productive productivity and competitive gains. So the senior management is focused and dedicated at this moment on competitiveness, cost reduction, implementing a more efficient management system, which is closer to the employees. We had a restructuring by creating 2 new VPs, which are dedicated to the engineering environment and safety areas. And the other one dedicated to primary steel processes. And we are also intensifying our management routine with systematic committees or the main topics of the company implementing a new cost system in addition to having a higher integration and a high level of support to the companies of the group. And all those initiatives have started to bring results. On the next slide, we can show some concrete examples of what we have been capturing and that have already impacted the results of the second quarter of this year. We reached the record of efficiency in the blast furnaces 1 and 2 with a reduction of 9% in the fill rate in relation to the first quarter of this year, we keep going and advancing with the Coke Plant #2. We had an increase of 36% in the production volume between the first and the third quarter. We decided to make a stop to Coke Plant #3 that was not responding well from the environmental viewpoint. So we were spending BRL 30 million per month until we made a decision about this coke unit. And we increased the consumption of scrap in the -- by 9% in relation to the second quarter. So these are some of the main examples of all the actions underway at Usiminas, and we are very confident in the gaining competitivity and the results that we are likely to see as of 2024. Proceeding, we would like to mention what are the main investments at the plant of Ipatinga this year. We invested in the steel unit, an investment of BRL 535 million in 2023, with the replacement and repair of some structures, and we also added new technologies and the benefits expected are especially cost reduction and higher productivity in addition to higher efficiency and the process control. And now we are going to show you a brief video so that you can see what we did in terms of investment. [Presentation]

Very good. The next investment may be the most important of all of them was the one in the Blast Furnace #3, BRL 2.7 billion of total investment for this blast furnace. It's a piece of equipment that had been operating for more than 20 years and underwent a total refurbishment and the expected benefits are many. We would like to draw your attention to, especially those that bring in improvement in terms of better costs, more competitive costs. We increased our productivity by 30% because the blast furnace recovered its nominal capacity. And there was a reduction of 9% in the fill rate in relation to the pre stop for the refurbishment of the blast furnace. These are some examples of what can be measured when the blast furnace comes back to operation. It's important to mention that the ramp-up has been happening very positively above the evolution curves of the blast furnace that we had as we had expected. So we feel very confident with those benefits, and we hope to see the results in a more enhanced way and as of the first quarter of 2024. Let's see another video showing what we did with investment. [Presentation]

Excellent. Very good. It's always good to see all those images of the blast furnace going back into operation. This brings a lot of satisfaction to us. So we made many comments. We overcame challenges. We focused on the management of the operating areas. There's a reason for all of that, our clients. We have important drivers that puts away outstanding in relation to the competition. Our research center at Ipatinga is the largest in Latin America and allows us to develop products at high speed, different applications in many areas. So the percentage of steel is 8% in the ratio, and this is -- these are metrics that we have been following, and we want to increase this level because this is what put us apart from the competition, high resistance, steel for the automotive industry, solar panels. And this is all very important for us. And we have a very important share in the market of oil and gas. In 2023, we were the main supplier for the pipeline projects in Latin America, and we are very proud of it. And our leadership in automotive and industrial sectors focus on meeting the needs of the clients, providing not only products, but also steel related solutions was recognized this year by Toyota and John Deere that gave award to Toyota as a reference supplier, of which we are very proud. And we maintain our focus in meeting the demands of our clients, which are fundamental to the success of the company. I'm now going to talk about the prospects for 2024. We could see a scenario, which is slightly positive. We could say, for 2024. the global scenario, we can see a downward spiral for inflation, interest rates at high level yet with the geopolitical instability, which is concerning. But in Brazil, we could see some slightly better indicators Inflation is better controlled, but interest rates have also been falling, which is fundamental to the growth of the economy, we grew less than the global average. So we understand the cost to Brazil has different inefficiencies, which are at the structural level, and this keeps Brazil from growing as it should. When we look at the main sectors where we operate on the next slide, we can see a slightly positive prospect when we compare to 2023. Some sectors have growth expectations, estimates, some of them are likely to be stable, the automotive sector, as we understand shows a recovery trend, a growth of about 5%. And the main factors that lead to this result would be the drop in interest rates, the improvement in the job market and the prospect of higher investments driven by some government programs. In spite of this slightly positive way of looking at things, it's important to show the are concerned with imports. As we mentioned in the beginning of the presentation, this can be a red flag of point of attention and we are going to be monitoring very closely. When we talk about long-term vision -- strategic vision, what's at play and what's on the table of the main officers at Usiminas? We can mention some points. Decarbonization for sure is a priority for us. It's a key point to the company. We understand this is necessary for the long-term sustainability of Usiminas as for all the companies, in fact, and all vision of the future all decision of investment, production configuration, all of those items take into consideration the decarbonization, the reduction of GHG. So this is something that is going to remain in our plans on our agenda for many years to come. Competitiveness and operational excellence are already part of our team, but we want more. We want Usiminas to be a benchmark. We're going to continue and intensify all our activities so that we can gain more competitiveness and reach a level that we understand that Usiminas should be seeing when we talk about operational excellence and efficiency, leading position in high added value is a central point as well. We are working hard on developing products, but we are also conducting studies to diversify products. So this is a topic that is going to remain on the agenda in the years to come. And the main investments that we still have been studying about, which is still a very relevant topic, we have already started environmental permitting process for compact projects in mining. Our expectation is that once those permits are granted, we are going to be able to make a decision in the beginning of 2024 -- 2025, sorry. So this was the presentation. The idea is to give an overview of what happened in 2023 and what we expect to the future. I'll give the floor back to Leo, and we are already receiving some questions to answer.

So we're going to open -- we are then going to open the Q&A session. Now we're going to turn the floor to Lucy so that she can deliver the seal of APIMEC. Lucy, the floor is yours. Good morning, everyone, investing professionals, Usiminas board, investors, everyone. It's an honor for APIMEC Brazil to deliver this 20-year award platinum category to Usiminas. It has been a very long-standing relationship of with which we are very proud. And we hope the Q&A session is very fruitful.

Thank you, Lucy. We feel honored for being awarded the seal and the years of partnership with APIMEC. We are now going to start the Q&A session. [Operator Instructions] . Our first question comes from Ricardo [indiscernible] with Safra and he is asks about the margins of Blast Furnace #1. What are the options to recover margins in the steel area considering that the domestic prices have limited its pace for recovery in 2024. Can we expect reorganization of the setup of the blast furnaces at Ipatinga?

Okay. Ricardo, thank you for your question. In the presentation, we mentioned some initiatives. There are many in fact, for cost reduction. And this is our main focus, and we are looking at what we can do internally so that we can lessen or recover the margins of the steel activities that are many actions involved and expected return with the resumption of Blast Furnace #3 is very promising. We have reduction expectation of costs, which are very significant, and we continue working in order to reduce costs and increase productivity. There's a lot to do, and we believe there is a room for improving the costs at Usiminas. In relation to production setup, I imagine you were asking about, let's say, blast furnace operation, how many furnaces are going to be in operation? It's important to mention that at this time, we are studying the possibility of reducing production -- well, in fact, remove some of the furnace. And with the recovery of Blast Furnace #3 since its nominal capacity has been restored. We can maintain the capacity using only 2 furnaces. We are making all the calculations in order to go along with this plan. It's important that the investments we made for the refurbishing of sandblast -- Blast Furnace #3 of BRL 2.7 billion. Our intention was not to stop using one of the furnace because our idea was to increase production. But with -- considering the situation of the market, this is how we stand. We have no prospect of production increase at the moment. On the contrary, we are going to maintain the production level, but possibly in optimized setup, focusing on the production of Blast Furnace #3, whose cost situation is better and probably disconnecting one of the small furnaces.

Thank you, Thiago. Our next question comes from Ricardo [indiscernible] with Safra. He asks about capital allocation. What are the priorities on about how the capital is going to be allocated? And he's also asked us if it provides some information about the CapEx and the intensity per ton of the project. for the exhaustion of fryables.

Okay. Ricardo, it's important to mention that, well, our strategy to the series to go -- undergo this cycle of investment, which was a very important cycle as we showed to you. And our strategy was to maintain a comfortable cash position so that we could go through and face any additional challenges. And that was a very assertive and correct decision, and we can see that the leverage is at a very comfortable level. And now we are at another moment where we were going to rethink Usiminas of the future. And this involves different studies so that we can define what would be the production setup for the future investments. So we are still in this period of defining what the strategy will be. So for the time, there is nothing to be commented about in relation to changes of leverage strategy for the company. In relation to investments, we do not have figures to be disclosed for 2024. We're still conducting the budget process. What we know that is that the budget and the investment will be lower than this year. This year was a record level of investment, but we have to have vision of the future that can be more structured in order to have a definition of how we are going to allocate the capital. And then you talked about the compact project and the production of fryables. Our horizon production of fryables will be up to the end of this decade, up to 2029. We are going to continue or maintain the production of fryables and we have this the definition, which are matched when we're talking about the project and the production of fryables did I miss anything? Have I answered everything?

Our next question comes from -- it's also related to CapEx comes from Carlos De Alba I think you may have answered already. He wants to know about budget. What's the budget -- the CapEx for 2024?

As mentioned, we still do not have a guidance, but the message is that it will be a CapEx smaller than that of 2023 because we made huge investments in the blast furnace and the steel unit. So the CapEx is likely to be significantly lower than that of 2023. We are likely to disclose the guidance briefly.

The next question comes from -- it's about imports Thiago, [indiscernible] an individual and Marcio Farid Filho with Goldman Sachs asks about imports. What are the original countries of subsidized imported steel and Marcio asks if we reach the peak of imports, are we likely to see increases in the tariffs.

It's easy to answer the first question. The steel is coming from China. I do not have the percentage by heart, but 90% of the imported steel comes from China and steel is subsidized, and it's sold below the cost price, which is very harmful to the industry. And this is very concerning to us. I'm not going to repeat what I said during my presentation. If we reach the peak of imports, maybe it's hard to say, but maybe so because the difference between the international price, China price and the price in the Brazilian market is very small. So prices are already leveled and Brazilian importer will think twice whether or not he's going to import or if he's going to purchase from the Brazilian market. We can see a trend of hike in prices because of the higher prices of input, iron ore has increased its price quite a lot. And we see this increase even in China, and this has been reducing the gap. So it's possible to see some reduction, but it's still very concerning. And our focus is to try to get the tariff leveled in Brazil. The second question, I cannot answer. It's difficult to say. I can say that the sector as a whole is working very hard in this along those lines, showing how harmful this is to the industry and how dependent the country can be in the long term you know this dependency on the Chinese steel. And we're not talking about a lack of competitiveness of our industry, but it's an unfair competition. So we are going to continue trying to reach this isonomy in the competition in the market of steel in Brazil.

Thank you, Thiago. Marcelo Furlan with Itau BBA was asking about the possibility of an increase in import tariff. [ Homolo Bret ] asks about what we can expect on the strategy in the short and long term in order to face the challenge of steel, Chinese steel coming into Brazil and recover its profitability.

[ Homolo ], as I said, the main thing we have to do is to do our homework to be efficient. We have to be productive, we have to reduce costs, eliminate inefficiencies. So this is our main role. This is what we can do in order to lower cost and have a minimum margin so that we continue operating. It's important to mention that for a reason, the Chinese can maintain the production price is lower than the cost with subsidies. We cannot sell below the production costs. Our effort is to lower the production costs so that we can continue operating in the market. I think this is the matter of all steel industry in Brazil. But in summary, I mentioned some actions for us to get more competitiveness and this is our main focus. We are not going to just mention what's happening in the international market, but let's go look inside and gain competitive and reduce costs.

About Blast Furnace #3 [indiscernible] and Carlos De Alba with Morgan Stanley. He asks, what we can expect in terms of cost reduction and the full operation of Blast Furnace #3?

Yes, basically, Carlos is asking the same question. He's asking about what's the percentage of reduction and/or per ton that the Blast Furnace can bring after its refurbishment. It's always complicated to give an a certain number in terms of percentage because there are many variables at play. So production set up would play a part and production level would also play a part in raw materials, inputs. It's dangerous to give a number because the message can be mistaken -- mistakenly understood. What we can see is that we can mention the benefits that we can get from the resumption of operational Blast Furnace. And we can make a calculation how this is going to impact the costs considering the base scenario. The scenario that you have been using. Productivity gain is visible. So if we continue reducing or interrupting the production of the small furnace that would increase the production of Blast Furnace #3. We -- so the gain on productivity is expected to reach about 30% and another better relevant driver in the cost of production of pig iron is the fuel rate the amount of fuel that's used for the production of the pig iron, and we expect a reduction of 9%. It may be more or less depending on the factors that I just mentioned here. So in summary, it's an important reduction. And this takes us in the direction that we expect to be a, let's say, average margin or expected margin expected for a business such as that of Usiminas that would be an EBITDA from 15% to 20% in the long-term vision. We are still in the ramp-up period in spite of the fact that the blast furnace operation is very favorable is very well. We are not likely to see any important result in the Q4. We are likely to see the impact only as of the first quarter of 2024. But we are in an upward curve -- so we have positive impacts in the third -- fourth quarter and the positive sequential impact in the -- as of the second quarter of 2024.

We also have compliment by Rafal Araujo, but I think you have read answered about when the impacts are going to be materialized. So if the government increases the import tariffs, would the local producers increase prices or reduce discounts or increase the steel production?

That's a good question, Carlos. And it's very hard to answer this question. I'd like to have -- I think it's very important to have a long-term vision for the industry. We are a highly intensive, capital intensive industry. we have just invested BRL 2.7 billion in the refurbishment of blast furnace 3. For you to maintain an industry sustainable a long time and including technological updates and with the initiative of decarbonization, we did a minimum margin in order to maintain this situation. So we are talking about sustainability now. It's no use working at a price level which would provide us a margin for the company, but will not allow the company to be sustainable along the time. I believe that this is the driver to decide, which would be the adequate margin for the sector and whether or not price increases are desirable or favorable or not and always comparing and competing with the market and open markets. I mean, markets where there are no subsidies so we have to think about prices in Brazil, but we have to consider the reality of other regions across the planet, in countries that compete with fairness. I cannot say for sure whether or not we are going to have increases, but we -- what I mean to say is that we have to look in the long term. What is necessary for us to have in terms of profitability to maintain our operations sustainable in the long term, investing in all those points that I mentioned during the presentation, such as environment, safety and operating efficiency.

Our next question comes from Luiz Bergmann with Kapitalo, he wants to know about production setup. This is what he says. Considering the internal expectations of the company in terms of reduction of costs, for the production of plates and sheets and the market outsourced are low. Does it make sense to increase the purchase of third parties? and increase the production of steel?

Yes, the purchase that we made of the sheets made -- because we stopped the operation of Blast Furnace #3. So increased our working capital by purchasing plates and slabs so that we can continue doing the rolling operation and meeting the demand of our clients. In the natural setup of Usiminas, in other words, the Blast Furnace #3 operating, the purchase of slabs or plates is much lower. Basically, the need for plates that we have is only to meet the demands of Cubatao unit that does not have the production of gross plates and the logistics to bring from Ipatinga to Cubatao is not favorable. Even having the production of plates at Ipatinga, it does not pay to take the steel to Cubatao unless when we need specific kinds of steel that is only produced at Ipatinga. So this is how the company is going to continue operating and we are going to purchase from outsourced origins so that we can meet the rolling operations at Cubatao unit.

Our next question comes from [indiscernible] with Morgan Stanley. He asks you to comment on the perspectives on the mining of Usiminas. So we heard some news that production is going to increase by 2030. Could you provide some details about this?

I take this respective increase up to 2030 has to do with Compact project. We would like to remind you that the pig iron or big iron, we mine the materials that we refer to as fryable materials with some specific characteristics. And this operation has a useful life up to the end of this decade up to 2030. And we have the Compact project under study so that we can manage to explore and produce a different material, which is a harder, more rigid material that demands investments in processing plants and everything else that's required. So this is the long-term vision for pig iron. We really believe in the Compact project, it's going to encourage the production, incentivize the production higher than what we have pig iron, a good material with, iron content, higher than what we see in pig iron, which is very interesting for direct reduction of the electrical furnaces. So we have always linked with the decarbonization initiative. So we are very interested in conducting this project. We are at a high level of study, a more advanced level studies and environmental permit has already been filed and we expect to be granted the permit by 2024, '25 and we are likely to make decisions in relation to this investment.

Our next question comes from [ Lucidio Banucachi ], it is related to dividend. First, he starts congratulating on how the company has been operating. And then he asks whether dividends are going to be paid in the beginning of the year.

There's nothing to be said about this at the moment. As we said, the results of the company this year were not so favorable because of the fact facts and the situations that we mentioned. So there has been no approval of payment of dividends. This is not something we are expecting to happen. But when a decision is made, you are going to be informed of it.

I think we have already answered this question that was asked by [indiscernible] an individual and he asks about cost reduction as internal actions and external actions.

We have already made some actions. So this is the focus. We are going to focus on internal actions. We mentioned the main actions, which are the ones that bring in large return. And the fact that we recovered and resumed the operation of blast furnace and also the investments led us to a better situation than before. New technologies have already been implemented. I would say that Blast Furnace #3 has what is most modern cutting-edge technology in terms of blast furnaces and also the way we operate the furnace, how we can improve productivity and the most cost-related indicators. I'd like to mention the reduction of fill rate. I mentioned it again because it's relevance the lowest level of coke and charcoal to produce the same amount of pig iron this is the main cost driver for the blast furnace. So any [ kilo ] in the reduction of the fuel rate is relevant. We are always at all times looking after this reduction and also to reduce the emissions of CO2. So we touched upon the main topics, the operational aspects, the use of scrap in the steel unit. These are all measures that have a very important impact. And we are focused on those measures, but we are also looking at smaller points.

Now in terms of volume, Carlos De Alba with Morgan Stanley asks what would be the sales volumes expected for 2024, both for steel and iron ore?

Carlos, I cannot disclose this information right now. We still do not have a guidance to be provided. In other words, we should provide this information in a different way. Unfortunately, I cannot disclose this. I think we made it clear during the presentation that the prospects for the sector where we operate are very good or slightly positive as to say, and we have production capacity, okay? The volumes are going to be adjusted depending on the margins, depending on the prices that are going to be seen in the market depending on the imports.

In relation to prices, [indiscernible] with Bank of America and also Gabriela Brumart with [indiscernible] Markets, they ask what are the discussions of automotive agreements in January? And in the last call, it was mentioned that the prices are likely to remain stable in the first -- in this quarter? And if we can say anything in relation to the prices in the first quarter of 2024?

Okay, automotive agreement. So we are going to have negotiations in January and there have been no adjustments. So the prices are the same as those of January 2023, but we are now negotiating with the assemblers that account for 30% or 40% of our portfolio of clients in the automotive sector. I think we still cannot give a lot of information because the negotiations are ongoing. So there is a mismatch of prices when compared to the prices of January 2023. So it's very likely that some new prices will be established. Following what happened to the market in 2023, considering what happened throughout the year, namely price drop trend. Domestic prices in the fourth quarter and the first quarter of 2024.

All the sectors?

Yes, yes, that's right. It's difficult to say as I mentioned, we see that there is a better balance between the prices of imported product and domestic products. So we can see an increase in the input, iron ore at around 130. So this put pressures on the cost and we can now see that prices are increasing in other regions, including China. And considering the margins that we have today, I would say that the next step in relation to prices. If the situation is maintained, is that we are going to increase prices, not reduce prices. But we have to wait and see how things play out at the end of the year and also in the beginning of next year.

In relation to new products, Diego [ Arauja ] asks, what can we expect in terms of product development, new product development for 2024?

Okay. Diego, we continue using our research center, developing new products and the KPI that we monitor is the percentage of new products over the total percentage of sold steel, which, at present, is 8%. So we expect to increase this indicator using the expertise that we have at the company, which is very important. So the expectation is to maintain the focus on the company and develop solutions to our clients, solutions with lower costs and better quality. We are going to follow this path.

We are getting close to the end of our event. So I'm going to be more selective. If your question is not answered, our IR team will answer your question at a later time. Carlos asks, if we can mention the number of slabs or sheets purchased from third parties Cubatao and what we can expect for 2024?

Nearly all the material necessary for Cubatao comes from outsourced parts even being very competitive at Ipatinga, the logistics is not good. So we can bring slabs in place from third parties. There are a few -- very few exceptions, special only when the product is very specific, we would send from Ipatinga to Cubatao, Otherwise, they come from third parties.

[indiscernible] with Bank of America is asking about what we can expect about working capital?

As we mentioned in the last call of results, so we are still likely to reduce the working capital not at the same level that we saw from the third -- second to the third quarter. So we are likely to have a slight reduction. And for the future, we still need a more -- a better vision. As to 2024, we are working on the 2024 budget. So I would not say that there is a specific trend for next year, not yet.

Carlos De Alba asks what are the plans for the future of Cubatao? Will the company continued purchasing slabs from third parties? Will build blast furnace? What's the way, what's the solution the company will adopt?

Carlos, this is a topic that is being discussed we are studying this. One of the topics that we are studying at the moment is we are looking at many things, by the way. But -- and we also mentioned the decarbonization topic that is going to permeate all the operations of the company and we're still evaluating, these are long-term decisions, but the long term will come to the present 1 day. So at Ipatinga, we have two small furnaces whose use of life is between 5 and 7 years. So we have already started studying the alternatives for the production of steel using those furnaces and also to Cubatao unit. There is nothing concrete that can be disclosed at this time around, but these are studies that are affected because Cubatao has a strategic position. The location is very important. It's close to major economic centers [indiscernible] close to Sao Paulo. We have our own port. Cubatao can receive very competitive gas. So we see Cubatao as a strategic asset. So we are studying options, alternatives to this plant. But there's nothing concrete that could be disclosed at this time.

So to the benefit of time, we're going to close the event. Now if your question has not been answered, please look for the IR team. We are available at all times. And now I turn the floor to Thiago for his final remarks.

So I would like to thank everyone's attendance. I would like to thank you for your interest in Usiminas. It was an honor to be talking to you. And as Leo mentioned, any additional questions that you might have, the IR team is available for -- to answer. Have a good day, everyone. Thank you.