Hello, and welcome everyone to the Second Quarter Fiscal 2022 Earnings Call for Commercial Metals Company. Today’s materials, including the press release and supplemental slides that accompany this call can be found on CMC’s Investor Relations website. Today’s call is being recorded. After the company's remarks, we will have a question-and-answer session. And we will have a few instructions at that time. I would like to remind all participants that during the course of this conference call, the Company will make statements that provide information other than historical information and will include expectations regarding economic conditions, the impact of the Russian invasion on Ukraine, effects of legislation, US steel import levels, US construction activity, demands for finished steel products, the expected capabilities and benefits of new facilities, the Company’s future operations, the timeline for execution of Company’s growth plan, the Company’s future results of operations, financial measures and capital spending. These and other similar statements are considered forward-looking and may involve certain assumptions and speculation and are subject to risks and uncertainties that could cause actual results to differ materially from these expectations. These statements reflect the Company’s beliefs based on current conditions that are subject to certain risks and uncertainties, including those that are described in the Risk Factors and forward-looking statements section of the Company’s latest filings with the securities and exchange commission, including the Company’s latest annual report on Form 10-K. Although these statements are based on management’s current expectations and beliefs, CMC offers no assurance that these expectations or beliefs will prove to be correct, and results may vary materially. All statements are made only as of this date except as required by law. CMC does not assume any obligation to update, amend or clarify these statements in connection with the future events, changes in assumptions, the occurrence of anticipated or unanticipated events, new information or circumstances or otherwise. Some numbers presented will be non-GAAP financial measures, and reconciliations for such numbers can be found in the Company’s earnings release, supplemental slide presentation, or on the Company’s website. Unless stated otherwise, all references made to year or quarter and are references to the Company’s fiscal year or fiscal quarter. And now for opening remarks and introductions, I will turn the call over to the Chairman of the Board, President and Chief Executive Officer of Commercial Metals Company, Ms. Barbara Smith.

Good morning, everyone and thank you for joining CMC's second quarter earnings conference call. Before we begin, I would like to again extend my appreciation and congratulations to CMC's 11,000 employees for another outstanding quarterly performance. Each day through your hard work you find innovative ways for our company to drive efficiencies across the business, improve product quality, deliver world-class customer service and advance our strategic vision. On behalf of the entire leadership team, we're extremely proud of your efforts and of the culture of teamwork and accountability that defines our organization and that you carry forward every day. I'll start today's call with highlights from the quarter and a brief status update on CMC's strategic growth projects. I will also provide commentary regarding the impact of the war in Ukraine on CMC's people and business. Paul Lawrence will then cover the quarter's financial information in more detail, and I will conclude with a discussion of the current market environment and our outlook for the third quarter of fiscal 2022, after which we will open the call to questions. Before starting my prepared remarks, I would like to direct listeners to the supplemental slides that accompany this call. The presentation can be found on CMC's Investor Relations website. Earnings from continuing operations were $383.3 million or $3.12 per diluted share on net sales of $2 billion, which is a record quarterly result for CMC. Excluding the impact of non-operational items that Paul will discuss, adjusted earnings from continuing operations were $187.6 million or $1.53 per diluted share, the second best in our company's history, trailing only the prior quarter. CMC generated core EBITDA of $323.1 million, an increase of 89% from the year-ago period and virtually unchanged from the historically seasonally stronger first quarter results. With this quarter's strong performance, CMC's trailing 12-month core EBITDA totaled more than $1.1 billion and our trailing 12-month return on invested capital was 21%. This is a significant achievement. During the last 12 consecutive quarters, a time period that includes the global pandemic and broad supply chain and labor force challenges, CMC has generated annualized return on invested capital well above 10%. Our past and current strategic actions have clearly created consistent and substantial value for shareholders and we are poised to continue doing so. CMC's excellent second quarter benefited from favorable demand conditions across virtually all end markets in a very strong margin environment for our major product lines. Our performance also benefited from CMC's ability to capitalize on these conditions. As one example, Europe's record quarterly EBITDA reflects the contributions of our third rolling line commissioned last May. This new line in our Polish mill can produce rebar, merchant bar and wire rod simultaneously and is generating volumes and profits well above our initial expectations, enabling our European commercial team to more fully serve their very strong marketplace. This example is like many of the strategic initiatives and investments that are allowing CMC to turn strong market conditions into record financial results. Let me now provide a status update on CMC's strategic growth projects, starting with our announced acquisition of Tensar. We expect to close the Tensar transaction during the third fiscal quarter. As a reminder, this acquisition will meaningfully extend CMC's growth runway providing a platform for further expansion into high-margin, high customer service engineered solutions. Tensar's offerings provide best-in-class propositions to customers and are currently under-penetrated in the marketplace. We believe this combination of attractiveness to customers and large potential market opportunity will support significant organic growth for Tensar in the years ahead. Our Arizona 2 micro mill project remains on track for an early calendar 2023 startup. This timing lines up well with the expected ramp-up in spending related to the Infrastructure Investment and Jobs Act signed last November. The new mill will provide CMC with 400,000 tons of rebar capacity to serve incremental infrastructure demand, as well as about 150,000 tons of merchant bar that will extend our sales reach to the West Coast. Lastly, CMC continues to study options regarding our announced fourth micro mill to be constructed in the Eastern US. We are currently in the site selection process and expect to be able to share project details in the coming months. The war in Ukraine has dominated the news cycle for several weeks and we are monitoring the situation closely. For our team in Poland, the war is very close to home. In only in the last few weeks, an estimated 1.4 million Ukrainian refugees have crossed into Poland. I'd like to give you a sense of the quality and unselfish kindness of the CMC team members in Poland. Local leadership has acted swiftly to assist those who leave for safety by coordinating with a well-known humanitarian aid group in Poland that specializes in helping victims of armed conflicts and natural disasters. Leadership has also made CMC's accommodations available to refugee families. Many employees are traveling to the Ukrainian border on their own time to transport refugees to safe areas. Many have also opened their homes to refugees and provided food, comfort and shelter. The response by CMC's Polish team members to the human tragedy and need is inspiring and we thank them for everything they are doing. To date, CMC has not experienced any disruptions to our operations. Currently, market demand has continued unabated within CMC's core Polish and German markets. Barring an expansion to the conflict, we do not anticipate any significant interruptions to business functions. EU sanctions placed on imported materials from Russia and Belarus, combined with the disruption of the flow of Ukrainian material are expected to meaningfully tighten the supply of long steel products. For reference in calendar 2021, Russia, Belarus and Ukraine accounted for 46% of the rebar imported into the EU and a higher percentage of the imports into Central and Eastern Europe. These countries also make up roughly 25% to 30% of imported merchant bar and wire rod into the EU. Looking at the impact on steel-making raw materials, we are confident in our Polish supply chain. Scrap for our mill is domestically sourced, much of it coming from CMC's own facilities. Likewise, CMC has a strong procurement team in place to ensure access to alloys, electrodes and other key inputs. These comments extend to our North American operations as well. And just as a reminder, CMC does not require pig iron or prime scrap at any of our steel mills. Finally, as stated in our press release, our Board of Directors declared a quarterly cash dividend of $0.14 per share of CMC common stock for stockholders of record on March 30th, 2022. The dividend will be paid on April 13th, 2022, this represents CMC's 230th consecutive quarterly dividend with the amount paid per share increasing 17% from the second quarter of fiscal 2021. With that overview, I will now turn the discussion over to Paul Lawrence, Vice President and Chief Financial Officer to provide some more comments on the results for the quarter.

Thank you, Barbara, and good morning to everyone on the call today, as Barbara noted, we reported record fiscal second quarter 2022 earnings from continuing operations of $383.3 million or $3.12 per diluted share, compared to prior year levels of $66.2 million or $0.54, respectively. Results this quarter include a net after-tax benefit of $195.8 million. The benefit was related to a large gain recognized on the sale of the California real estate, which was partially offset by debt extinguishment costs associated with the opportunistic refinancing completed during the quarter. Excluding the impact of these items, adjusted earnings from continuing operations were $187.6 million or $1.53 per diluted share. Core EBITDA from continuing operations was $323.1 million for the second quarter, nearly doubling the $171.1 million generated during the prior year period. Slide nine of the supplemental presentation illustrates the strength of CMC's quarterly results. Both our North American and Europe segments contributed significantly to year-over-year earnings growth, while core EBITDA per ton of finished steel reached a record level of $226 per ton. Now I will review the results by segment for the second quarter of fiscal 2022. Excluding the gain realized on the California land sale, CMC's North American segment generated adjusted EBITDA of $262.1 million for the quarter, just $6 million below the record level achieved in the first quarter. Adjusted EBITDA per ton of finished steel shipped hit a new all-time high of $268. Segment adjusted EBITDA improved 53% on a year-over-year basis, driven by significant increases in margins on steel products and raw materials. Partially offsetting this benefit were higher controllable costs on a per ton of finished steel basis, due primarily to major maintenance programs and increased unit pricing for freight, energy and alloys. Selling prices for steel products from our mills increased $346 per ton on a year-over-year basis and $65 per ton sequentially. Margin over scrap on steel products increased $254 per ton from a year ago and $57 per ton sequentially. The average selling price of downstream products increased by $240 per ton from the prior year, reaching a new record of $1,169; this increase was more than double the rate of change in underlying scrap costs, leading to a significant expansion in profitability on volumes processed and shipped through CMC's entire vertically integrated value chain. During our fourth quarter earnings call, I indicated that CMC’s downstream backlog was expected to reprice higher throughout fiscal 2022, as new higher priced work replaces older lower price work. We are seeing this scenario play out, as demonstrated by the $155 per ton increase in downstream average selling price from CMC’s fourth quarter of 2021 to the second quarter of 2022. We continue to expect further upward movement in CMC's average backlog price through the remainder of the fiscal year, particularly in light of the strong market demand and bid volumes that we are experiencing within our downstream geographies. Shipments of finished product in the second quarter decreased approximately 10% from a year ago, due to a difficult comparison to unusually strong volumes in the prior year period, as well as weather challenges in much of the Eastern US. End markets for our mill products remain robust, which we are seeing in both order rates and broader industry data we track. Downstream product shipments decreased by roughly 5% as weather slowed construction activity in several geographies. However, we have seen downstream backlog volumes increase providing good optimism regarding the strength of underlying demand. Turning to Slide 11 of the supplemental deck. Our Europe segment generated record adjusted EBITDA of $81.1 million for the second quarter of 2022, compared to adjusted EBITDA of $16.1 million in the prior year quarter. The improvement was driven by expanded margins over scrap and a significant increase in shipment volumes. Higher costs for energy and mill consumables partially offset these positive factors. Margins over scrap increased $203 per ton on a year-over-year basis reaching $407 per ton; robust market conditions provided the backdrop to achieve a $319 per ton increase in average selling price with solid year-to-year trends across each product we sell. Europe volumes increased 27% compared to the prior year as a result of strong market fundamentals and the absence of major planned maintenance that occurred during the second quarter of fiscal 2021. Shipment of merchant and other products were relatively unchanged as sales of higher margin finished product from our third rolling line replace sales of semi-finished billets. This positive shift in sales mix has provided a strong benefit to segment earnings and as Barbara mentioned the recently commissioned rolling line continues to materially outperform expectations. Demand conditions within Central Europe remain strong. The Polish construction market continues to grow, while consumption of our merchant and wire rod products have been supported by expanding manufacturing activity. Polish and German PMI readings have registered growth for 20 consecutive months. Turning to the balance sheet, liquidity and capital allocation. As of February 28th, 2022 cash and cash equivalents totaled $846.6 million. Our cash position was augmented by the successful $600 million senior notes offering completed in January, which provided CMC with $300 million of new funding and advantageously allowed us to redeem $300 million of outstanding 5.375% interest rate notes due in 2027. The new senior notes due in 2030 and 2032 were re-priced to yield 4.125% and 4.375% respectively, enabling us to cost-effectively fund our business and extend our maturities. Further, in conjunction with the Industrial Development Authority of the county of Maricopa CMC issued 25-year tax exempt bonds to fund a portion of our new Arizona 2 micro mill. This offering was structured to yield 3.5% for the $150 million of proceeds received. We have regularly discussed our Arizona 2 project since announcing it in August of 2020. We are proud not only of its first in the world merchant bar capabilities, world-class environmental footprint and strategic value to CMC's position in the Western US, but also from its financing. The vast majority of funding for Arizona 2 was sourced by unlocking the significant real estate value gained in CMC's 2018 rebar asset acquisition, as well as now the long-term financing at just 3.5%. So not only will Arizona 2 have world-class operating costs, but it will also have a world-class capital structure as well. As of February 28th, 2022, we had approximately $685 million of availability under our credit and accounts receivable programs, bringing total liquidity to $1.5 billion; a portion of this liquidity will be used to fund the Tensar acquisition on the close of the transaction. During the quarter, we generated $29 million of cash from operating activities, despite almost a $200 million increase in working capital. The rise in working capital was driven by the significant increase in average selling prices. Over the course of the past six quarters, CMC has invested over $800 million in working capital, which will be converted to cash when prices retreat. Our leverage metrics remain attractive and have improved significantly over the last three fiscal years. As can be seen on Slide 15, our net debt to EBITDA ratio now sits at just 0.5 times, while our net debt to capitalization is at 14%. We believe our robust balance sheet and overall financial strength provides us the flexibility to finance our strategic organic growth projects and complete the acquisition of Tensar while continuing to return cash to shareholders. CMC's effective tax rate was 24.8% for the second quarter and we forecast a full-year rate to be between 24% and 25%. Turning to CMC’s fiscal 2022 capital spend outlook. We continue to expect to invest between $475 million and $525 million in this year for a total, roughly half of which will be attributable to Arizona 2. Lastly, CMC repurchased 335,500 shares during this fiscal second quarter at an average price of $34.85. These transactions amounted to approximately $11.7 million, leaving $333 million remaining under our current authorization. We plan to increase our pace of repurchase activity during the second half of fiscal 2022. This concludes my remarks and I'll turn it back to Barbara for an outlook on the current market environment.

Thank you, Paul. Turning now to market conditions, first in North America, we continue to see strong demand at the mill level for each of our major product groups. Rebar and wire rod are being supported by healthy construction markets with many customers indicating that their own order books are at multi-year or even all-time highs. This anecdotal view is consistent with the current rate of growth in overall US construction spending as measured by the Census Bureau, which is growing at a high single-digit year-over-year rate. Encouragingly, we are also seeing signs in both our internal indicators and external measures that the non-residential construction activity we anticipated is beginning to follow the rapid new community build-out that has occurred in our Southern markets during the last two years. Historically, non-residential investment has followed residential construction by 12 to 24 months, as local, public and commercial infrastructure is constructed to support the inflow of new residents. We see this demand first hand in our downstream Rebar Fabrication operations. Our best leading indicator of future activity is our level of construction bids. This measure continues to grow on a year-over-year basis and reached its highest ever second quarter rate. New project quotes are well balanced between public and private sector work, as well as across industries. Activity has increased in traditional areas of private non-residential like office mixed use, commercial and industrial. Additionally, the sectors that were hot during the pandemic, warehousing, data centers and healthcare remain strong sources of demand. Late in the quarter, as a result of the current energy market turbulence, we even began to see previously delayed LNG projects reemerge. Rising downstream business is at historically attractive levels and should be nicely profitable, when shipped in quarters ahead. I would also like to note that the strong environment just described is yet to be impacted by the new infrastructure plan, which we estimate will add approximately 1.5 million tons of incremental rebar demand to the market at full run rate. As previously mentioned, the timing of the start-up of our Arizona 2 micro mill will position CMC well to fully capitalize on unexpected additional demand related to infrastructure. The positive tone of our outlook is backed up by several key external construction forecasts and indicators. The Portland Cement Association expects healthy growth of 2.5% in cement consumption in 2022. The Architectural Billing Index continues to point toward expansion in the year ahead, particularly within our core Southern US footprint. Additionally, the Dodge Momentum Index, which measures the value of non-residential projects entering the planning phase remains at levels seen only a handful of times over the last 15 years and shows strength in both its commercial and institutional components. Demand for merchant bar also remains strong; this product reaches numerous end markets and the majority of the largest consuming sectors are growing, including General Industrial, Metal Buildings, Racking and Conveyors for Warehousing, Farm Machinery and Construction Equipment. The demand picture in Europe is equally positive, but because of the Ukrainian war more uncertain. Current demand is robust across sectors, with construction activity strong and new residential construction permits remaining near multi-decade highs. The Central European industrial sector continues to grow as reflected solidly in PMI readings for both current production and new orders. With production from our new rolling line, which allows our Polish operations to produce each of our three major product groups simultaneously, CMC is now even better positioned to capitalize on market strength. However, while business conditions are favorable at the moment and expected to remain so, the future direction of the Ukrainian crisis is unknown. Given the anticipated tightening of long product supply in Eastern and Central Europe, we do expect strong financial results in the near term, but a prolonged conflict will likely impact. So to reinforce our outlook for fiscal 2022 is very bullish. Based on our current view of the marketplace and our internal indicators, we anticipate continued strong financial performance; signs point to robust demand in our key end markets and we expect supply and demand conditions to remain favorable, supporting healthy margin levels. More near term in the third quarter of fiscal 2022, we expect shipments to follow a typical seasonal trend, which has historically equated to a high-single or low double-digit increase sequentially. Margins on steel products, as well as controllable cost per ton should be generally consistent on a quarter-over-quarter basis. Once again, I'd like to thank all of the CMC employees for delivering yet another quarter of outstanding performance. Thank you, and at this time, we'll now open the call to questions.

Thank you. We will now begin the question-and-answer session. Our first question comes from Michael Glick with J.P. Morgan. Please go ahead.

Good morning. Could you just remind us on how your power contracts and hedges in Poland are structured? The implications for margins going forward and given those important stats you cited earlier. Do you think rebar prices can offset the incremental energy costs? And then shorter term has there been any change in demand or customer behavior in the very recent terms since the invasion?

Let me take a couple of them and then I'm going to pass it to Paul. First and foremost, we do not see any concern relative to energy supply to our Polish operation. Poland is probably the least dependent country on the effect of geography. And so, Paul can talk more specifically about our energy hedges, which will also provide some benefit to us in the near term. But as you know, a number of steel operations have shuttered due to the rise in energy prices, and I just want to emphasize that we don't see any disruption in supply. As it relates to demand, we are not seeing any negative effect on demand. Bear in mind that a very large portion of our output stays in the Polish market; we do ship into our second largest market, which would be Germany. However, we're not seeing any changes in demand as a result of the conflict.

Yes, Mike, and good morning. Just a little bit additional information on the Polish power arrangement, as Barbara said, you know, it is not dependent on natural gas as a source of energy for the country as other countries within Europe are; primarily it is coal-based generation of energy. So not only are the spot prices lower in Poland than what we see across much of the rest of Western Europe, we also have the financial arrangement such that our exposure to spot prices is significantly reduced. As we've talked about in the past, we've got both financial hedges in place, which have a significant portion of our overall power, as well as we've got various arrangements with our power supplier, which includes a portion of fixed-price power. And so the increase as a result of energy has not been a material increase to the overall cost structure related to our Polish operations.

Got it. And then, you know, I guess the main question I get is just, do you all have the view that rebar prices in both the US and Europe will increase more so than cost via scrap? And you mentioned energy is a small piece, but I'm curious to get your view there?

Yes, Michael, and we have to be careful what we say relative to selling price, but what I would say is that there was a significant correction in scrap prices in March as a result of the conflict, both in the US and around the world. The beauty of our business and our products is that our customer base is used to adjustments when we see fluctuations in raw material prices. The other thing I would point out is we do not require any pig iron for our melt need, so the pressure for us is less significant than other players, and we also don't require prime scrap in the prime and the pig is where there is significant impact relative to the conflict in Ukraine. So we feel good about the market absorbing the various inflationary pressures, not only scrap, but other inflationary pressures that we're all familiar with.

Okay. Got it. Thank you very much.

Thank you, Michael.

Our next question comes from Seth Rosenfeld with BNP Paribas Exane. Please go ahead.

Hi, good afternoon, thanks for taking our questions today. Another question on Europe, please. In your prepared remarks, you touched on the EU's high reliance on Russia, Ukraine and Belarus for imports and long products. Can you remind us on the current effective capacity of your Polish mill, obviously with the third rolling line recently ramped up? Should we assume if any additional upside to output volumes there as recent performance representative of MAP's potential output? Just thinking about potential for share gains, I'll stop there, please.

Thank you, Seth. Hope you're doing well. With the sanctions, we do see that as a potential opportunity for us in Poland, not only for the reasons we just mentioned around the ability to continue operations uninterrupted due to available energy, and we also don't see any major risks from an overall supply chain. But it could create a tightness in the market. I think, as you know, the sanctions included some language suggesting that the quotas that are currently allocated to Russia and Ukraine could be allocated to other countries. But our current view, and it's early, is that that could represent an opportunity for CMC. I'm not going to comment on specific capacity numbers because that varies based on the product mix that you're running, and we do have some ability to ship product mix around across the platform. But certainly the addition of that rolling line was very effective and has been outperforming our expectations, as Paul indicated, and we see that scenario continuing to be really favorable to generate just a very attractive return on that investment.

Thank you. And a separate question, please, with regard to conversion costs or controllable costs. And I'm not quite sure if your comments were reflective of global cost or specific to the US. But given that in the last quarter, there were other maintenance outage costs? What scale of decrease or alleviation of that pressures reflecting the Q3? If you can quantify that, please, and then in the other direction are you expecting any incremental increase in freight or alloys going into Q3, please?

Yes, Seth, as far as the maintenance outages, it’s been now over a year and I would say probably closer to a year and a half that we've been operating our facilities at a high rate of utilization, and as a result we are continuing to do necessary preventative maintenance across our operations. We did get a lot of those done within the second quarter, but some will continue into the third quarter as well. But mostly, the focus is on the continued reliability of the equipment versus significant costs associated with the outages. If we look at our overall outlook for costs going forward for us, it's really how do we position ourselves in comparison to other industrial activity even outside the steel industry, and we believe we are very, very well positioned. As you look at the innovation that we have brought with the micro mill as an example, that is the lowest energy consumption form of producing steel in the world today. As a result of the impact that we have seen from rising energy costs, yes we’re not immune to it, but it is lower than what has been incurred by others. So we are not anticipating based on what we see today significant further increases in cost. However, it will depend on what happens to the general inflation factors. But what we are confident of South is really our competitive position will remain very, very strong and being able to be a low-cost producer.

Okay, just to clarify on maintenance, would that be down Q-over-Q? It sounds like it is going to be compensated for by inflation elsewhere, am I understanding it correctly?

The maintenance itself is likely to continue to be with us into the third quarter as we continue to go through our routine maintenance at other facilities.

Okay, understood. Thank you.

Our next question comes from Curt Woodworth with Credit Suisse. Please go ahead.

Yes. Thanks, good morning everyone.

Good morning, Curt.

Good morning, Curt.

You know, Barbara, I was wondering if you could comment on some of the current dynamics at play in Poland just from a supply demand perspective. I know that Europe put sanctions on the inability to import steel from Russia and Belarus, and historically, I believe Belarus have been a pretty big exporter into your region in Poland. And some of the price hikes we've seen recently coming out of North and South Europe have rebar in anywhere from $1,200 up to $1,350 metric tons, so pretty dramatic increases. So what is your ability to kind of capitalize on that situation? Are you evaluating ways to maybe change your customer flow path to be able to migrate more material potentially in Northern Europe to capture those prices? And then can you comment at all about how what's going on in Europe from a pricing standpoint? And as the Turkish pricing is up to probably going higher, how that's kind of feeding into your thinking around US pricing in terms of the arbitrage and how customers are thinking about imports maybe today versus where they were a month ago?

Okay, there's a lot there. And you're absolutely right, Curt, that Belarus and Russia are significant importers into the EU. Like we said, they account for about 46% of the long steel imports into the EU. So by those flows being cut off, I think we're going to wait and see how those quotas are allocated elsewhere, but we were enjoying an extremely strong demand situation when that flow was coming into the EU. Now that is disrupted, I think that just creates additional opportunity for us to capitalize on not only our high-quality product and service, and our low-cost position, I think it will continue to support a favorable margin environment. And we have the greatest flexibility we've ever had in the ownership of the Polish assets in terms of optimizing our product mix and optimizing our margin. So it's early in the understanding of how the supply chain is going to be impacted by this. But we do definitely see it as a market opportunity and we do see it as something that is going to continue to support a really strong margin environment. And as I said earlier, at this point demand is still extremely strong. I'd like to harken back to the COVID, which was an unexpected crisis and there was huge concern about disruption in activity and demand, and we saw the exact opposite; that construction activity was able to continue on throughout that pandemic and we had some of our strongest quarterly results. At this stage of the situation, we don't see anything that is going to disrupt that strong environment that we were experiencing before. And in fact, there could be an opportunity or two that presents itself. As it relates to the US, clearly scrap is traded globally and the rise in raw material prices and the disruption of prime grades and pig iron, and all of that is wreaking havoc on some, not on us, but it is also affecting the typical importers of steel into the US market. Currently, there are concerns among our customers about making commitments for imported product; there are concerns about logistics and timing of delivery of imported product. So we are seeing an increase in inquiries from customers that would be typically looking at those import offers.

Okay. And then on fabrication, if I go back, back when you used to report the separate segment, it seemed like EBITDA per ton kind of ranged from 35 to 75 to 80 and it seems like right now it's materially above kind of historical levels. One of your peers commented that their fabrication EBITDA will almost double sequentially in calendar 1Q? So can you provide any context on how profitability looks? I know you don't typically disclose that, but could you give us any sense for maybe how profitability looks today versus through cycles? And then your comment that backlog and pricing is getting better wouldn't imply that margins should continue to expand going forward? Yes, your guidance, you kind of said that margins would be flat sequentially! So would that kind of imply, you would expect margins in the rebar mills segment to maybe decline, which would offset fabrication expansion or any more granularity you can provide around that near-term outlook would be appreciated. Thank you very much.

Curt, regarding the value above scrap costs in the downstream business, it's clear that there is significant activity happening in the US market, which, in line with supply-demand balances, is creating an opportunity to surpass current and historical margin levels over scrap. We have observed margin expansion in the mills. The fabrication business, however, has a lag before it fully catches up. Nonetheless, we expect to see continued expansion in these numbers as we address the remaining lower-cost backlog. Regarding overall margins moving forward, scrap costs rose considerably in March, making it challenging to accurately predict how this will impact the third quarter due to its significance. Therefore, while we anticipate that margins will remain fairly stable, there are many factors to consider before we can offer more detailed guidance.

Understood. Thanks very much.

Our next question comes from Emily Chieng with Goldman Sachs. Please go ahead.

Good morning, Barbara and Paul, and thanks for taking my questions. The first one I have for you guys is just around your comment earlier around shipments in the third quarter being up sequentially in the high-single or low double-digit range. Just wanted to confirm if that was an overall company comment? And maybe if you could get some granularity around what that would mean for the US side as well? Because it still looks like, if we were to imply a low double-digit increase sequentially, but that could be still lower than what we'd seen in the past for third quarter?

Emily, I'll start it and Barbara can add any color. But essentially, it will be relatively consistent to both. Obviously, North America represents the majority of our overall volume, so that will be in line with the increase and have more significance. We've seen a big increase in volumes this past quarter in Poland; there’s still a seasonal factor, but it wasn't as significant in the European segment. But really what we'll see is North America rebound, as that represents the majority of our overall volumes.

Understood. And then my second question is just around, I think, it was the 1.5 million tons of incremental rebar demand when we see the impacts of the infrastructure bill rate to full run rate there? Curious how we should be thinking about that number as it relates to any sort of sensitivities you may have run with respect to higher energy costs, labor and other raw material costs and whether or not that 1.5 million tons are still the right number given we've shifted higher along the cost curve of a lot of those other items there?

Yes. Well, Emily, good morning. I think we're pretty confident in the 1.5 million there are others. I know that it forecasts a number that's a bit higher than that, and the other thing I would say is that we anticipate seeing the benefit of that start to occur in 2023, and that's just the normal time period that you typically see when an infrastructure plan like this is put in place; it takes time for the projects to come to market. This bill is funded, and we do believe the activity will move forward. I would also remind you that the steel component of most projects is a small percentage of the overall cost of the project, and we'll see how it evolves going forward. By 2023, you could see some abatement of some of these near-term inflationary pressures that are a result of the dislocation that's going on there in Russia and Ukraine. But we think it's a pretty solid view.

Understood. Thanks, Barbara.

Thank you, Emily.

The next question comes from Timna Tanners with Wolfe Research. Please go ahead.

Yes. Hey, good morning.

Good morning, Timna.

I wanted to follow up on the scrap situation and the dynamics in the US. I believe you mentioned that you expect to pass on the price increases, but it seems like everything is happening quickly, and your guidance appears somewhat conservative. To phrase my question differently, while you don't have to purchase pig iron or plant scrap, those who do are struggling with obsolete materials. It seems like there may still be inflation in the grade where you operate. So, my straightforward question is whether you foresee any changes in your historical capability to pass through scrap prices, as this trend has been quite stable for a while regarding long products. Additionally, are you worried about your capacity to pass it through considering the scramble for even the highest grades? Thank you.

Thank you, Timna. I'll take a shot at this, and Paul can chime in if I miss anything. We successfully completed our buy in March, and generally, there is a robust supply of scrap and the necessary grades for our operations. While there may be increased competition for scrap, leading to rising raw material costs, the supply remains abundant. In fact, we might be in a stronger position compared to other regions that don't have the same access to scrap as we do in our key markets. We remain mindful of our customers' challenges with the recent raw material price fluctuations. The two main factors to consider are overall demand and supply. As I mentioned earlier, we haven’t observed any changes in import levels, which may be lower in the current licensing period, and customers are expressing concerns. Interestingly, we've noticed an increase in customer inquiries as they seek our assistance to meet their needs due to diminished confidence in alternate supply sources from imports. All things considered, it is now construction season, and the weather is excellent here in Dallas, prompting many to move forward on their projects, especially given recent weather events across the country. This is a time when customers are eager to advance their initiatives. I believe this will create an environment where customers will understand the shifts in raw material prices. There will be fluctuations, as is typical when a price change is announced with a future effective date. Sometimes, we see customers trying to expedite shipments, but there's also the consideration of raw materials purchased in earlier periods at lower prices. Overall, I expect it to remain a very strong environment.

Okay. In your discussion about the European market being particularly tight, I noted the absence of materials from Russia and Ukraine, alongside some capacity closures we observed in Spain. However, Turkey is beginning to export to the European market. Could this shift, along with the historical import of goods from Russia, Ukraine, and other European markets by the US, indicate a possibility of further tightening in the US market if this conflict continues?

I think that possibility exists, so that was certainly what I was trying to convey as it relates to our Polish operations, given that Belarus and Russia are now under sanctions and that supply has been cut off. There is still the quota in place both in Poland and in the US, which is going to limit supply from other countries. And as I also indicated, the EU language around sanctions was that they were going to consider reallocating some of the Russia and Belarus quotas to other countries, but we haven't seen the details on that. Given the overall strong demand in most of the major markets, who knows if the countries they've allocated to have the ability to take advantage of that. So we do see the potential opportunity for further tightening of supply.

Thank you.

Thank you, Timna.

Our next question comes from Alex Hacking with Citi. Please go ahead.

Yes. Hey, thanks. The strong bid volumes that you're seeing in the US, is there any part of that that you can link to the infrastructure bill? Or is it still way too soon for that and those tons are still to come? Thanks.

Now the beauty of it, Alex, is that we aren't seeing that yet and that's on the way, so the activity we're observing is normal transportation billing. I don't want to imply that there isn't infrastructure involved, but it is primarily being funded by existing transportation levels without an increase. We believe that demand will start to show in 2023, which coincides perfectly with the startup of Arizona 2. Despite the volatility, we remain quite optimistic for the short, medium, and long term.

Okay, thanks. And then on Poland, first let me commend the team there on the humanitarian efforts. On the supply side, you mentioned obviously lack of supply coming from Russia, Ukraine and Belarus. We are hearing a lot about very high power costs put in some EIFs in Europe temporarily out of commission. Is that something you're seeing that's further tightening up the market there?

It's still early, but it's clear that speculators contributed to the rise in energy prices, and we've certainly seen a decrease in oil prices. We'll have to wait and see how it all settles regarding the conflict. Any steel operation in Europe lacking certainty in both energy supply and pricing will face challenges, especially those reliant on spot purchases. This creates an economic dilemma for those operations, influenced by various factors. The steel mills that have announced curtailments or shutdowns, even temporarily, are likely to lose a week's worth of output, which will definitely tighten supply. We remain confident about our energy supply in Poland and believe our energy costs will be advantageous compared to competitors. These factors suggest strong potential for our Polish operations, but we will need to monitor the situation as it develops.

Okay, great. Thank you.

Thank you, Alex.

And our final question comes from Phil Gibbs with KeyBanc Capital Markets. Please go ahead.

Yes. Thanks very much, good morning.

Good morning, Phil.

Good morning, Phil.

With the discussion for net working capital, I know you guys have built up a lot over the last two to four quarters. When does that start to level out?

Phil, your audio wasn't great. But if your question was what's our view towards working capital from this point forward? Had it been not for the scrap increase that we've seen here in March, I would have said, we would expect it to be pretty level at this point. However, with the further increase of substantial increase close to $100 a ton that we've seen in scrap costs, we will continue to see investment into the third quarter as a rough magnitude, it will probably be close to $100 million that we would look if these prices continue at that higher level to invest in the coming quarters.

Okay.

And we do see a seasonal release in the fall as construction activity slows down, due to holidays and weather. So we generally see a nice release in the fall, but I mean it's all going to depend on where raw material prices go, but as Paul articulated in his comments, we have significant financial flexibility on our balance sheet to fund that additional working capital based upon where raw material prices go.

Okay. And then on the CapEx this year, I think you're circling around $500 million. How much of that again is the growth-related portion of that capital? And should we be expecting there to be some investment in 2023 in the new micro mill as you get past the site selection process?

Phil, this is obviously the big year for investment in Arizona 2, and so yes, it represents over half of the $500 million. It will come off significantly as we enter into 2023 given the permitting process that would be required from the new mill probably won't see a heavy lift of spend for the new micro mill. So as we look to 2023, it will come down from these levels, pretty substantially.

Thanks very much.

Thanks, Phil.

Thank you, Phil.

This concludes our question-and-answer session. I would like to turn the call back over to you.

Thank you everyone for joining us on today's conference call. We will look forward to speaking with many of you during our investor calls in the coming days and weeks. Hope you all have a wonderful day.

This concludes today's Commercial Metals Company conference call. You may now disconnect.