ATI
#Well that number that we gave, that at least $1 billion in revenue is all parts and components, it is all forgings and castings.
I think most of it, <UNK> ---+ I see what you're saying, I think most of it is parts and components as opposed to metal.
There is some metal because of the Rene 65 and the 718Plus but when you're talking numbers that big, the majority of that increase is parts and components.
Yes, that would be our goal.
There is a lot of questions there.
The flow time from sponge into a mill product, we are doing that now.
So we're using ---+ we have been using our own sponge for a number of years.
We just couldn't use it until recently on premium ---+ on certain premium quality rotating part mill products, either for the aerospace or in some cases for the medical market, which has similar specifications for a wide variety of reasons.
So now we can.
We are producing basically at a 15 million pound annualized run rate.
We will continue at least at that rate, I think the question for us as to whether we increase it in the second half of the year is really more tied to the cost competitiveness of our tickle supply.
Because tickle is such a significant cost of the production of sponge that we are in discussions now on that front in terms of our tickle supply beyond 2015, and it really just becomes an economic decision of what is the economical price point of tickle and how does that relate to the ultimate production cost of sponge at varying operational (technical difficulty) either 15 million pounds or ultimately 20 million pounds or 24 million pounds at that facility, versus the cost of procuring the raw material units externally.
So those are things we will always balance out.
And I think the one thing that we have learned about ramping up greenfield facilities, not [Indiana] <UNK> facilities but greenfield facilities, is that we want to do that in chunks.
Because when we brought the facility down because of ---+ we didn't need as much of the sponge being produced because it wasn't PQ, we backed down the workforce to a number that was minimal, and now we are hiring and growing.
But what we want to do is do that really in manageable segments so that we get the workforce added, the crew added, they become trained, it becomes very stable.
We come down the learning curve, and then we will go the next pace, so we will continue to do that in an orderly fashion.
Yes, I think that is a good conclusion.
Thank you.
Yes, I think it is more than 20% or 25%, it feels more like 35% to 40%, quite frankly, and the impact of that is obviously not just on that revenue stream but also on the load factors in the facilities, including on the forging side.
We had a significant piece of oil and gas business, forgings not necessarily what you might think the traditional Cudahy, the former [lattice] facilities, but more in the legacy former Teledyne facilities in Portland, Indiana, and Lebanon, Kentucky.
So those businesses have been impacted negatively from a reduction, obviously impacts the cost absorption and everything going all the way back to melt.
So it's impacting us in the high-performance materials and components segment, in melt, in our Sheffield, UK operations, which is more heavily involved in oil and gas ---+ the oil and gas market than aerospace, quite frankly, and then in some of our forgings.
So I think the depth of the correction continued to worsen in discussions with our customers as we move through the second quarter.
I think now ---+ what we are seeing now is what we expect to see at least through the end of 2015, and I think quite frankly, the dialogue we're having and just the assessment of the overall market, I personally don't see those market conditions improving, absent some geopolitical event which none of us want to see.
I don't see the market demand and fundamentals improving until probably mid-2016 at the earliest.
I think it was pretty evenly split, quite frankly.
I think the oil and gas had a pretty dramatic impact on it, probably more so than just the normal margining off of the revenues, because of the load factors and the lower utilization, and what happens with those fixed costs.
So we need to replace that business, quite frankly, and we need to focus on reducing the cost structure and that's what we'll be doing here, and then when the market does come back and it will, quite frankly, the cost structure will be better and the margins will be higher.
Yes.
I think it is an important factor, and really what we are trying to do is ---+ what we're trying to accomplish with our negotiating strategy is really not an overall cost reduction, it's more of a stabilization at the existing level, so that the current all-in rate that we have now doesn't continue to grow.
And if we can do that and then capture the benefits of attrition and normal attrition, and improve productivity, which is really where some of the language and work rule changes come in, then I think that's supportive of that, plus what we need to do in other cost areas in that business outside of the represented employees, I think that's where the strategy of $0.50 a pound profitability can work.
So the aim is not to do that 100% on the backs of the United Steelworkers.
That is just not the case at all.
Yes, I think that while our preference is a joint venture, I think as a temporary basis, when we consider tolling for a carbon steel partner on a short-term basis, the answer is sure, we would.
The first thing we need to do is get the rotary crop shear replaced, right, which is the end of September, and then we need ---+ our primary focus has always been to continue to focus on the products that we make and to maximize the learning curve opportunity there, and then at the same time turn our sights to what we are going to do on the carbon steel side or what opportunities exist on the carbon steel side.
As I have said many times, the return on investment calculation of the HRPF did not assume a carbon steel partner or any type of carbon steel tolling for that matter.
We just believe that because of the power and the capabilities, and the available capacity of the HRPF, that it makes sense and it would make sense for ATI and someone else, to use the capabilities of this very unique asset in a very capital efficient way.
And we still believe that, and quite frankly, the dialogue that we have had, in one case it was more advanced, in other cases it's very early, is an intriguing proposition to potential carbon steel parties, and I'll just leave it at that.
And we are not ---+ I'm not going to put a self-imposed ---+ do I have a goal in mind in terms of when we would like to have that completed.
Yes.
Tomorrow.
But we are not going to do it for the sake of doing it.
It's going to be with the right partner, or the right ---+ if it's a tolling arrangement on an interim basis, the right party that makes sense for them and for us under the right terms and conditions.
So it's not something that we are going to do just to check the box.
Yes.
Sure.
I think it's mainly targeted towards the more commodity 300 series stainless, the 304 type stainless mainly, primarily in terms of sheet product form and to a lesser extent in terms of strip product form.
I think it's not only us.
I think a more successful trade case is representative of industry participation and that ---+ we work that process, quite frankly, through a US-based trade association called SSINA.
ATI is very important member of SSINA and has been for a very long time.
So we tend to, if there is any one company or one member of SSINA that tends to drive these types of issues and considerations on the trade side through SSINA, it's probably ATI.
So we take that responsibility seriously.
We know what the trade laws are in terms of when you can bring a successful trade case.
I think we have worked in partnership ---+ I know we have worked in partnership in the past with other affected parties like the United Steelworkers, and the leadership of the USW and the support of appropriate trade cases, and it's a very fact specific situation.
When you look at the trade laws in terms of will a trade case be successful, we think a trade case is required and necessary based upon the behavior of certain importers into the US, mainly from China, and that data is being collected, and I would think the path that we are on, we would expect the trade case to be brought.
Okay.
Thank you, everybody, for joining us on the call today, and thank those who asked us questions, they were great questions.
We appreciate your continuing interest in ATI.
Thank you, <UNK>, and thanks to all of our listeners for joining us today, that concludes our conference call.
