Daniel Fairclough - Director of Investor Relations London Lakshmi Niwas Mittal - Chairman, Chief Executive Officer, President, Managing Director of Operations and Member of Group Management Board Aditya Mittal - Chief Financial Officer, Principal Accounting Officer and Member of Group Management Board Gonzalo Pedro Urquijo Fernandez de Araoz - Member of The Group Management Board and Chairman of Investment Allocation Committee Louis L. Schorsch - Chief Technology Officer of Research & Development - Global Automotive, Member of Group Management Board and Member of Investment Allocation Committee Peter G. J. Kukielski - Chief Executive of Mining and Member of Group Management Board

Michael Shillaker - Crédit Suisse AG, Research Division Alexander Haissl - Morgan Stanley, Research Division Brett M. Levy - Jefferies & Company, Inc. Fixed Income Research Carsten Riek - UBS Investment Bank, Research Division Alessandro Abate - JP Morgan Chase & Co, Research Division Neil Sampat - Nomura Securities Co. Ltd., Research Division Anindya Mohinta Charles A. Bradford - Bradford Research, Inc. Jeffrey R. Largey - Macquarie Research Rochus Brauneiser - Kepler Capital Markets, Research Division Alexander Hauenstein - MainFirst Bank AG, Research Division Bastian Synagowitz - Deutsche Bank AG, Research Division Justine Fisher - Goldman Sachs Group Inc., Research Division Luc Pez - Exane BNP Paribas, Research Division Sohail Tharani - Goldman Sachs Group Inc., Research Division

Good afternoon, and good morning, everybody. This is Daniel Fairclough from the ArcelorMittal Investor Relations team. Thank you for joining us today on our conference call for the first quarter 2013 results. First, can I remind you that this call is being recorded, and we're going to have a brief presentation from Mr. Mittal and Aditya, followed by a Q&A session. The whole call should last about 1 hour. [Operator Instructions] And with that, I will hand over the call to Mr. Mittal.

Thank you, Daniel. Good day to everyone, and welcome to ArcelorMittal's First Quarter 2013 Results Call. I am joined on this call today by all the members of the group management board. Before I begin the presentation, I would like to make 3 key points. My opening point would be that markets remain very challenging. Results have not been positive, but as we move through this year, I expect the year-on-year data to improve. The second point I would like to make is that this result shows a clear improvement in our underlying performance as compared to the second half of 2012. I continue to believe the second half 2012 will mark the trough in ArcelorMittal's profitability. The key positive in this first quarter result is the improved sequential and year-on-year performance in our flat Europe business. I believe this demonstrates the positive result of our optimization efforts. My final point would be on our balance sheet. Our balance sheet is now very well positioned. We are well within our covenants, they are on track to hit our net debt targets and our significant liquidity places us in a strong position to deal with upcoming maturities. Moving to the agenda on Slide #2. As usual, I will begin this presentation with a brief overview of our results and an update on our strategic priorities. I will then spend some time on the outlook for our markets before I turn the call over to Adit, who will go through the results for the first quarter in greater detail, as well as an update on our guidance for 2013. Turning to Slide 3, I will start with safety. We saw a further improvement in the rate of lost time injuries in the first quarter, continuing the clear progress we have made in…

Okay. Thank you. Good afternoon, and good morning, everyone. Let me start with the EBITDA bridge on Page 11. The bridge is from fourth quarter 2012 to Q1 2013. You will notice that the starting point for Q4 is now $1.6 billion. This follows a mandatory adoption of new accounting standards and, in particular, IAS 19. I'll address the impact of these changes later, but I want to first focus on our performance. The bridge shows that our steel business was positively impacted by both volumes and the price/cost factor in Q1. Most of the volume impact came at FCE. With the exception of AACIS, all steel segments are priced -- a positive price/cost benefit in Q1, the largest contributor being Flat Carbon Europe, where the impact of lower selling prices was more than offset by lower costs. In our mining business, there was an overall increase in marketable shipments, driven by Liberia, as we've just heard, but this was offset by the mixed effect of seasonally lower volumes from our higher-margin operation in ArcelorMittal Mines Canada. The full impact of the increase in seaborne iron ore prices this quarter was somewhat curtailed by the effect of lagged pricing on a portion of our shipments from Canada and Mexico. But overall, there is a clear price/cost benefit of $126 million in mining. Stripping out the effects of the gain on sale of CO2 credits Paul Wurth, considering the reduced impact of DDH in Q1, you can see there was a clear improvement in underlying profitably this quarter as comparable EBITDA increased by more than $500 million. Turning to Slide 12, which is our P&L bridge. We will focus on the chart in the upper half of the slide, which shows Q1 2013 results, but comparative figures are there for the…

Great.

[Operator Instructions] We'll take the first question from Mike Shillaker of Crédit Suisse. Michael Shillaker - Crédit Suisse AG, Research Division: Two questions then, if I may. Firstly onto Europe, you've obviously been focusing very hard on the restructuring there. Can you just confirm how many tonnes of capacity are now actually closed in Europe? And when I actually look at the bridge or I look at the clean Q4 versus Q1 and I see 1 million tonnes of volume differential and add like $250 a tonne to that, that can get the difference between the 2, more or less. So can you help us add a little bit, seeing how much cost reduction you are actually keeping in the numbers, is my first question. Second question, what used to be the jewel in the crown on the old LNM days was CIS. And that, regardless of what's happening in South Africa, and the $67 million EBITDA disruption really does seem to be problematic for you now, especially in the long term with iron ore coming down. It almost feels like an unviable business. So what actually has gone wrong there? And what are you actually going to do to fix that business? And can you give us some sort of sense of the target long-term EBITDA that you would have for CIS?

Aditya Mittal?

Okay. Michael, thank you for the question. I'll answer on Europe. In terms of the capacity close, you know that the capacity close is primarily the Asian tranche that's -- I'm talking about FCE results. I presume your question has to deal with FCE. The Asia is about 2.7 million and Florange is about 2.2 million, so the total is 4.9 million tonnes of capacity closure. In terms of your direction, in terms of EBITDA, you're right, comparable EBITDA has gone up by $250 million in Q4 to Q1. I think part of the benefit is due to higher volumes, but there is a significant portion driven by lower fixed cost due to AOP. I don't know if what you meant by how much of the cost reduction in the numbers is. Maybe you can elaborate on what you mean by that. In the meantime, we can get on to the second question.

Okay. Yes, in terms of CIS, what can we say, versus the previous quarter, if you take out the quarter transaction, we were at negative minus 20, and this quarter, we would be at plus 20. And additionally to that, we've had a 67 of cost, as you said, of South Africa. So the real comparison would be minus 20 versus, let's say, in rand figures, plus 90, I would say. That would be the real comparison, number one. Two, I do think that in that area, there's various issues. One of them, we had this fire in South Africa. Second, I do think in Ukraine, we've had good progress in terms of reliability. And in terms of production, we had, I would tell you, record production in shipments in the last 5 years. Now we do have some issues. In terms of production, we have had some issues in Kazakhstan, which we're really focusing on and we're trying to bring them up very, very hard. Now another issue that you mentioned, it is true that if iron ore prices go down, this would mean -- where you have, in these countries, you have part of raw materials that is your own. This does mean a challenge. I do think that another challenge as for the moment is actually market pricing is not -- has not been that high. For example, in Ukraine, it has been following the scrap. The scrap market has been going down, so that's impacted the long business. In terms of Kazakhstan, you have a market that has practically disappeared, which is the Iranian market due to the sanctions which we're fully complying with. Then you do have a market in Russia that has become, in terms of prices, harder. So I think there's 2 different issues. One of them, the markets that is what it is and they have remained challenging. And on the other hand, you do have, in terms of what we can do internally. I think we're very focused internally. I think there's been enormous changes in South Africa and in Ukraine, and we are working very hard in terms of Kazakhstan. I have to tell you that in terms -- we are very focused in productivity, in reliability of our installations and management gains, and we do hope we are going to deliver. So what will be in our hand? We are convinced we are going to deliver, and this should mean a progress going forward to Q2. But as we said in the Investor Day, it does remain challenging. Some markets have disappeared internal, like what we've done. International market is challenging. As of today, what we have to do is deliver on what is there internally, Michael. Thank you.

Maybe I'll just provide a bit more color on Gonzalo's points and then come back on FCE savings follow-ups. I think you're right that in the long run, iron ore price is declining, which is a negative headwind on ACIS. Nevertheless, in ACIS, the productivity levels are much more inferior to what we had in Western Europe. So we can achieve productivity gains, which means lower fixed costs, which can offset some of that. Number two, if you look at where ACIS is located, it is basically in growth markets. So at the end of the day, ACIS is still exporting a lot of tonnages. And to the extent that these markets grow, we will have more domestic market exposure, which again is higher margin. So I do agree with you. There is a negative headwind, but there are some positive headwinds as well, which is productivity and increased domestic market exposure. And Gonzalo addressed already the benefits as we have better operational reliability in these facilities. In terms of FCE, if you're looking for what is the cost impact of AOP, I mean another way of looking at the same number is just to compare Q1 2012 with Q1 2013. There also, EBITDA is up by about $200 million when you strip out the impact of lower DDH, and this was despite 8% lower shipments. So you have a sense that there really is a cost reduction which has occurred in the operating footprint of FCE. Michael Shillaker - Crédit Suisse AG, Research Division: Okay, it's clear. I got just one very quick follow-up. Have you got a target EBITDA or a timeframe to get that for CIS?

We're not giving for CIS target EBITDA.

We do have an internal one, but we don't make it public. But of course we do and it's very demanding in terms of cost reduction of productivity and reliability of installations. Yes, we have, but it's internal, Michael.

We'll move on to the next question from Alex Haissl of Morgan Stanley.

This is Alex Haissl, Morgan Stanley. The first question also on the Flat Carbon Europe. If I look at your volumes and would annualize these volumes on your Flat Carbon European business, this would imply a 6% year-over-year gross for this business. How does this fit into your market outlook, which you expect to be down minus 1.5%?

I'm not sure how you run your numbers. Clearly, we do see -- I mean I think of FCE in 2013 a normal evolution of shipments compared to what we are seeing in terms of demand outlook. So I'm not forecasting a significant loss of shipments in the second half. I think second half would reflect the seasonal downturn. 2Q should be higher than Q1, which again reflects the seasonal shift. Clearly, our shipments at FCE are dependent on what our end customers are requiring, and perhaps there are changes in what our customers are requiring. Secondly, when we look at EU27, the number 1.5% is -- including flat and long.

Okay. I mean my calculation was quite simple. I just take your first quarter and analyze it and compare what you have done last year and I would come to a 6% year-over-year growth, which is even if you take long into account much more than what you seem to guide for the full year. My second question is also on the bridge for the group. If I give a $7.1 billion target for the full year, it leaves some $5.5 billion for the remaining 9 quarters, which implies a quarterly run rate of $1.85 billion roundabout versus $1.4 billion. I think it's easy to strip out the mining expansion, as well as steel volumes, but still they come to $1.7 billion. Can you explain where you basically bring up the run rate from $1.4 billion in the first quarter, excluding delta hedge and devaluation in the $1.85 billion?

Okay. I think you're asking me to repeat our guidance, which I'm happy to do so. Our guidance is that we should do reported EBITDA at or about $7.1 billion in 2013, and the framework around that, which you know, which is iron ore price is similar to 2012. Steel price and raw material costs are similar to 2012, and then there are 3 discrete factors. Clearly, iron ore, as you said, is one of them as steel shipment increases. Second one and the third is the benefit of management gains and asset optimization. The only other color I can provide you is that 2Q EBITDA should be higher than Q1, and that allows us to achieve our net debt target of $17 billion. I don't really have much more color to provide you other than reiterating our guidance framework.

Just lastly on the management gain savings that you have achieved in the first quarter is $200 million. Can you give us an indication of how much have seen in Flat Carbon Europe?

So the management gains has been seen at various segments, and a significant portion has also been seen at FCE. At this point in time, we don't break out management gains per segment on a quarterly basis.

We'll take the next question from Brett Levy of Jefferies. Brett M. Levy - Jefferies & Company, Inc. Fixed Income Research: It's 2, actually, macro questions. The first one is with the price levels as they are, certainly below 600 for hot bands in North American and much lower than that in other parts of the world. Why is it that you believe that there's not been a significant increase in trade-related actions in the current context? I've seen the other points in this type of environment in other cycles, and just wondering why there's not more trade cases being filed.

This is Louis Schorsch from Flat Carbon Americas. I think that -- as I'm sure you know, in the U.S. context, you need to show injury and that's typically a backward-looking perspective. And I think we certainly have very experienced and expert attorneys, as well as managements that know how to calculate the prospects for successful actions. And frequently, there's a lag involved. That's one of the complaints of the industry where you can see damage occurring. But again, the period at which the authorities would look is lagged at that. So I think that explains potentially the fact that there haven't been actions to the same degree as you might expect, given the situation in the market. And then if you look outside that region, certainly, in other parts of the world, I think you have too many different regimes and different practices and different ways of dealing with these issues. I think particularly a lot of countries, for example, in our company, Brazil is a very important market for us. Brazil has been traditionally a major exporting region. I think it takes time for countries to, let's say, adapt to an environment where they face potentially unfairly traded imports. But if you look at Brazil, though, that I think over the past 2 or 3 years, there's been a significant movement, particularly last year with the acquisition of what they called lab tech tariffs, many steel products. These are relatively temporary, but they're substantial 25% than many hot rolled products, as well as the political measures to eliminate some of the tax incentives that were provided by individual state governments to encourage imports. So I think these things take time. And again, the regimes politically and legally are very different. And frequently, there's a lag required to show the injury that's required under an international tax -- or trade regimes.

So we'll move on to the next question from Carsten Riek of UBS.

First question, if I look at your cash position, it looks like comfortable. On the -- and I also look at your bonds, I believe you have 2 bonds which stick out, both come from 2009 with coupon rates 8% and above. The one is actually expiring in June. Could we also expect something on the one which expires in 2016, because it would actually lower your interest build quite substantially? Second question, also on the steel shipments, you still expect to present increase in steel shipments year-over-year, but you ended up 6% down year-over-year in the first quarter. How much of that was weather-related in Flat Carbon Europe and Long Carbon? And can you make up for the loss of volumes in South Africa due to the fire?

Okay, thank you. In terms of your first question, you're right the liquidity position of the company remains very strong, and we're in a good position to meet upcoming maturities. Beyond that, I cannot comment on what we will do with the remaining debt profile. In terms of 2% increase in shipments, if you look at Q1 [indiscernible] consumption in Europe and in the U.S., you see that's quite negative. For example, in Europe and the U.S., it's about minus 5% in Q1 year-on-year. Nevertheless, in the U.S., we're forecasting positive growth for the year and a slightly negative growth in Europe for the year. This implies that in the next 9 months, we will have stronger year-on-year growth, and that is why we believe we will achieve 2% increase in shipments. In terms of South Africa, I'll get Gonzalo to provide you more color specifically.

Thank you, Aditya. In terms of crude steel, we lost 247 kt. That is one. In terms of EBITDA, we've estimated 67 million. But in terms of shipments, we've lost 150, because what we've been doing is recuperating those loss in production through various methods. One, we've used a lot of our stock, number one. Two, we've got tonnes coming from Brazil, 22 kts in forms of slab and Mexico. Number three, we also used Saldanha. Instead of exporting, we took it to the domestic market. So at the end, the impact in shipments has only been 350 kts. We do hope by June with customers we are going to be updated. Now we're going to try our best to recuperate a part of it, but we'll see how the installations work. So we lost 350 in crude steel, 150 in shipments because we really worked hard to give service to our customers. We'll work hard and we'll see. We all have an ambitious internal target, but we'll see if that is feasible, okay?

We'll take the next question from Alessandro Abate of JPMorgan. Alessandro Abate - JP Morgan Chase & Co, Research Division: Just one question which is related to what you discussed of this cycle at the capital market day, the restructuring program seems to be taking off quite nicely, in fact, over Europe. But I haven't heard any more talking about the portfolio optimization. What does that mean, assuming that you have 120 million tonnes capacity sold? In other words, you have a lot of little assets, niche assets, that are generating nice profitability. But at the moment, the data that comes out of rate is up suddenly extremely low. Is there any possibility that in the future, you might not be ruling out a potential spinoff of these assets?

Spinoff of?

It's the low return assets.

Portfolio optimization, as we explained during our Investor Day, means that we have got different classes for our FX differentiating between our franchise business and the global business. Franchise business is our value-creating business where we continue to invest. That is like the auto steel for auto companies, ship [indiscernible] mechanical tubing, ultrahigh steel, ultra-coal, et cetera, and the mining business where we continue to invest and grow to 84 million tonnes by 2015. Then the rest of the business, we continue to evaluate them, continue to analyze them, that what is the growth pattern, what is the demand pattern in different businesses, how is the competitiveness and where we should invest them -- what we should invest them to make them competitive, so that they can still go towards the value-creation part. So this is our focus at this time, and we have done lots of sale of non-core assets already. Everything now is opportunity for us to look at the existing assets and try to optimize their business, improve their productivity and create value from these portfolios. Alessandro Abate - JP Morgan Chase & Co, Research Division: Just a follow-up question, if I may. What about your tubular business at the moment? There's about a couple of million tonnes capacity installed. Do you see any kind of potential spinoff in the future?

I think our -- we do not comment on the future speculation, but I can tell you that we are continuing to invest rightly in some of in the segments where we create value in our tubular business.

So we'll move on to the next question from Neil Sampat of Nomura.

I had 3 questions. Firstly, on the accounting changes, the $5.1 billion increase in liability, could you update us on where the pension deficit stands and whether all of this increase in liability was on that line? And also secondly, on AA and CIS, I understand that you are due or you're covered by insurance in terms of the fire. To what extent will the $67 million and any continuing amount in Q2 be covered by insurance? And when -- what kind of timing do you expect on that hitting the P&L?

Question about the South Africa?

The insurance? Look, insurance, you have to for us to cover the loss that we've had plus the CapEx we've done. But we have to tell you that we had...

A deductible.

A deductible, sorry, of $45 million at that factory level, and then we have part with the captive, that is another $30 million. So that is where we are now in the total $75 million. And at present now, we are negotiating with the insurance company. So we'll announce more and we hope to get, during the second and third quarter, part of this back, especially part of the CapEx. So that's where we are at this stage. We are negotiating, and there's little more we can say now.

Okay great. Thank you. Neil, in terms of the $5.1 billion, the breakup between OPEB and pension is $3.9 billion is pension and $1.2 billion is OPEB, that totals $5.1 billion. On a total basis, if you look at the total liabilities, the pension deficit is $4.8 billion and the OPEB deficit is $6 billion. And that gets us to a total deficit of $10.8 billion. So predominantly, this is an OPEB issue. We account for health care liabilities on the balance sheet of certain companies which do not have these health care liabilities on their balance sheet, predominantly North America where the majority of these liabilities are. If you just look at our U.S. operations, out of $10.8 billion, $5.6 billion belongs to our U.S. operations.

And can I ask what is now the ongoing charge following these accounting changes? What's the ongoing pension charges that's affecting your operating profit?

So it's roughly about $800 million, $400 million going to COGS, $400 million going to financial expense. That matches the cash. So actually, in the past, we were recording more than the cash expense. And now, because we're no longer amortizing these liabilities, the P&L expense matches the cash expense much better, which is roughly $800 million on $10.8 billion of liability.

We'll take the next question from Ani Mohinta of Goldman Sachs.

A couple of questions, please. Can you give us an update on the Kalagadi divestment process? I know it's subject to financing, but is that process still alive? And is there a certain cutoff point by which negotiations terminate? Or any sort of color you can give us on that would be helpful. And secondly, just broadly on divestments. You still have quite a few assets in your portfolio that I guess one could say are not entirely core to the business. Are -- what is the thinking on those assets? Are you still looking, but from a more comfortable position from where you were 6, 7 months ago? Or are divestments completely off the agenda for the rest of the year?

So Adit, what is it?

So in Kalahari, we have no further update. I mean, clearly, we have signed a sale agreement, which is subject to various conditions if conditions remain. Regardless, our net debt target is not subject to a close at Kalahari by Q2 to our net debt target of $17 billion. In terms of portfolio optimization, I think we addressed it before. We continue to look at how we should better allocate our portfolio based on which businesses we find attractive. Clearly, businesses which are strategically not as attractive as others, we may look at divestment potential. There's nothing on the radar screen of significance. We continue to just optimize the portfolio. I think the significant aspects of asset sales have been completed. If you remember, in Q3, our balance sheet had rough -- Q3 2011 had roughly $25 billion of net debt. And now, we are at $18 billion going down to $17 billion by June end. So that reflects the efforts we have put in, in terms of optimizing our portfolio, as well as our recent capital raise.

We'll take the next question from Chuck Bradford.

Two questions. First of all, has Dofasco in Canada benefited at all from the Lake Erie lockout?

Look, I think that it's very early days on that front. Obviously, the Canadian market moves very much in tandem with the U.S. market, with some, let's say, slight wrinkles, if you will. One of the unfortunate wrinkles right now is that the inventory levels and distribution in Canada, which, for almost geographic reasons, are typically higher in normal conditions than in the U.S. They're now at extremely high levels, so over 4 months on hand. So that market is still relatively soft. I think U.S. Steel, that's great for them, but certainly, I think they have a lot of capacity in that region in North America. And so far, as those markets move together, I think we haven't seen a major impact of the stoppages at Lake Erie. Now it's very early days but could -- at the margin, it had some positive impact on the market fundamentals, but we haven't really seen it dramatically yet.

It appears that Rio Tinto has put their share of Iron Ore Company of Canada on the market. Would it not make sense for you to look [indiscernible] the expense in the Baffinland?

We do not comment on our -- these activities.

Neil, I think he asked previously a question on service costs on the liabilities. I overstated it by $100 million. So EBITDA is approximately $300 million and P&L is $400 million. So funds raised cost is $700 million and not $800 million as I mentioned earlier.

So we'll move on to the next question, and we'll take that from Jeff Largey at Macquarie.

Most of my questions have been answered, but -- and I promise I'm not asking specifically about the ThyssenKrupp sales process here. But I do want to know if you have a view on how worried you would be about a new entrant entering the North American market? I mean, to be perfectly blunt, I think there's 2 options here with the Alabama plant, either you guys buy it or someone else buys it. And I'm just curious as to your sense on how that shakes out in the North American sheet market. It seems to me that some of your competitors over there seem quite nervous. I would argue you guys are probably in a better position given where the balance sheet stands and your market share and all of that. But just was wondering if you could share some thoughts on how the market might evolve in North America, assuming a new foreign entrant takes a hold of that Alabama plant.

Gonzalo?

I think someone else -- someone did already. So there's no net deterioration in our position if someone else buys it versus where we were a year ago or 2 years ago or what have you. I think, obviously, the current owner is a extremely capable company. The assets is a very good one, and yet it's been extremely difficult to make that business model work. So I think we, as has been indicated, we're in the process now, but we're not going to overpay. And again, if someone else gets it, then I think we'll just cope with it as we would have coped with that much ownership. [indiscernible]

I think we'll move on to the next question, which we will take from Rochus at Kepler.

It's Rochus from Kepler. Just a few follow-ups from my side. When we look at the guidance, which was confirmed, and I guess that when you gave guidance, you were probably aware of the accounting effects. Can you give us a sense where the incremental buffer you get from as you have brought down the volume expectations slightly from a 2% to 3% to 2%? And in that respect, can you also give us a sense how you see the second half seasonality versus the first half? Typically, it's the weaker half. Is there any reason to believe that this is different this time, because the first half is rather weaker? Second question is regarding your recurring accounting effects. When I look at the restated numbers, it's clear that there was a positive trend in the -- and this accounting effects differ. Can you give us a range for -- that you expect as recurring effects for the current year? And finally, on the mining side, obviously, on your Canadian business, there are still operational problems. Is there anything which impacts your business apart from the weather which is obvious and apart from some distortions you had in the previous quarters due to the expansion of the business? Do you see some slightly increased risk to deliver only the 20% increase, because this now means that you have to improve the run rate quite significantly from the second quarter onwards? And maybe a word on the coal business. I think this continues to run well below the run rate you targeted for the business years ago. I think there was a -- I remember a number of like 12 million tonnes, and it continues to be stuck at around 8 million tonnes now.

Okay, great. I'll answer the non-mining questions, and then I'll ask Peter to answer the mining questions. So when we announced our guidance at the end of our 2012 results, we were aware of the accounting change. There was no buffer as such. Clearly, when we announced the framework of guidance, we announced at about 7.1, so to the extent that shipments have moderated a bit, we have not felt it necessary to change our guidance. In terms of the second half versus the first half, you're right, the second half of 2012 was very weak. We went through a de-stock period. If you look at Q1 2013, it's also very weak where we had negative apparent steel consumption growth, a 4.7% in EU and 3.8% in NAFTA. We're still projecting positive growth in NAFTA, as well as a negative growth of 1.5% for the year at EU. This implies that the next 9 months will be stronger and what we saw in 2012, which implies that the second half of 2013 should be stronger than the second half of 2012, and the change between the first half and the second half should not be as pronounced. And does the recurring accounting effects -- there's no recurring accounting effects. Our statements are now recast. So all comparisons are on a like-to-like basis. As I've said previously, we were overstating the P&L cost as we were amortizing these liabilities. We no longer amortize these liabilities. We recognize these liabilities, and amortization charge has dropped by about $400 million in EBITDA, which reflects cash much better. And as I've clarified, the ongoing costs within EBITDA is about $300 million and on the P&L is $400 million to service these liabilities. Peter?

Sure. On the mining side, our Canadian operations, the operational issues that we experienced in the third -- first quarter were primarily related to a short crusher breakdown, as well as a conveyor tie-in for the expansion and then a slightly lower iron ore iron grades. But all of those will be reversed in the second quarter. So we're mining higher iron grades right now. The conveyor tie-in is being completed in order to support the startup of the seventh line. And some of the production that had an effect was up at the concentrator and not shipped out to the port. It's not accounted for, so that would appear in our second quarter volumes. So those effects will be reversed completely. And then, of course, in the second quarter, we'll be -- towards the end of this quarter, we'll be starting up the expansion. So we do not anticipate any further impact to that business during the course of the year. On the cost side, you're correct. We've -- our production has been -- are pretty flat for the last few years, and there is quite a lot of opportunity for us to grow that business, both in the United States and in Kazakhstan. In Princeton, we're operating at about 2.6 million tonnes and there's a significant potential to expand that. Same applies at Kazakhstan, but we're being quite cautious in the current environment, and we want to make sure that however we grow that business, it's done very, very carefully.

In respect to the Canadian business in the second half, can we expect that the capacity expansion at AMCC -- AMMC, is this fully reflected from the third quarter onwards or is there kind of a ramp-up effect which would delay the full run rate into the first quarter?

Yes, there will definitely be a ramp-up curve. I mean, none of these operations start up at the nameplate capacity. So I would expect that, that ramp-up will proceed through the third quarter.

We'll take the next question from Alex Hauenstein of MainFirst.

A lot of questions were already answered. One remaining with regard to temporary shutdowns. Is there some scope for further temporary production shutdowns, i.e. in Eastern Europe? And when could these become effective? And the second one, also with regard to Europe, you mentioned that the Q3 and eventually also Q4 development in terms of demand might be a bit less lower than the usual seasonality would suggest. Could you elaborate a bit about the order development you see already maybe from some of your customers with regard to automotive so that we can a bit better understand what makes it more positive for the second half than some of your peers since you restated?

Okay. In terms of temporary shutdowns at FCE, we do not see much benefit in a temporary shutdown, because at the end of the day, a lot of the cost remain in the system when you do a temporary shutdown. What we're focused on is optimizing our assets, which is, if we feel that the market -- the asset has no market value, we eliminate the asset and all of the costs associated to those assets. If we look at the footprint at Flat Carbon Europe today, post the closures of Liege and Florange, we have 21 furnaces in our footprint. Out of those 21 furnaces, we're operating 16. The 5 that we're not operating, there's 1 in the eastern part of Germany, which is in Eisenhüttenstadt, and the remaining 4 are in Eastern Europe. The value of those assets is dependent on the growth in the Eastern European market environment. To the extent that we are not as bullish on the prospects of Eastern Europe, then clearly, the potential of asset optimization does exist in our Eastern European operating footprint. Nevertheless, I would just caution that in Eastern Europe, as you can appreciate, the fixed cost element is a lower factor than what it is in Western Europe. So the gains associated with such action would not be as significant as what we saw in Western Europe and also the ability for us to wait a little bit and see how the demand environment evolves. In terms of your question on the second half, clearly, in terms of FCE results, second half results would be impacted. They would be impacted by the seasonal slowdown that occurs in the second half. There's no change to that. Our raw material costs will be higher as well in the second half as the Q1 cost of raw materials flow through the inventory. All that we're trying to suggest is the level of slowdown that we saw in the second half of 2012, we should not experience in second half of 2013, because in the second half of 2012 in Europe, we saw a de-stock, and we're not forecasting another de-stock as inventory positions remain low. Other than that, we are seeing the muted demand patterns from our customer base in Europe, reflecting the fact that real demand is negative, as well as the fact that our forecast for the year remains negative of apparent steel consumption growth in Europe. Thank you.

We'll move on to the next question from Bastian Synagowitz at Deutsche Bank.

Just to follow up on the last question regarding FCE. So I guess you already mentioned the drivers of the prices seem like they're coming down and then variable costs are going up. So basically any improvement possibly in the next quarter, including the second half, would have to come from your cost cuts, because that's basically what you're trying to convey. And then the second question is on cash generation. Just looking at the cash flow bridge which we saw from EBITDA, it seems like the components of financial cost, techs and others is almost robbing the entire EBITDA, despite the fact that they actually lower the net debt quite considerably. Just hoping you remind us whether this $1.3 billion include any positive or negative one-off items, and also whether this is basically a run rate which we can work with on a quarterly basis?

Okay. In terms of FCE, I'm not suggesting that we can offset seasonal impact or an increase in raw material cost through cost cutting. I'm just suggesting that, that will occur in FCE. And nevertheless, within our summit, though, we are seeing positives in terms of mining, because it should have extra growth due to the expansion in ArcelorMittal Mines Canada. Gonzalo has talked about resolving issues in South Africa, as well as in Kazakhstan, which should allow for higher volumes. So those are our other positive drivers, though the FCE would be a negative driver as we move through the year. In terms of Q1, I think we had some exceptional in the cash that we had to reverse, the DDH. We reversed the DJG gain, the galvanizing joint venture that we bought for $47 million. There were some DAT cables as well that we reversed. And that is why that cash outflow was larger. I wouldn't suggest that that's a normalized cash out for the company. So I would see that that's for the forecasting EBITDA of -- a net debt of $17 billion. As we are forecasting that in the second quarter, some of these cash elements will be less. Operating working capital should swing to a positive and EBITDA will be higher. In terms of interest charge, clearly, the capital structure or the balance sheet in Q1 was not ideal as we carried almost $8 billion in cash. We have upcoming maturities, as you know, a month from today, basically in the first week of June, which is about $3.1 billion, so as those debts get paid and interest costs over time will further reduce. So I think that's all the color I can provide on your questions.

Okay. But I have just a very brief follow-up, if I may, on the effect on your pension provisions, basically the $5.1 billion increase in other liabilities, could you just confirm whether this is still not at all relevant for any of your covenants and basically what it means for your discussions with the rating agencies?

Sure. So the $5.1 billion, it flows through equity and has no cash impact, and we've discussed all the P&L impacts. As you know, the rating agencies look at our adjusted debt in any case, and so we are forecasting no impact of this change on the rating agencies' assessment of ArcelorMittal.

And therefore, so no impact or implication for the covenants, I assume is still...

Yes, we have no gearing ratio, as you may be aware. And so we see no impact on any covenants or any bank facilities. At the end of the day, even though we did record a liability of $5.1 billion, please appreciate that we also raised $4 billion in capital and we sold $1 billion -- we are -- we sold about $810 million so far of ArcelorMittal Mines Canada, and we'll sell another $300 million. So the equity is almost un-impacted by this because we had the negative of the liability but a positive of the capital raised, as well as the minority sale in ArcelorMittal Mines Canada.

So we'll take the next question from Justine Fisher of Goldman Sachs.

I have 2 questions. The first question is about the working capital number for the second quarter. I know that you have highlighted that you expect the release of cash from working capital in the second quarter in order to be able to hit your net debt target. But it seems as though that, that release would have to be about $1 billion, which is pretty significant. So I was wondering if you could give us some color as to where that's going to come from? Is it a significant liquidation of inventories? Is there one particular region that we'll see that much of a release of cash from? And then the second question is just on the total debt balance. I was just wondering how much of the first quarter convertible bond issue you actually are accounting as debt on the balance sheet. I think it was supposed to be 80-20, and so there should be about $450 million of those converts accounted on the balance sheet as debt, but I just was wondering if you could clarify how much you ultimately did count as debt.

Sure. So there's 2 factors which bring us to $17 billion of net debt from $18 billion. You've highlighted one, which is working capital. I cannot comment on the direction of your number, but I would just highlight that there are 2 other factors which are also equally important. The second is EBITDA increase, and the third is, we'll continue to optimize our portfolio of assets. So you know we have the second tranche of ArcelorMittal Mines Canada, which is roughly $300 million and then we have other smaller items similar to that. We have treated the full combined offering as 100% equity, so we are not applying the 80-20, and therefore, you have a full impact of the $4 billion capital raised on our net debt number.

We've got time for probably 2 more questions. The first we'll take from Luc Pez at Exane.

One question, if I may, following up on the pension liabilities. If I understand correctly, the new number is $10.8 billion unfunded one. I'm wondering whether this includes the additional deferred tax assets you were referring to as potentially $1.3 billion. And if you could also say which time frame you would expect to recoup these? And the second question would be related to your comments on working capital requirements going into Q2. Given the fact that you're guiding on higher EBITDA for Q2, could you perhaps anticipate a bit on what you would expect in terms of volume for Q2 versus Q1, and how is it compatible with reducing working capital requirement if you expect profitability to improve?

Okay, great. Luc, I'm happy to answer your first question. The $10.8 billion of liabilities is excluding the deferred tax asset, so this is a gross amount. I would just highlight to everyone that out of the $10.8 million, $4.8 billion is pension and $6 billion is health care, all right? So this is not pension underfunding. This is health care, which we can have a long discussion on whether this is a liability or not, what will happen to health care legislation in the United States. What -- at the end of the day, what will happen to North American steel industry in dealing with retiree health care. And as I'd highlighted, out of the $6 billion of OPEB liability, $4.2 billion is just in our U.S. operations. In terms of Q2 to Q1, we can't really get into detail because then we'd be talking about very specific guidance for the second quarter. The third thing I would just highlight on all of these liabilities is that the reason the $5.1 billion is being recognized is the history is that as discount rates have reduced over time, we have an unrecognized portion. The unrecognized portion is what we estimate the discount rate to be at the beginning of the year and what the discount rate is at the end of the year. And as we've gone through a period 3 or 4 years, whether discount rates have trended down, we have accumulated an unrecognized liability of $5.1 billion, which is now being recognized in the balance sheet through equity. As discount rates go up, then clearly, this would reverse as well because the liability will reduce. So this is very interest rate-specific as well, and I just thought I would mention that for everyone's benefit.

So we'll move on to the last question from Sal Tharani at Goldman Sachs.

You recently signed a contract for iron ore in the U.S. with FR. I just wanted to understand some color on that, what kind of pricing mechanism would that be? And also, if -- I think you're starting it from sometime in early 2015. If there were a delay in the FR mine, what will be the alternative for you? Is there a provision for that?

You'll comment?

I'd just say something. Yes, I think, Sal, you're right, that we did sign this contract. I don't think we can get the details of the terms of it, but I can tell you that it based on the IDEX index, so it this linked to world prices. I think anytime you're negotiating the contract in that region for that commodity, a lot of it is especially going to be around export parity versus import parity, et cetera. So those are terms that I don't think it's appropriate for us to get into. But obviously, both parties felt that this is an attractive arrangement and that's how we went forward with it. So I think, again, I think it's a bit awkward to get into the details of the contract. Hopefully, that gives you a little bit of color on that arrangement.

What if it's delayed?

Yes. I think if it's delayed, there is protection on the contract for us. So that component is in the arrangement.

Thank you. This concludes our first quarter earnings call, and thank you for participating and looking forward to talk to you for the second quarter. Thank you. Have a good day.