Jeff Horwitz - Investor Relations Edward Lehner - President and Chief Executive Officer Erich Schnaufer - Chief Financial Officer Kevin Richardson - President, South-East Region Mike Burbach - President, North-West Region.

Jorge Beristain - Deutsche Bank Tyler Kenyon - KeyBanc Capital Markets Aldo Mazzaferro - Macquarie Group Limited Brett Levy - Loop Capital.

I will now turn the call over to Jeff Horwitz with Ryerson’s Investor Relations Department..

Good morning. Thank you for joining Ryerson Holding Corporation’s 2016 earnings call. I’m here this morning with Eddie Lehner, Ryerson’s President and Chief Executive Officer; and our Chief Financial Officer, Erich Schnaufer. Kevin Richardson and Mike Burbach, our two North American Regional Presidents, will be joining us for Q&A.

Before we get started, let me remind you that certain comments we make on this call contain forward-looking statements within the meaning of the Federal Securities Laws.

These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially from those implied by the forward-looking statements. Such risks and uncertainties include, but are not limited to, those set forth under risk factors in our Annual Report on Form 10-K for the year ended December 31, 2016.

You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made and are not guarantees of future performance.

In addition, our remarks today refer to several non-GAAP financial measures, including adjusted EBITDA, some that exclude LIFO expense or income or that make adjustments for certain items such as restructuring and other charges, impairment charges on assets and gains or losses on retirement of debt.

These non-GAAP measures are intended to supplement, but not substitute for the most directly comparable GAAP measures.

A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures is provided in our fourth quarter 2016 earnings release, filed on Form 8-K yesterday, which is available on the Investor Relations section of our website. I’ll now turn the call over to Eddie..

Thank you, Jeff, and thank you all for joining us this morning. In 2017, Ryerson embarked on our 175th year as leading distributor and value-added processor of industrial metals with a bright future, thanks to our continued success implementing our transformational strategy.

I want to start by commending my colleagues on a very successful 2016 as we strengthened our company in all respects, despite the challenges facing the service center industry.

Together our team has continued to make measurable progress, developing competitive advantages, driven by our operating platform of interconnected smart service centers, utilizing our common core attributes of speed, scale, value-add culture and analytics.

We had improved our collaboration to offer an enhanced customer experience through widespread adoption of SAY YES, FIGURE OUT approach to our customers’ needs. It was another challenging year for our industry and we saw demand contraction and improved, but significantly volatile, pricing conditions.

Carbon steel prices recovered from decade lows at the end of 2015, peaked in June of 2016 and deflated again in October of 2016, before starting an upward trajectory that is continued into the first quarter of 2017.

Through 2016 we also saw double-digit underlying commodity price improvements in nickel and aluminum, which continued into early 2017, until very recently seen some retracement. Despite the demand and pricing challenges experienced in 2016, Ryerson made significant progress as we executed well upon our transformational strategy.

We generated significant improvements in net income and adjusted EBITDA. We gained market share with volume up slightly on the year while the MSCI reported a 6.2% decline in industry shipments for 2016. Additionally, we generated gross margin of 20% or 19.7%, excluding net LIFO income, our best full-year gross margin performance in at least a decade.

Our strong performance allowed us to make significant improvements to our capital structure, further deleveraging our balance sheet and extending debt maturities to 2021. We believe Ryerson is in a vastly improved position commercially, operationally and financially heading into 2017.

Turning to the current economic environment, we have a budding but contained optimism regarding the present state of demand within the metals service center landscape. As previously noted, industry tons shipped fell by 6.2% in 2016 compared to 2015. However, MSCI industry tons per day were up 4.2% in January of 2017 compared to January of 2016.

We acknowledge and welcome a potential and positive inflection point, as U.S. steel capacity utilization rates approached 75% in early 2017 after moving between 66% and 76% in 2016. Initial PMI readings for the start of the year are also encouraging despite continued dollar strength and increasingly divergent interest rate policy among the U.S.

Federal Reserve, eurozone and Japan. In terms of current metal intensity and sustaining the demand trend, some of the ingredients exist, but given history and experience within the current cycle, we would like to see more consecutive positive data points develop before drawing any conclusions as reversals have come fast and sharp since 2009.

GDP in the fourth quarter of 2016 was 1.9% and GDP estimates for the first quarter of 2017 are around 3%, serving as evidence that the pricing recovery is currently ahead of demand recovery, but that improved and sustained demand may be on the way.

A few more comments on the supply side, favorable trade case determinations contributed to a decline in carbon and stainless import levels in 2016. U.S. imports of steel mill products were down 14.8% in 2016, compared to 2015 as reported by the U.S. commerce department. However, the stronger U.S.

dollar and emerging offshore supply chains from nations not included in or affected by the trade-case filings may invite increased imports as 2017 develops. That being said, current price spreads between U.S. and offshore products have narrowed and import offers are sparse and selectively attractive.

Therefore, domestic metal customers have less incentive to source internationally if spreads don’t widen meaningfully and fair trade policies, particularly around enforcement continue and strengthen. On the commodity-pricing front, carbon hot-rolled coil was the tempest in the scrap bucket throughout 2016.

CRU hot-rolled prices were up 66% in December of 2016 compared to December 2015. However, the volatility throughout the year created headwinds for the industry as second quarter 2016 peak mill prices did not last long enough to become fully priced into service center price-books.

From December 2015 to June of 2016, CRU hot-rolled prices rallied almost 80%, followed by a 24% drop from June to November of 2016, then December prices reversed again with a 22% gain in the month.

The significant rise in prices for metallurgical coal, Chinese iron ore and steel scrap, combined with increased Chinese domestic steel consumption and improved post U.S. election settlement had supported higher global steel prices. Midwest aluminum prices trended up during 2016 after hitting lows in March.

But the average price was down 9% compared to 2015. Aluminum has gained momentum and steadied into 2017, with China capacity additions not yet pressuring prices. LME nickel prices trended steadily upward through most of 2016 after bottoming in February with the average nickel price in 2016 still down 19% from the 2015 average.

Recent increases in coal prices, driven by supply tightening had positively impacted stainless steel prices in the first quarter of 2017, although nickel fundamentals have been unsteadied by current policy uncertainty in Indonesia and Philippines.

That said, stainless imports retained and base price increases by primary stainless steel producers are finding acceptance in the market.

Taking a closer look at our financial progress, revenues were $2.9 billion in 2016, down 9.7% from 2015, as our increase in tons shipped was more than offset by a 10% decline in average selling prices, driven by the commodity weakness and deflationary trends that began in late 2014, and continued through the first half of 2016.

After bottoming in the second quarter, our average selling price increased in the third and fourth quarter of 2016. We anticipate stronger average selling prices in the first quarter of 2017, led by stainless steel and carbon sheet products, primarily due to underlying metal commodity price improvements that began in the fourth quarter of 2016.

Net income attributable the Ryerson Holding Corporation for 2016 improved to $18.7 million or $28 million on an adjusted basis compared to a loss of $0.5 million or income of $16.1 million on an adjusted basis in 2015. Adjusted EBITDA excluding LIFO increased 63% to $178 million in 2016 compared to $109 million in 2015.

We generated operating cash flow of $25.4 million in 2016 and paid down an additional $60 million of debt, reducing our total outstanding debt by $279 million or 22% since the end of 2014.

Our continued progress across the income statement and balance sheet in a contracting environment was a self-help success story in 2016, providing Ryerson with positive momentum as we move into 2017.

Regarding the end-markets, Ryerson saw volume growth in 2016 compared to the prior year period in our food processing and agricultural equipments, consumer durables and construction industries, offset by declines in oil and gas, and ground transportation.

The other two main general industrial sectors of our business metal fabricators, and industrial machine and equipment, showed a slight net gain in volume, but still trailed overall with U.S. GDP growth rates. In early 2017, demand has improved modestly in most end-markets with a notable improvement in oil and gas.

The better story thus far is supply side stabilization as policy lines have created a playing field in which prices are better supported globally. Ryerson continues to grow through smart investments and high-return capital projects and acquisitions.

In January of 2017, we acquired The Laserflex Corporation, a metal fabricator specializing in laser fabrication and welding services. We subsequently acquired Guy Metals, Inc. in February of 2017, a metal service center, which processes and polishes stainless and nickel alloy products.

The acquisition of these companies are consistent with our strategy to invest in accretive bolt-on businesses that broaden our value-added processing and fabrication capabilities, and whose products we can leverage and sell across our extensive commercial network.

We discussed at length the macro variables that affect our industry, environment and is right to do that even if the refrain has been difficult one since the fourth quarter of 2014. Despite the challenges brought about by price deflation and weak demand.

Ryerson continues to build a more dynamic and responsive organization, one designed to outperform the market regardless of conditions and is prepared to capitalize when we emerge from a prolong period of under investment in equipment and infrastructure.

With that, I’ll turn the call over to Erich, who will discuss the highlights of our 2016 performance..

Thanks, Eddie and good morning. As Eddie highlighted in his remarks, Ryerson’s financial performance in 2016 illustrates our resilience in the phase of tough market conditions. We saw market share gains, higher margins affected expense and working capital management, and improved earnings.

Our improved financial performance enabled us to refinance our debt and issue equity, further deleveraging our balance sheet and extending our debt maturities to 2021.

Net income attributable to Ryerson Holding Corporation increased to $18.7 million or $0.54 per diluted share in 2016 compared with a loss of $0.5 million or a loss of $0.02 per diluted share in 2015.

Excluding restructuring and other charges, impairment charges on assets, and gains or losses on the retirement of debt, net income attributable to Ryerson Holding Corporation increased to $28 million or $0.81 per diluted share in 2016 compared to $16.1 million or $0.50 per diluted share in 2015.

Overall, Ryerson solid execution resulted in 63% increase in adjusted EBITDA excluding LIFO, reaching a $178 million in 2016 compared to $109 million in 2015. Additionally, gross margins expanded significantly year-over-year. Gross margins increased to 20% in 2016 compared to 17.9% in 2015.

Gross margin excluding LIFO increased to 19.7% in 2016 compared to 16% in 2015. In the fourth quarter of 2016, Ryerson grew its ton sold per day with higher average selling prices, stronger gross margins and lower expenses compared to the fourth quarter of 2015.

Our fourth quarter net loss attributable to Ryerson Holding Corporation was $8.6 million or a loss of $0.23 per diluted share for 2016 compared to a net loss of $20.5 million or a loss of $0.64 per diluted share for 2015.

Excluding one-time items, the net loss attributable to Ryerson Holding Corporation was $7.1 million for a loss of $0.19 per share for the fourth quarter of 2016 compared to a loss of $12.9 million or a loss of $0.40 per diluted share with the fourth quarter of 2015.

Adjusted EBITDA excluding LIFO increased over a 150% to $36 million in the fourth quarter of 2016 compared to $14.2 million in the fourth quarter of 2015.

We continued exceptional expense management in 2016 with warehousing, delivery, selling, general and administrative expense down 3.2% or $14.4 million compared to the prior year period reflecting the results of our realized operational efficiencies.

Moreover, our prudent consistent and aggressive management of fixed and variable expenses means we have increased our operating leverage should pricing and/or demand further improve. The Ryerson team delivered on our commitment to generate free cash flow by reducing inventory levels by just over $60 million in the fourth quarter.

For the full year, Ryerson’s inventory averaged 76 days of supply compared to 80 days in 2015. Working capital management remains a core zone of our business models, providing financial flexibility and free cash flow to effectively adapt in volatile metal pricing environments.

Moreover, we continue to improve our analytical approach to supply chain optimization to ensure that we have the right inventory in the right places to meet customer’s demand across our interconnected network of service and processing centers. Additionally, we generated more than $20 million in cash from effective liability management in 2016.

Our destocking efforts paired with payables management and positive earnings contributed to operating cash flow of $25.4 million for the year. At the same time, we further deleveraged our balance sheet and improved our debt structure through a series of capital markets transactions in 2016.

First, we issued $650 million of senior secured notes due in 2022, then we issued common stock with net proceeds of $71.5 million, which we used to further reduce debt and deleverage the balance sheet.

Lastly, we amended our credit facility, thereby extending the maturity date to November 2021, and reducing interest expense and fees on the revolving line of credits. Overall, we have made significant progress in our transformation, reducing our debt by $279 million in since 2014, a reduction of 22%. We also maintained solid liquidity.

As of December 31, 2016, borrowings were $312 million on our primary revolving credit facility, with additional availability of $225 million including our cash marketable securities and availability from foreign sources, total liquidity was $301 million. Now, I’ll turn the call back over to Eddie to conclude..

Thanks, Erich. Embedded in Ryerson’s DNA is our ability to build a competitive advantage across our intelligent network of interconnected service centers, operating with speed, leveraging our scale, providing value-added processing and services, enhancing our customer service culture and using analytics to better serve our customers’ needs.

Looking ahead, we will continue working our plan to further variablize our costs, improve working capital efficiency, gain market share, expand margins and allocate capital with prudence to deleverage and grow. With that, let’s open the call to your questions.

Operator?.

Thank you. [Operator Instructions] And we’ll take our first question from Jorge Beristain from Deutsche Bank. Please go ahead. Your line is open..

Good morning, Eddie and Erich. I guess I’m getting in due to the snow here.

Just had a question about your LIFO reserve for 2017, given that we’re kind of through early April here and about 80% done with first quarter, can you point us in the kind of direction that you think you have to take the reserve for that line item?.

Good morning, Jorge. This is Erich Schnaufer. So, yes, our LIFO reserve at the end of the year was about $115 million. And we did have a lower of cost or market reserve of $24 million.

So we’re expecting, going into the first quarter that we would be able to bring back most of that - the lower of cost or market reserve, and we’ll end up with some LIFO expense in the first quarter thinking in the mid- to high-single-digit millions..

Thanks.

Sorry, what was your lower of cost or market in $125 million?.

The balance was $24 million at the end of the year..

Okay. Thanks..

Jorge, this is Eddie. The reserve was $115 million and the LCM was $24 million. I should say the LIFO was $115 million and the LCM reserve was $24 million..

Got it, okay. And could you just talk about any of the recent price hikes that we’re seeing? Are you getting any sense of those are sticking? And could you talk about customer buying activity really year-to-date? We obviously saw the post-election Trump bump.

But is there anything more you can kind of talk to about unusually - unseasonal buying patterns or any kind of pickup from the past FAST Act or any other infrastructure?.

Sure, I’ll start, and then I’m going to ask Kevin and Mike to go ahead and add some additional color. So here is what we see so far, Jorge, what we’ve seen so far is everything in 2017 at this point is better than it was in 2016. And when we break that into its components, clearly the pricing side of the equation is better.

The demand side, oil and gas showed some nice signs of life towards the very end of the fourth quarter and into the first quarter. And the other end-markets have been incrementally better. I wouldn’t say they are spectacular. So demand is trailing the price side of the ledger.

So it’s better, but it’s still - we’re still waiting to see how that’s going to form and how that’s really going to play out if the settlement really converts to a sustained level of higher orders and higher demand as we move through the first half of the year, but the pricing side looks pretty good and looks pretty well supported.

Even if you look at the next couple quarters, it looks pretty good..

Great.

Sorry, if I could just get one last question and are you able to comment a little about the shelf filing by Platinum, and any comments as to timing and potential staggering of that share sale?.

Jorge, no comments at this time other than I think the S-3 filing. It really it speaks for itself and just being ready as conditions afford Ryerson share price to reach what we all view as its real intrinsic value going forward..

Okay. Thank you..

Jorge, this is Kevin Richardson, just to make a comment on the energy markets in particular, since it’s got a lot of press. And to give you some perspective, in 2014 that was 9% of our sales, in 2016 that was down to 5% because of how hard that end-market got hit.

But if you look at the rig count today, the most recent rig count was 768, which is up 60% from last year at this time when it was 480. But to give some more context around that, the peak of the rig count was almost 2,000, it was actually a little over 1,900 in 2014.

So we’re only 40% of the peak, but that’s an end-market where the data is supporting the sentiment for sure..

Thank you.

And you said, sorry, your 2015 percentage of oil and gas was 4%?.

5% - no, the book….

7% to 8% in 2016..

7% to 8% in 2016. Okay. Thank you..

We’ll take our next question from Tyler Kenyon from KeyBanc Capital Markets. Please go ahead. Your line is open..

Hey, good morning..

Hi, Tyler..

Good morning, Tyler..

Just wanted to start off here with just a question on gross margins, any sense that maybe you can provide us in terms of the momentum moving into the first quarter, just trying to think of how to balance from a margin progression perspective the difference between the spot and contract sides of the business?.

Yes, Tyler, so the transactional side is more responsive, whereby you start out and you have lower cost and inventory. You price to spot, margins expand on the transaction side and the contract side is lagging. So you have that being at somewhat crosscurrents if you will. And then the contract are just monthly or quarterly.

And then you have a catch-up, where the inventory catches up in terms of its value margins compress a little bit before they led out again in a continued environment of price escalation. So we’re in an environment of price escalations now. So it’s not smooth and linear all the way up, as you know.

You tend to go in staggered steps on the way up, expansion, some consolidation of margin, little bit of compression as the contract and the transactional side start to balance one another out. And then, eventually, we see where prices plateau at that point and then margin stabilize..

Okay. Thanks for that, Eddie. Would you expect your first quarter shipments to be up on a year-over-year basis? And I know Class 8 is a pretty decent size market for you.

Any signs of optimism there at this point? And then, Kevin, just on the oil and gas commentary, any perspective as to how things - the magnitude of the improvement in the latter parts of the fourth quarter and kind of what you’re seeing year-to-date?.

Well, so we use rig count as the best forward indicator for us, because we don’t really participate in line pipe at all. So on a relative basis in terms of that percentage of increase of up 60% from a year ago, we’re not seeing that type of lift in the overall industry, people are working down the inventory.

But directionally, it’s been a pretty good start to the year. In terms of Class 8, let me take that one as well. When we had our last quarterly call in November, the outlook for Class 8, the consensus was about 203,000 units. That’s been revised upward two times and it’s now sitting at 217,000 units.

That’s still down from 2016 by about 5%, but it’s certainly a lot better than it is recently as 90 days ago. So we are starting to see that translate into higher shipments..

Okay, great. And then just as far as I know you mentioned earlier, you’re going to continue to be good stewards on the working capital side as it relates to inventory. And I guess, I was just wondering if there was any target you could provide us for 2017.

I mean last year you took down your inventories at least how we calculate them from about 80 turns - 80 days to about 77 days in 2016. So I know you’ve stated kind of a longer term goal of around 70.

So what do you think you could get this year in terms of the inventory turns?.

So Tyler, let me first say that inventory days are more dependent on lead times than anything else. So if lead times were to go out meaningfully, you have to revise your targets in that. We’ve always said that we really want to manage the parts that we can control, so the lead times for particular category let’s say six weeks that’s 42 days.

You put buffers in a time and transit and receiving time to that. And that’s sort of how the industries always gotten this idea of 75 to 80 days. That said, we have to look at it as all things been equal.

Things that we’re doing structurally to better manage our working capital, should afford us the opportunity to takedown days to supply if everything was the same as last year, okay.

If conditions were the same and the only thing you’re going to make into a variable is just how we manage the inventory piece of our working capital internally and structurally, I would expect us to get three or four more days off of our benchmark results in 2016..

In 2017?.

I’m sorry, you’re right….

In 2016?.

In 2017. I was just reliving the glory days for a second..

All right. I think, I’m all set. Thanks a lot for the color. I appreciate it..

Thanks, Tyler..

[Operator Instructions] We’ll take our next question from Aldo Mazzaferro from Macquarie. Please go ahead. Your line is open..

Hey, Eddie and Erich..

Hi, Aldo.

How are you doing?.

Good. I’ve got kind of a theoretical question for you, Eddie, is when some big service centers look at their business, they can identify sometimes pockets of our performance are under performance within the company in terms of margins, sometimes around product or region. I’m wondering around that 18% or 19% gross margin you report ex-LIFO.

Do you think, you could tell us more or less with the range of margins you see within the company is, and maybe how big those are at either end?.

Aldo, we’ve been walking up a staircase, and I think if you go back and look at Ryerson’s history since 2010, 2011. We’ve been walking up the staircase from 15% to 16%, 16% to 17%, 17% to 18%, you tend to look at intervals of time. So I look at the period 2011 to 2013, I look at the period 2014 to 2015, and then 2016 and going into 2017.

And we’ve seen real structural improvement in our margins, and we look at that as to how much value we added to metal. How much better we buy.

How much better we use analytics, and how much better we’re getting that improving the customer experience, which - when you put that altogether there is reasons for us to be very confident that our margins will continue to expand over time.

For example, if you look at 2016 significant part of our value add profile, which would have been around fabricated plate particularly carbon fabricated plate, and process long products, materials that tend to go into transportation energy and other end markets that we really beat up in 2016 that would fold back our margins even though managed the supply side very, very well as to how we turned our inventories.

How we replaced. How we bought, and how we priced our product to the year. So we have places, we can find margin momentum structurally in the business and continue to drive that profile, and our next destination is 20%.

And when we get the 20%, we look to drive those margins higher, because that’s always been a real fertile ground of opportunity within Ryerson when you look at our peers. We’ve always had the ability to expand our margins and improve our margin profile across the entire business.

And Kevin and Mike, what do you think?.

Hey, Aldo, Kevin Richardson. So the other thing that I would add is we have locations that do very different things. So we may have one plant that does high volume carbon flat roll that goes out in truck load quantities, and we’ve got other locations that do primarily fabrication.

And so the range of margins as you can imagine just because of the types of products is really wide, and those are margins that you would expect to be wide and can be explained away.

Well, we spend a lot of time though looking at a similar location, similar product mix within a certain product mix and certain item size as we benchmark and we look at where can we go get lift and so one of the advantages of being a big company is we can grab a lot of data and benchmark a lot of things, and so we’ve done a lot of work in terms of pricing segmentation and understanding quote order ratio, and really managing the price book is a full contact sport in terms of driving margins..

Take a look at the last four bolt-ons that we did. I think it’s instructive from an investment perspective. When you look at, say, industries and if you look at Laserflex, if you look at Guy Metals, and you look at STS, if you look at those companies they all had really, really good margin profiles.

They all have really, really good margin profiles and they all add a lot of value, and they have attributes and characteristics that mesh really well with our existing network and service centers. And I think the real opportunity for margin expansion Aldo is - it’s the idea of this unifying thread, we really put into our strategy.

And I’ll do a quick advertisement and just say that the real value we feel in this industry is when you make every service center smart. You make the inventory smart. You make the equipment smart. You make the network smart. And you keep getting down that coefficient of friction as to how you quote orders, how you take orders.

How you provide really good customer experiences. And then on the contract program side, you’re selling multiple attributes of value for six months, one year, two years and three years.

And you’re bringing a package of goods of value - of things that are valuable of that customer whether it’d be risk management, scrap management, obviously constructing the best supply chain you possibly can cost savings value engineering, KPIs quarterly reviews.

You put a package of things together that make that value proposition of the customer irresistible. And we continue to make progress, it’s not a part of our business. In 2017, it’s not better than it was in 2016.

So we should have another year in 2017 like we did in 2016 in terms of progress around EBITDA growth, working capital management, expense management, market share gains and customer churn. And I think we’ll consider that a really good year..

Great. You’re speaking of acquisitions, Eddie, can you tell us that the laser welding acquisition you made.

Do you do laser welding elsewhere in the company right now and can you say roughly like how much of a percent of sales your laser activities might be today?.

Yes. When you - I’m going to have Kevin supplement here, but when you look at laser welding as opposed - and you think about that part of the value add that is not a value-added adjacent part of our metals processing that were really big in right now, but we’re getting bigger and that’s what the Laserflex acquisition really embodied for us.

So it is a part of the value-add, when you go down the sort of curve of adjacency and you think about distribution of metal, and you think about processing the metal in terms of a cut burning a plate.

And then where do you go from there? Well, you can start using shape lasers, sheet lasers, you can start water-jetting more, you can start roll forming more. There is a lot of adjacent value-added steps you can take on, as you go all the way to contract manufacturing and making parts for your customers.

So clearly we’re taking on those adjacent steps and looking to add value more and more away from first stage processing. And I let Kevin supplement that..

Yes, Aldo, the only thing that I would add is just from a terminology standpoint, Laserflex does laser cutting and fabrication, not laser welding.

So they’re doing standard fabrication, but this is a work that we’ve been doing for decades, and it’s always been a combination of some things that we would do in-house not necessarily welding and then doing work with outside shop partners as well..

Great. Thank you. That’s helpful.

Can I ask one more? Erich, on your comment about the LIFO possible charge of the high-single-digit, did you mean to imply there would be any change in the lower cost of market adjustment, as well as is there possibility of reversing some of that charge?.

Yes. We’re expecting the lower of cost or market reserve to fully reverse into the P&L during the first quarter that’s the way we’re seeing things right now. But we are expecting that the LIFO expense would exceed the reversal of the LCM. The net LIFO expense is going to be somewhere again the single-digit millions..

I got it. Thank you very much. It’s really helpful..

Thank you..

Thanks, Aldo..

And we will take our next question from Brett Levy from Loop Capital. Please go ahead..

Hey, [how are you] [ph], guys?.

Hey, Brett..

Hey, the move into plates and shapes, I think it’s always traditionally been a very inventory intense business. You guys have continued to get the turns better and better. What would you attribute that - again it seems like it’s one of the same work [ph].

There is got to be a theoretical limit and then customers especially in plates and shapes tend to expect a lot of skews or is there something unique about the way that you’re doing it, that enables you to keep doing..

Yes, Brett, I mean at the risk of using some highfalutin terms, I would say this idea of mapping supply chain is a real opportunity, and what we mean by that in mapping supply chain. So we buy from mills, so we obviously buy plate from our mill partners. We buy plate in some cases not very often but some - in some cases we buy some plate offshore.

But there is also plate you can buy within the channel, and what I mean by within the channel is you’ve got depots, you’ve got mass distributors. You have other places where you can get plate to supplement your mill buyers.

And the challenge and the opportunity in our industry is to get faster and faster when it comes to locating material in the channel that you need that you might not have gotten exactly right when you placed orders on the mill, and in some cases you can go out of the mill and they can accommodate you, and they can get you into a rolling or they can sell off a floor stock or what they have on the plant floor that’s available.

But this idea that there is a lot of metal in the channel whether it’s carbon plate, whether it’s stainless aluminum or various shapes.

It’s really been able to very quickly get a line of sight and to procure material it’s available in the channel, because you’ve got really highly developed supply chain maps that tell you where to go to get it and then you can act on it.

And that’s a key to managing inventory in this industry is knowing where to go get it, when everything doesn’t go exactly according to plan..

Brett, the other - this is Kevin. The other advantage in terms of having an interconnected network is we don’t have to have every SKU in every location. So we’ve done a lot of work on stratification, the top moving A items need to be local.

You get into Bs and Cs, and as long as you can get visibility, entry expectation and you can get it from somewhere within the network in the geographies that we service quickly that’s an opportunity to take days of supply down and not have the redundancy of having the SKU in every location..

Got it. All right, guys. The other questions have already been answered. Thanks so much..

Thanks, Brett..

Thanks, Brett..

And we’ll take our next question from Tyler Kenyon from KeyBanc Capital Markets. Please go ahead. Your line is open..

Thanks for the follow-up. Eddie, kind of a high level and somewhat philosophical question here for you, but following some of the carbon price volatility that we’ve seen over last few years.

Do you think that this will require shorter contract duration moving forward?.

That’s a good question. Here in the script, we’ve made a comment that you have to pay respect to what happened in 2014 and 2015 and 2016, so you have to be respectful of that.

And we’ve seen customers look at their contracts and look at their procurement cycles over shorter duration not really - and a lot of it, because of even not just the last two years, but on balance the last nine years.

I think folks have been burnt so many times with what on balance has been a deflationary environment, and people have experienced inventory devaluation.

That there is some changing behavior where folks want to buy on shorter cycles as a physical hedge of source, also we’re seeing customers that are looking at financial hedges more than they did in the past. So on balance the answer to your question is yes, we’re seeing shorter cycles. We’re seeing more short-term rollovers of customer.

I’d say incumbent type procurement relationships. But that will change if the environment changes and we get good supply side support over a longer duration as opposed to seeing it come apart after three months, four months, five months.

But if we get better durations around supply side stabilization, better price supports in the market for longer, I think you’ll see a reverse into the mean in terms of how people look at their procurement cycles..

Do you see that occurring across any particular product categories?.

No, it tends to be more OEM driven. It tends to be more contract-driven. If you’re going to look for a bucket to put in or a category to put it in, that’s where you’re going to see it more. I mean, folks that are buying on a more transactional basis, more on a spot basis, they’re looking to meet immediate bill of material needs for their business.

So they’re really buying at a point in time in the market without a lot of hindsight or foresight. And again, I think that’s also a function of the environment we’ve been. And then people are buying more to their immediate backlogs, not taking positions in inventory, not going long on inventory.

So until we see more sustainability around price supports within this type of bandwidth and we start to see some sustained demand, say, up 2% or 3%, even up 5%, dare to dream up a little bit higher, then I think you’ll start to see behaviors change, because people will have really good line of sight on their backlogs.

And they’ll be willing to take more of a risk when they go out to purchase, because they know that their backlog is solid and is going to hold up. And it’s going to - it’s not going to be prone to a high amount of cancellation.

Hey, Mike Burbach, do you have any - do you want to add anything?.

No, I think you said it good Eddie. I would add that, when you think about this in a way we look at managing these risks so much of it comes back to what we discussed about our efforts and focus to manage our inventory and assets better.

That indicates a lot of the volatility and it certainly helps stirring these times where we’ve seen rampant increases as well as decreases. And I think our customers are doing the same thing.

More and more people right now I think especially on the transactional side of things are trying to do exactly the same thing, buy to need, not necessarily trying to take a position, because with this volatility I guess the focus or the expectation of what the future is going to be is up in the air.

So I think inventory management is clearly the focus right now. And we have vehicles and processes that we can work with our program customers to handle whatever makes sense for their business as well as - as long as it makes sense for us as well..

Tyler, sitting here right now on March 14, I find that we’re in a really interesting point of the year, because there was some folks that made some really smart buys in the fourth quarter. They bought at a relative low point, particularly when you look at where prices have gone since maybe October 2014.

I think some folks made some good buys that material has found its way into the marketplace. But like everything, once that material turns over, the market replaces at a higher number. And there are customers out there now that are thinking that prices may fall and they don’t want to get caught buying at the top.

So they don’t want to feel that they bought at CRU when it peaked, whether it’s $635, whether it’s $840, whether it’s $920.

But when you really look at what’s happened in the price environment, here is - if you shot a really broad floodlight on this and you look at SBQ being up, MBQ being up, sheet obviously being up, plate being way, way up, prices are higher and they’re going higher.

And it’s going to take some time for that to reverse when you really look at all the data et cetera available to analyze the former view to form what we hope as a composite and smart-view of things. It doesn’t look like the price increases unwind quickly over the next one to two quarters.

So if I had to make a call, I would say folks are going to be replacing, they’re going to be buying to their backlogs and replacing. But they’re going to be replacing higher. And if there is a bias to not replacing right now, because they think prices could inflect lower as they have over the last several years, then it will have the opposite effect.

It will actually move prices higher..

Thanks. I appreciate all that..

So that actually - yes..

I’m sorry, go ahead, Eddie..

No, no, so I actually think there is an opportunity for prices to go higher over the next one to two quarters, because longer people wait to replace, the more tension that will put on pricing over the next one to two quarters. So it will have the opposite effect..

Great. Really appreciate all that perspective. Thank you..

Thanks. Thanks, Tyler..

[Operator Instructions] And there are no more telephone questions..

Thank you. Our Ryerson team accomplished a great deal in 2016 and some early 2017 indicators look promising. Whatever 2017 brings, I am most proud of the culture change taking hold in our organization. Our SAY YES, CAN DO approach creates the best possible experiences for our customers.

And this value proposition can weather any environment successfully. 2016 was a year of elections and referendums. Every day in our industry there are thousands of referendums and elections as customers elect their partners order-by-order and contract-by-contract.

As we continue to execute our strategy well, we will win more and more of these elections. Thank you for your continued support and interest in Ryerson. We look forward to talking with you again next quarter..

And this concludes today’s presentation. We have [Technical Difficulty] that you have a wonderful day..