John Hill: Is the majority of the increase in the market price of these inputs already reflected in the cost structure of the company and should these remain at current levels?

Charles D. McLane Jr: No, they depend on market factors.

Oscar Cabrera: Are you planning to balance in terms of your alumina and aluminum production?

Klaus Kleinfeld: We are long on alumina and at the same time, we aim on the cost curve side. On the smelting side, we are at the midpoint and the factors that are driving the cost of aluminum have a natural floor of the LME price with the structural increases. And we managed price, volume, and productivity to offset the cost inflation.

Oscar Cabrera: Are you looking to capitalize costs as energy prices increase, or to have to go down the cost curve?

Klaus Kleinfeld: We are always trying to go down the cost curve.

Anthony Rizzuto: On commercial aerospace, do you expect softer demand and some dislocation in the supply for heat treat sheet and plate?

Charles D. McLane Jr: It is negative but that is right now as Bohai is getting into a start-up mode where it is bringing people online and bringing up the equipment, so there was an improvement in Russia and there was an improvement overall.

William F. Christopher: The commercial aerospace is driven by the 787 delay and the ramp-up, and the spare demand in the jet engine market, which would not impact sheet and plate either.

Mark Lanoma: Would we expect any offset because of performance improvements in the downstream?

Charles D. McLane Jr: There will be some underlying productivity improvements in there but looking at the weakness in the markets in both North America and Europe right now, are weaker than the normal seasonal decline.

Mark Lanoma: About shortening up payment terms with customers, is there anything in the U.S. market that could be weaker than as discussed?

Charles D. McLane Jr: That was in the primary side of North America and that was done for some very specific reasons because of the credit situation that has changed. We were getting it on an even basis, so that is going to be accepted in the marketplace.

Charles Bradford: There were comments in the trade press about the smelter in Iceland producing off-grade materials, is that the standard start-up that you would expect?

Charles D. McLane Jr: There are maintenance issues in getting some of the supplies up to speed, as well as the training that takes place on the people, so that is why it is at 100% capacity, it will not reach mature profitability levels for a couple of quarters.

Charles Bradford: What is the difference between the mature level of profitability and what you achieved in the second quarter?

Charles D. McLane Jr: Not specifically for one client, no.

John Redstone: On the flat roll products, the ATOI is improving, what is your guidance to see profitable results from those operations.

Klaus Kleinfeld: On Russia, there is improvement in 2008 compared to 2007, but we remain in a loss position, as pointed out. We are increasing the can sheet production and we are making good results there.

John Redstone: Given that the Russian demand seems growing on track, could we see positive numbers next year?

Klaus Kleinfeld: We will clearly do our utmost best to get it to the best possible level.

Joe Thorton: What do you anticipate the cost would be to add either brownfield or greenfield refining or smelting capacity?

Klaus Kleinfeld: It varies with where you do it and under what circumstances you do it, whether you do it in Iceland, Greenland, or Amazon in Brazil. And looking at the recent projects that our competitors have completed, there is quite a variation there.

Joe Thorton: Looking at some of the numbers from your competitors, it is higher for longer aluminum and alumina prices to get returns for their investment.

Klaus Kleinfeld: I absolutely agree.

Brian Macarthur: Elaborate whether everything that you need is in place in Russia from now onwards?

Klaus Kleinfeld: We are in the process of bringing the rest of the 75% of the capital investment, and we are in the process of getting the 25% installed, so this is not about bringing equipment into Russia or into the plant.