Q2 2020 Century Aluminum Co Earnings Call
Our standing by and welcome to these century aluminum company second quarter Twentytwenty earnings Conference call. At this time, all participants are any listen only mode. After the speaker presentation. There will be a question and answer session to ask your question. During the session you will need to press star one on your telephone keypad if.
You require any further assistance. Please press Star then zero I would now like to hand, the conference over to your speaker today Peter Trpkovski. Thank you. Please go ahead.
Thank you Brandy good afternoon, everyone and welcome to the conference call.
I'm joined here today by might bless century's, President and Chief Executive Officer, Craig currency, Executive Vice President and Chief Financial Officer, and Shelly Harrison Senior Vice President Finance and our treasurer.
After our prepared comments, we'll take your questions.
As a reminder, today's presentation is available on our website www dot century aluminum dot com.
We use our website as a means of disclosing material information about the company and for complying with regulation at the team.
Turning to slide Wong please take a moment to review the cautionary statements shown here with respect to forward looking statements and non-GAAP financial measures contained in todays discussion.
With that I'll hand, the call over to Mike.
Thanks, Pete and as usual thanks for all of you for us for joining US. This afternoon. We appreciate the time.
If we could just flip over to page three please let me just give you a brief overview of the highlight for the last couple of months.
First a quick update on the status of our operations, obviously still in the context of continuing health crisis.
As we discussed with you a couple of months ago in early March we essentially ceased all activity in the plants not oriented towards safe and sustainable production.
So that in addition allowed us increased flexibility as we instituted a variety of measures both inside and outside the plants to keep our folks safe.
These measures to date of produce the intended results. Thus far we've recorded a small but very manageable number of confirmed infections.
The one surprise you that we don't expect these policies to change in the near term obviously, given the situation in the U.S. generally.
The public health environment in the Iceland and in the Netherlands is a bit better, but we're still airing towards caution at each of grander comedy and leasing.
Consistent with this operating discipline, we've maintained a strict management of our controllable costs.
In essence, all non required spending remains on hold massive change of course, we made in March.
Exceptions since the beginning has been only for spending related to safety and or the sustainability of operations.
Recently, though we have begun begun to okay. A few modest projects with very quick paybacks in a matter of month type of paybacks.
This operating discipline contributed to strong Q2 financial results that were consistent with our expectations.
In a couple of minutes, Craig will provide more detail on the quarter that just ended when he does that you'll see that a drop in the LNG price.
Plus the drop in regional premiums principally the Midwest premium of course.
Reduced EBITDA by $32 million from Q1, so thats LMCA and premiums combined $32 million Q1 to Q2 down.
Lets just a couple million dollars worse than we forecasted in late April as the last month of the quarter. As you recall remained on price at that time as it always does.
You'll also recall made prices LNG prices remained very low in Midwest.
We were able to partially offset rates this reduction versus the 313 million dollar decrease in controllable costs and raw material prices.
In addition, cash flow was quite strong operating cash flow for the quarter was $37 million and capex only $4 million cash on hand increased by $28 million.
Craig will also walk you through the expected changes in realized commodity prices Q2, Q3, obviously the quarter that we're now in.
And the impact that that change will have on our reported financial results in Q3.
Obviously, the impact of those very low metal prices in April and May will be felt in the Q3 results.
To our normal two to three month lag.
Those prices appear now to be behind us at the current commodity prices. The company's performance is materially better than what the Q3 reported results will look like and Craig will give you more detail some data on all of that.
Moving along as I'm sure you saw we refinance the debt issue that was due to mature in June of next year.
That transaction only closed on the first in July so obviously, it's not reflected on the quarter and balance sheet.
Obviously, there's a higher coupon in the new issue, but believe we believe that was the right thing to do to get it done at this time.
In terms of the new notes are attractive early redemption, assuming conditions continue to improve.
And just a minute Pete will provide you with our outlook on the sector, including global supply and demand.
I'm sure you've noted recent data, indicating a decent upturn and global manufacturing activity generally.
You all follow the macro data, so I'm not going to spend more time now providing further commentary at that level, but I will make a few brief comments on the trading conditions were seeing in our specific markets.
The last few months has seen an encouraging pickup in extrusion and foundry activity in the US generally as you know thats driven largely by the automotive and certain parts of the building and construction sectors.
Payments through in Europe, there, we're seeing a good pickup and billet foundry wire rod other markets.
Obviously all of these in all these markets the recovery is still on even.
You've obviously seen activity in China looking broadly encouraging.
All this said customers, particularly in the US do remain somewhat cautious.
Our run rate of value added product orders in the queue in the third quarter. Thus far is showing only marginal pickup from Q2.
However, there has been kind of an interesting trend over the last couple of months, we've seen very strong spot orders at the end of the month.
So as that shows that our customers are exercising understandable caution.
But also that actual conditions are stronger than the and they're expecting.
Goes without saying obviously this next couple of months will be subject to a lot of uncertainty.
The strengthening of the strengthening of these overall conditions as evidenced by an increasing.
Alright product premiums.
For example to use spot commodity billet premiums now stands above seven cents a pound.
That was essentially zero at the height of the crisis.
The Midwest premium also improved from as low as eight cents to its current level at just shy of 12 cents.
The free fall in the Midwest premium was evident well before the impact from the public health crisis to go back to May of last year may of 2019 out of course as a day when Canada was exempted from the section to 32 tariff.
And you measure the Midwest from that point to January obviously before the impact of the pandemic. The Midwest was down 35% May 19 to January of this year.
Course, the impact of the health crisis has brought it down further.
The collapse of the Midwest is very straightforward to the cause of is due entirely to the surge of imports of primary aluminum from Canada.
Canadian imports sense the exemption in May of 2019 are up over 80% versus the same period before the exemption.
At the same time Canadian exports to other markets have fallen off a cliff exports to Europe have happened from an already low base.
Exports to the rest of the world Fanta nearly zero.
This all runs directly counter to the commitment made by Canada at the time of the exemption specifically that in imports wouldnt surge in this manner.
As we discussed at length, the tariff work precisely as intended when it was effective.
Three use smelters restarted with all the associated jobs in economic activity.
US production was up 60% versus 2018 that 19 over 18.
And there was no harm of any type to any downstream industry.
Job losses metal shortages, no price inflation in essence, none of the dire predictions that were heard of the time in fact 2019 was a banner year for the downstream industries.
The only way to make this program effective again that the Ram position of the tariff on Canadian imports.
And we hope the administration will act to do this without delay.
Lastly, we continue working with the newly formed goods Creek, South Carolina Municipally utilities on preparations for a new contractual arrangements for the Mt. Holly smelter.
Regrettably here the state owned utility continues to obstruction delay the process.
Thus, we've got no choice, but to engage in several legal course of action.
Time of course is marched on in the next couple of months will be key in determining the future. This plan.
As a reminder, Mt. Holly the newest smelter in the US It's got Ed will earned terrific reputation as a quality billet supplier has got a truly great team of dedicated long serving employees and it's got access to a plentiful supply of natural gas fired power and the southeastern part of this country.
The problem of course remains that the legacy power company continues to demand at Mt. Holly purchased 25% of our power requirements from them.
The natural gas fired power that we buy from the market that 75% is priced inside the median global power rate paid by smelters better than the median.
However, the price of the power from the legacy power company remains at over two times the price of the power we buy from the market.
And that's the weighted average of that 75% in that 25% is on the margin of the third and fourth quarter files with the global cost curve the smelters, making this plant unnecessarily on economic.
We remain absolutely, 100% committed to finding a way to make this excellent plant viable.
Breaking this log jam with the legacy power company is the only thing that stands in the way.
In solving this would enable Mt. Holly to operate at full capacity, both top pot lines as it should.
And with that I will give you a repeat for some comments on industry. Thanks, Mike If we can move on the slide four please I'll take you through the current state of the global aluminum market.
Actual cash LNG price averaged just under $1500 per ton in the second quarter, which was down approximately 12% or $200 per ton from the first quarter as coated 19 weighed heavily on the global economy in the quarter.
However industry conditions continue to improve and the LMP prices averaged 1600 $40 per tonne for the month of July and the current price is just shy of 17 55 zero per ton.
In the second quarter regional premiums averaged approximately nine cents per pound in the EU us down 35% quarter over quarter and approximately $100 per ton in Europe, a decrease of 30% from the prior quarter.
Current spot prices are around 12 cents in the us Midwest and $120 per ton in Europe.
In the second quarter of 2020 global aluminum demand was down about 9% as compared to the second quarter of 2019.
China showed strong signs of recovery and many in the end markets during the quarter as evidenced in demand growth of 5% compared to the prior year quarter.
In the world, excluding China, we saw demand contraction to nearly 30% from the prior year quarter. However, there has been a sharp recovery manufacturing activity in the world, Excluding China, particularly in the United States as well as Europe.
Despite volatile price movements in the sector global production was flat in the second quarter year over year.
We saw a 2% production growth in China versus the same quarter last year, which was offset by 1% decline from the rest of the world in the same period.
With this backdrop, we've seen the LNG price rally to its highest level in nearly six months on the heels of a rising.
Should be aluminum price, a weaker us dollar and global manufacturing expansion led by the Us China and Europe.
Just a quick comment on raw material prices right handed over to Craig.
The aluminum price index has ticked back up a bit since the low of approximately $240 per tonne. We saw during the second quarter.
Currently the aluminum price index is about $270 per ton or less than 16% of the all new credits today.
Okay with that will have new called the Craig.
Thanks Pete.
Let's turn to slide five they will take you through the results for the second quarter.
On a consolidated basis global shipments were up 4% quarter over quarter, while realized prices were down 8%, primarily as a result lowered lagged Ellen need regional fleet.
Looking at operating results adjusted EBITDA was 4.7 million this quarter and we added adjusted net loss at 18.4 million or 19 cents. This year.
In Q2, the primary adjusting items were 6.4 million for the net realizable value of inventory, a 2.7 million for unrealized impacts forward contracts.
Our liquidity remains strong with 197 million of funds available via a mix of cash on hand in credit facilities.
As Mike mentioned earlier, we successfully refinanced our $250 million to open July onest effectively extending its maturity out into mid 2025.
Concurrent with our refinancing we also extended the maturity of our us revolving credit facility into 2023.
Let's turn to slide six and I can walk you through our quarter to quarter bridge of adjusted EBITDA.
Decreases in realized LMP prices in regional premiums comprised the majority of EBITDA reduction versus Q1 levels.
Q2 realized LSB of $1630 per tonne was down $120 per tonne from Q1 levels, while realized Midwest premiums of $249 per tonne were down $55 per tonne over the same period.
These actual realized values are slightly lower than those we discussed on our last call.
Keep in mind that a portion of our us sales price on a one month lag in one week. When we provide these estimates each quarter there are volumes still and priced.
We generally assume flat pricing for the remainder of the quarter.
As you know the Midwest premium in particular was extremely weak in may with an average level about 17% less than when we last spoke in April.
Realized alumina prices were roughly flat quarter over quarter.
The mix impact from the slowdown of billet and other value added product demand was about 4 million versus Q1, as Mike mentioned, we've already begun to see the resurgence of this volume in the third quarter.
Domestic power prices continue lead dropped throughout the majority of the second quarter and generated a 7% or about $1.50 cent per megawatt hour savings versus Q.
As we discussed previously approximately 30% of rice landed power pricing. It now based on the board pool index, which was down $11 per megawatt hour or about 65% from Q1 levels.
Finally, our sustained effort and controlling operating cost amid this uncertain environment was the primary driver a 5 million of increased earnings versus prior quarter.
Looking ahead to Q3, specifically.
The lag LM me, a $1530 per tonne, it's expected to be down $100 per tonne from Q2 realized prices.
The Q3, realizing us Midwest premium is forecasted to be $240 per time or down about $10 per done in the European delivery premium is expected at $100 per tonne are down about $40 per tonne versus the second quarter.
Realize alumina is expected to be $280 per ton or down about $20 per tonne versus prior quarter.
Taken together the LP me aluminum and delivery premium pricing declines are expected to negatively impact Q3, EBITDA by about 20 to 25 million versus Q2 levels.
Additionally, seasonal power price increases are expected to negatively impact Q3, EBITDA by about $10 million versus Q2.
Please keep in mind that we buy on the day ahead market and we still have two months of unpriced purchases assumed in this incremental impact.
In sum we expect these items in isolation will equate to an approximate EBITDA decrease of 30 to 35 million from Q2 levels.
Let's turn to slide seven and we'll pick a quick look at our cash flow over the last quarter.
We started the quarter with 148 million in cash and ended June with 174.
During the quarter, we have $4 billion of Capex spending the largest individual component of which was related to the hawesville restart. It represented the final expenditures to support our newly restarted and rebuild for line operation.
Our normal semi annual notes interest payment was a usage of 9 million in working capital was a sizable inflow for Q4 Q2, primarily driven by inventory reductions as a result, lower raw material carrying levels versus prior quarter.
Finally today I'd like to provide some insight on how the recent trend than LMP prices in Midwest premiums could impact our business in the future.
As Mike mentioned earlier and as I'm sure you've all seen in your own research LMP prices have continued to increase rather steadily from the recent low point in mid April of $1425 per ton to today's spot price of $1740 per ton.
Midwest premiums have from have followed the same upward trajectory from the recent low point in early may of $176 per ton to today's spot price of $259 per ton.
Keep in mind that the Q3 commodity base sensitivities, we shared earlier were derived using our normal lags across the portfolio, hence, creating a timing disconnect from the recent market recovery to the anticipated PNM link backs in other words, the recent market recovery in Lenny and Midwest premium will begin to impact our reported results.
In the fourth quarter.
Let's turn to page eight and I'll take you through a simple analysis, we put together to illustrate the potential impact of recent pricing trends on a typical quarter for the company.
We began with our Q2 adjusted EBITDA of $5 million as we discussed earlier. This result includes a realized LSB of $1630 per ton Midwest premium of 249.
Updating the LNG in Midwest premiums to spot prices of 1740 per ton and 259 per tonne respectively.
Resulted in adjusted EBITDA of about $24 million.
Again. This is a representative example of the impact to spot prices on an actual period is not intended to be used as an outlook for any particular period.
Ms and other prices from Q2 levels other than the LNG in Midwest premium could also affect the sensitivity show.
In short recent spot pricing, while still depressed versus historical levels will benefit our PNM materially in the future due to the lag nature of the LNG in the west premium pricing.
This concludes our prepared remarks. Thank you for your time intention I'd like to turn the call back over to Brandy to begin the question and answer session Randy.
At this time, if he would like to ask your question. Please press Star then the number one on your telephone keypad, we will pause for just a moment to comes all the Q any roster.
Your first question comes from the line of Lucas pipes with B Riley Fcr.
Hey, good afternoon everybody.
Just just a few questions here from.
First I wanted to touch on Mt. Holly.
Like things are moving into right direction there.
Slowly, but steadily can you.
Hi, guys.
But the procedural steps are from here on out and how quickly.
Yes, sure Lukas, it's Mike I'll take that one thanks for the question without getting into the specifics of the various court cases, there is several here that.
That are that are ongoing.
Those will sort of wine their way through those processes over the coming couple of months the real.
The date, that's in front of US of course is 31 December which is the expiry of the current power contract.
And so.
I guess I'd say over the next month or two or three we need to develop.
On a.
Some confidence.
As to how the legal posture, we will look as we look to.
Two.
A replacement for that for that power contracts. So.
I guess.
Throwaway comment to say these these processes take some time.
Clear to very difficult to predict move us I long try whether any of them will.
Or all of them, obviously would be at their fruition over the next couple of months.
But we do have from other alternatives on which were up alternatives on which we're working.
And.
We will be.
Making some of those decisions over the next couple of months ultimately, we think we've got to winning hand, just a timing issue.
Any.
Any additional color.
I will turn Terry.
Very good no very difficult at this point and we want to continue running that plant and ultimately Lucas we want to run both pot lines because thats. The way. It was design that's the way it should on the demand for the product the ability to serve is there are many many many times over.
So so thats the report at the end of the Rainbow as Ryan the plan to two lines, it's running at one line today.
And.
And we're going to as I said have to make some decisions here coming up as to has as to how we get from where we are now.
To the end of the Rainbow specifically on your question. There's a bunch of court cases cases in Federal Court. This cases and state court, it's pretty complex it it really I don't.
Being presumptuous it might sound that way.
Expand expounding on the detailed running those cases isn't going to do anybody any good.
Hi, I understand I appreciate the color.
We're able to Tim sure. My second question is is.
I'll try to touch on a couple points and kind of ones smooth.
Hi.
First just just kind of understanding this price recovery.
Premium specifically you mentioned demand is fine 30% North American production is.
Yes, the import search from Canada.
How do all of these pieces fit together and then of course.
Translates to your results.
Looking forward much stronger Q4.
Could you share kind of where where we might be shaken out on an adjusted basis.
Fourth quarter, Thank you for free.
Sure you got them I think in your question, you've got some apples and oranges and maybe a come quite an upgrade.
So let me try to dissect that are parse through the 30% down and I think thats a reference if I recall from from that from our first quarter call was simply referencing not total primary aluminum demand decline, but declined in value added products that bill it in other value added products diligence lab et cetera et cetera.
So so that wasn't referencing the.
Total.
Unraveled momentum or primary however people use those and items.
As you correctly reference the significant increase I think.
I understood your question correctly.
Over the last couple of months in that frankly over the last 15 months has been from Canada. As you look at the import data. It's all up on Commerce is website. So so obviously all those those data are there that's really been a different use demand has been bumping along but this significant proportion of imports that are coming from.
Coming down from Canada have been has significantly changed the market I mean that 80% for example increase 12 month over 12 months has driven the market share of Canada's imports in the us from around 50%, which was an all time high percentage just shy of 80% today.
So it's just that it's simply a I am a source of whereas the demand is being fed from.
As a as Canadian imports of serves into the U.S. that does that address your question or if I Miss it a bit.
That's very helpful for now.
I'll, let you get to the second part of question I'm just follow up so yes. Please please jump back into queue.
Yes.
On the EBITDA, and which being with touched on that.
Before.
EBITDA specifically what in one respect what was your question.
The question is so we price recovery.
Push the price recovery in premium Q3 is going to be weaker, but then I notice we think about Q4 given today's prices.
Correct.
Hi.
Correct, Yes that devastate was still I'm, sorry, Lukas revenue a little trouble here that was still Lucas right.
Yes, Okay. Okay look as you know we're not we're not going to talk specifically about Q4 table certainly save that for the next call.
But but I think a good way to do that we did share a sensitivity based on Q2 actual today, which would give you.
Kind of pulling a mark to market for two of the largest movers and then also in the appendix we've included or our second half sensitivities on EBITDA right. So if you were to take what your assumptions would be for LMP in Midwest premium and add those onto an actual correlate to Q would be.
With that are relevant range a good place to start that would give you a sense I.
This is exactly why we'd on one of the rates. Many reasons in my opinion why by commodity companies find it difficult to provide guidance and probably should specific items, but as Craig has pointed out.
In detail over over the last couple of years.
Given the lag you can impart your own estimates on the on commodity prices two to three month on average as we've said we've given you the data as to how much of our out of our sales are just one month lag and given your own estimates for LNG prices and delivery premiums principally Midwest, but also.
European though to be paid premium.
You can.
You can work out your on that I mean, the master, which Craig took Turkey was pretty simple it answers the question simply.
Taking Q2 and changing nothing but let me realized in the Midwest realized to today's spot prices. What would Q2 have looked like pro forma sponsor finance, where it's obviously in that that was what was on that last chart there.
I appreciate the color this very helpful.
The blackout I'll jump back in queue, but.
Thank you thanks.
Your next question comes from the line of John Tumazos.
Thank you.
Thank you for the explanation of the lag in your selling price.
Is the alike.
On your alumina cost the Sam.
Or is that even longer.
Because of the aluminum has to be delivered and then.
We're through your work in process Great. Great question. Thank you for the FIFO quick on infringed on the back of that I'm going to let Craig to answer the answer is it's a kind of the same but to get there in a different way, but go ahead Craig sure now that is that is very good question at the highest level from a book perspective.
From a both reported perspective, that's going to come through with about a three month lag in that depending on where inventory levels go on that could be add on and I am Paul south into that Colin at two months' could be as long as four months, but on average about three months from a cash perspective to your point, it's on a one month lag so.
That's the salient point John is that unlike the sales the vast majority are Allah pardon me alumina is price we paid for it on a one month lag that's the cash this actually flowing out the door, but to your very good point via the logistics I guess in this stuff either ocean going cargo and or barges and then depending on.
How much that we have in the silos to Craig's point that averages are weighted.
Adds a weighted average with one and two months to that one month contractual pricing lag that makes sense.
Yes. Thank you.
If I can I ask the second question.
You made reference to the rebound in demand.
The aluminum association orders for the first six months.
Our down 15.6% from last year.
Surely housing is recovering really well.
Wood prices are at record 45% hires in March.
Our the aluminum customers liquidating inventory.
Why is everybody I'm sort of lots of not obvious from looking at orders.
Yeah, there was some inventory de stocking it goes without saying not just customers, John but but throughout the supply chain right. You had a lot of that middle folks whether their distributors are wholesalers or depending upon the how the specific downstream sector is a instruction from a commercial standpoint so.
Clearly some of that it's really hard to.
To put your hand on how much of Oh. This is due to a restocking to replace that restocking, but you know look to the six months. It's written so hard generally in these markets as you well now and especially hard given Uh huh.
Six months like we've just seen the kind of site that that block of time and kinda infer anything from and I think we should we need to all watch it we need to watch as he said we need to watch auto builds you saw that printed last week, we need to start watch obviously housing starts were application for new housing permits.
All that you guys.
As all of the.
Forward Soco forward looking indicators that our our mortgage applications et cetera, et cetera that are good indicators, it's kind of hard to tell let's let's have this not trying to give you an on answer but this will be a more I think interesting discussion a couple of months from now.
Within the aluminum owners.
Wiring cable was up 24%.
Is there a particular reason why.
Electrical transmission or wire and cable yet you doing better some more closely tied to housing.
No insights hasn't been it's also tried.
Tire pardon me John to Us in general infrastructure spending wire rod and wire and cable has been a reasonably if I think of even that the worst of time and I look at our specific customer base those customers orders were.
Literally spot on no upon dead on they're around contractual.
Volumes for the or in fact, some of the mix seating. So so at least in our small neck of the was and then as you say referring to the broader industry data and that sector never took a never took a pause I mean utility spending.
Does it did continue through whatever including a pandemic.
94% of my time doesn't have electricity and there's gotta, yeah demand for wire and cable out here I'm, sorry about that I hope you don't need John I have a roof for someone like that.
Oh I just want to the far house to charge my devices to hear your call Mike It's all good.
Ongoing with Oh that makes us feel good John Thanks, Good luck by the way. Thank you.
Your next question comes from the line of David Gagliano would be in L. capital markets.
Hi, Thanks for taking my questions hopefully you can hear me okay. The.
I got the that I wanted to focus in a little but just on the some of the.
Some of the funny math on slide eight sort of thing so to Q2, adjusted the spot LNG and regional premiums is 24 million of EBITDA.
And then you know the other adjustments I'm, assuming you're going to be power.
But you mentioned is I'm, assuming that's right, which you mentioned you know for the third quarter was about a $10 million.
Thats right likely drag and then.
That's the only other other one would be alumina, which as you know if you use your sensitivities and use the Threeq you bridge.
Math sort of thing would imply maybe a $6 million more sorry $4 million benefit right. So that's kind of those are the other two main puts and takes or anything else that we should be thinking about.
Yes go ahead, Chris will have a couple of things David just to split those topics. So the first one so were crystal clear here. The I'm on page eight that was just marking our current quarter. So we took our printed result interest market to spot to give an idea right. So I just wanted to make sure for everybody else on the culture, We don't complete that with looking at Q3 goal for.
So if we go to Q3 go forward. So the three pieces, we talked about the first let me regional premiums that I think I think you got those rate, though down about 100 on Eleni down 10, I'm Midwest premium.
And down 40 on DDP brake power you are right about down 10 alumina further sensitivity we look at it at a at about 20 Bucks is going to be quite a bit less than $4 billion. David I think it's already I think you were asking about other changes.
Q2 pro forma right and so yes, yep Yep Yep, I mean power.
Powered printed in Q2 pretty.
Consistent with a typical Q2 spraying shoulder season in the patent power land et cetera et cetera. There's no reason if you look at the forwards and whatnot. There's no reason that that should be up or down obviously, it's up as Craig correctly said three just given the hot summer a hot summer typical seasonal trend and.
Then allied yeah, I mean, as we've said before we've given you the sensitivity, but as we've I think we're pretty sure we talked about this last time.
We have very little exposure.
For the balance of by design correct for the balance of 2020.
So the.
And so we're buying almost all on either.
On a percentage alimi basis, which adjust itself it will for those sensitivities.
Okay got it thanks for clarifying that and then just on the.
You mentioned sort of marginal project a approvals are not marginal sorry, I don't that's not the right word but.
Modest modest project approval it was worth.
It was or is there a potline restart rebuild restart in that mix or no if you're you're really hot on it. So thats. The most of them. The biggest one is as we.
Told you guys last time, when we talk one of the things that we did.
More for sustainability of operations reasons, and economic reasons, because even at the dairy commodity prices that sell rebuilding it grander Tommy and Seebri was still measures and and pay bet simple cash on cash payback in a way way way inside a year and so we have restarted for example that seebri, where we had stuff.
Weve stuck we started normal salary lining activity now and so no. It's not a full pot line, but it's just getting a couple of cells that.
In normal times would have been re line did back in service within the United six or seven or eight days is our normal turnaround times for when they were cut out or failed.
Via the normal course, it's just getting those patch stepping up at that rebuilt put back in.
Okay. Okay.
Okay and then just the last question for me the the the commentary obviously about obviously lot of folks on the west premiums and.
What's driving the run up in obviously, you're you're clearly focused on on on Canada, which makes you know logical sense from your perspective and my question is.
If you could provide us a little more insight into what you think is actually going on right now within the administration with regards to that issue and secondly, you know fundamentally if there were to be you know tariffs are yet towers, I guess re implemented against Canada.
Fundamentally what do you think the regional Merseyside the Midwest premium.
You know should go to where do you think it's you go too.
Yeah sure David on the first phase of the real answer is we don't know, we don't know any better than anyone else with but all we can do and what we do do it goes without saying is look at what they say and so you know the most recent tangible stuff that's come out his point probably goes back now almost a month, perhaps when ambassador lighthizer testified in front of Congo.
Yes, both house ways and means in the Senate finance and he talked at length at reasonable length about the specific issue. So there obviously very aware of it that's in the U.S. trade reps on words and and are focused on engine have identified as urgent and he said a lot of things like that and.
And so but other than that we we don't know we know that's they agree it's a certain space on ambassador like I, just commented that they're focused on it and not much up in terms of whereas the Midwest goes it's hard to tell I mean, you you know where it was right before when the tariff was affected by Ie before the exaggerated before the surge started a month after exams.
And started to build and build the middle to build a bill and then of course.
You saw where it was it was in that sort of 16 to 18 cents plus category and then it came down to 12 13, and then it came down further you know let's call. It the pandemic effect, where beginning in fab it came down to eight cents.
Where it goes I you know some of it is only me dependent of course given the.
The circular efforts in it.
But you can look back at where it wasn't it was affected and start to draw some some influences.
Alright. Thanks, that's helpful. Appreciate it.
Your next question comes from the line <unk> Heritage with Berenberg.
Thank you thanks for taking my questions. So first Paul just wanted to.
Talk about the coke and pitch market. So I just curious.
What you're seeing there I mean, let up on.
Uncomfortable can pick just as a derivative of oil so did those prices fall in the oil are lower in Q2, and then it could that be out I sequential headwind as we look into Q3.
No I mean, you have two things going on there, yes crude prices are down parents as thanks to the question, but down on the other hand, the production of those products, specifically Coke, which of course as you know we use smelter uses multiple times more than in page four to five times more.
Is is dependent on refinery runs and so when demand for refined products go down that's that's a problem obviously that lets them at the answer is coast pitch.
'cause it ticked up a little bit, but it's now it's so where is it did create high 200 Gulf delivered we just closed we quote quarter at two there. So yeah. Okay. Two thirds, it's still going from way below that range has been pretty sticky. It's been you know again. This is devoted to reprice 800 give or take 790 790.
Thank you.
So you could see some movement there, but they've both been there's so many factors you've got demand down for those products you got the price of the raw material down as you correctly sided but also the supply.
Down due to first factor I, even less demand for refined products.
The bid in the mishmash of factors that affect those markets.
Not a big got or not.
Our variance here.
Thanks, Thanks for the color.
That's for useful a then I just want you to check you provided.
Cost guidance far.
For the second half of this year in your last call. So just wanted to make sure that you still expect Toronto fairly close to that guidance I mean of course after interesting for all the sensitive gauge, but otherwise you're are you on track.
Are we are very much.
So I wouldn't I think I would take that you know you're right. So the sensitivities, where you see a little bit of reduction in operating cost to sell those old costs go down and obviously Newsday, let me sensitivity on the revenue side, but when you get to the SGN a interest our capex spend very much in life will be shape.
Got it and or I guess last one net interest expense is there any change in that for a given after that this refinancing.
Im sorry interest expense did you say there it does.
Yes, that's right Yeah, you put desperate to yeah. So just just a new coupon that that's it yeah, it'll it'll it'll it'll be nominally more.
It'll be I mean, you you do the math NASA to 50, the coupon is all in including the pain kind of the two points of paying the kind is it's 12% solar will tick up you know 2 million Bucks a quarter just a quick math.
Got it Okay. I think that's all I had to thank you.
Thanks, so much thank you.
Your next question is a follow up question from the line of Lucas pipes with B Riley SBR.
Yes.
And then again and thank you Sir.
Follow up.
I wanted to get a little bit better sense for whereas.
Do you believe Canadian.
Ports are ultimately coming from so NANIUM homemade production has picked up as well is just the lion's share or increased imports into the that's or.
They are more going.
No I did you.
Yeah sure twofold. One is yes of course, there's been production restarted in Canada, just just like there's been production curtailed in the U.S. at the same time at the production came on in Canada, but the other is it just is a redirection of exports from them out from Canada to other mark.
Into the U.S. in order to a in order to capture the tariff again this is exactly what will happen.
<unk>.
And I decided.
Redirection of Canadian exports, it's not that.
I've seen additional imports into account Oh, no. It's all Canadian production I'm, sorry, you're getting at are you asking perhaps I misunderstood. It is it is their product coming from elsewhere through Canada. This is all Canadian production, absolutely. If if I missed your question I'm sorry, no no. It was.
You addressed I Wonder if you get a better sense.
At the end of stay where it comes from so I don't know, Canada, Canada, Canada Yeah.
Okay very helpful. I appreciate it and again.
Thank you look as for the questions.
And again, if you would like to ask your question. Please press Star then the number one on your telephone keypad.
And you do have a follow up question from the line of Paretosh Misra with Berenberg.
Hi, guys. Thanks for taking another one just curious you know as to be are entering.
Oh gosh.
Typically Ah I orders order book slow down or do you want to slow down at this time of year are you starting to see that this year or.
Not so much are and I do you have any expectations as to how the summer might look like versus typical.
I see that slowdown.
Sure I mean, just just to a market back to a up but whatever typical environment for us I in pre coded.
As you know the vast vast vast majority and 90% plus plus of our production is sold on a long term contract basis long term meeting one year plots and so we just don't.
We don't have a lot of sales in the spot market and so the takeaway. There is our order patterns are pretty in a normal environment are pretty a pretty stable a month to month.
Unless a customer has any specific seasonality, but that's built into our production forecasts anyway here as I said, we're actually seen a little bit of an encouraging uptick where where customers. You know when we were the depth of that April may even coming out through June you know sort of indicate where they thought they would be versus.
Their contractual quantities.
Or June July August, thus far and we're seeing you know sort of better than that and so that's why I said I don't we don't I don't blame those those manufacturers there exercising caution.
But business seems to be.
A bit better than they have plan because we are seeing more spot orders and we would normally a then we would normally see specifically of course for value added products, we're talking about billing.
Got it very clear enough. Thanks, guys. Good. Thank you so much.
And there are no further questions at this time.
We we thank you all as usual or for the time and look forward to talking within a couple of months take care.
This concludes today's conference call you may now disconnect.
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