Q4 2023 Century Aluminum Company Earnings Call

Good afternoon. Thank you for attending the century aluminum company fourth quarter 2023 earnings Conference call. My name is Matt and I'll be your moderator for today's call all lines will be muted during the presentation portion of the call up an opportunity for questions and answers at the end if you like to ask a question. Please press star one on your telephone keypad.

Matt: Good afternoon. Thank you for attending the Century Aluminum Company 4th Quarter 2023 Earnings Conference Call. My name is Matt, and I'll be your moderator for today's call.

Matt: All lines will be muted during the presentation portion of the call for an opportunity for questions and answers at the end. If you'd like to ask a question, please press star 1 on your telephone keypad. I'll now like to pass the conference over to our host, Ryan Crawford with Century Aluminum. Ryan, please go ahead.

I would now like to pass the conference over to our host Ryan Crawford with century aluminum.

Brian. Please go ahead, thank you operator.

Ryan Crawford: Thank you, Operator. Good afternoon, everyone, and welcome to the conference call. I'm joined here today by Jesse Gary, Century's President and Chief Executive Officer, Gary Bialek, Executive Vice President and Chief Financial Officer, and Peter Trpkovski, Senior Vice President of Finance and Treasurer. After our prepared comments, we will take your questions. As a reminder, today's presentation is available on our website at www.centuryaluminum.com. We use our website as a means of disclosing material information about the company and for complying with Regulation F.B. Turning to slide one, please take a moment to review the cautionary statements shown here with respect to forward-looking statements and non-GAAP financial measures contained in today's discussion. And with that, I'll hand the call to Jesse.

Afternoon, everyone and welcome to the conference call.

I'm joined here today by Jesse Gary Centurys, President and Chief Executive Officer, Jerry <unk>, Executive Vice President and Chief Financial Officer, and Peter <unk>, Senior Vice President of Finance and Treasurer.

After our prepared comments, we will take your questions.

As a reminder, today's presentation is available on our website at www dot century aluminum dotcom.

We use our website as a means of disclosing material information about the company and for complying with regulation FD.

Turning to slide one please take a moment to review the cautionary statements shown here with respect to forward looking statements and non-GAAP financial measures contained in today's discussion.

With that I'll hand, the call to Jesse.

Jesse Gary: Thanks, Ryan. Thanks to everyone for joining us. I'll start today by quickly reviewing our 2023 performance before turning to the current macro environment and some dynamic operating conditions we are working through in Q1. Jerry will then take you through the details of the fourth quarter results and Q1 outlook. And then I'll finish with an update on the Inflation Reduction Act and potential further benefits that we expect to receive. Turning to slide three, market conditions remained volatile last year, reflecting a seemingly new normal we've experienced post-COVID, where a broadly balanced global supply and demand picture for aluminum is paired with historically low levels of inventories. Tight global inventories, along with rising and dynamic geopolitical tensions, have created a market where small changes in market conditions are driving outsized effects on aluminum prices. Despite this continued volatility, Century produced adjusted EBITDA of $120 million in 2023, including $57 million of adjusted EBITDA in Q4, reflecting the impact of our 2023 Inflation Reduction Act Advanced Manufacturing Credit. Jerry will give you the full details here in a bit.

Thanks, Ryan and thanks to everyone for joining.

I'll start today by quickly reviewing our 2023 performance before turning to the current macro environment and some dynamic operating conditions, we are working through in Q1.

Jerry will then take you through the details of the fourth quarter results and Q1 outlook.

And then I'll finish with an update on the inflation reduction act potential further benefits that we expect to receive.

Turning to slide three market conditions remain volatile last year, reflecting a seemingly new normal we've experienced post COVID-19, where are broadly balanced global supply and demand picture for aluminum is paired with historically low levels of inventories.

Global inventories, along with rising and dynamic geopolitical tensions has created a market where small changes in market conditions are driving outsized effects on aluminum prices.

Despite this continued volatility centrally produced adjusted EBITDA of $120 million in 2023, including $57 million of adjusted EBITDA in Q4, reflecting the impact of our 2023 inflation reduction Act advanced manufacturing credit.

Jerry will give you the full details here in a bit.

Our team completed several strategic projects last year, including the acquisition of our 55% share in <unk> completing our long held ambitions to secure captive supply of high quality alumina and bauxite for smelters to create a more balanced consistent and robust operational footprint and better.

Jesse Gary: Our team completed several strategic projects last year, including the acquisition of our 55% share in Jamalco, completing our long-held ambitions to secure a captive supply of high-quality alumina and bauxite for our smelters to create a more balanced, consistent, and robust operational footprint and better position us to deliver strong performance through commodity cycles. Returning this asset to its full potential will continue to be one of our main priorities in 2024 Finally, we continue to focus on our most important priority, to return our employees home safely at the end of each and every day. While we will never be satisfied until we achieve zero workplace injuries, our team should be proud to have reduced injuries by 20 percent over 2022 levels.

Position us to deliver strong performance through commodity cycles.

Returning to this asset to its full potential we will continue to be one of our main priorities in 2024.

Finally, we continue to focus on our most important priority to return our employees home safely at the end of each and every day.

We will never be satisfied until we achieve zero workplace injuries, our team should be proud to have reduced injuries by 20% over 2022 levels.

Jesse Gary: We hope to significantly improve on this trend in the coming year. However, market conditions for centuries businesses continue to reflect uncertain macroeconomic conditions in much of the world. As you can see on slide four, global supply and demand remain roughly balanced, and global inventories remain near all-time lows. The driving forces behind these balanced markets, however, are much more dynamic than years past and reflect the complexity of the current market. Supply has been largely constrained over the past year. In China, growth was limited by their 45 million ton capacity cap and continued curtailments in Yunnan and surrounding provinces. Western supply also remained challenged over the past year by a difficult demand picture that ultimately led to the curtailment of two more Western smelters in Neuss, Germany, and New Madrid, Missouri. A bit further east, Russian metal continues to be disfavored in western markets, where it today constitutes 90% of all LME inventories.

We hope to significantly improve on this trend in the coming year.

Yeah.

Market conditions for centuries businesses continued to reflect uncertain macroeconomic conditions in much of the world.

As you can see on slide four global supply and demand remained roughly balanced and global inventories remain near all time lows.

The driving forces behind these balanced markets. However are much more dynamic than years past and reflect the complexity of the current market.

Supply was largely constrained over the past year and China growth was limited by their 45 million ton capacity cap and continued curtailments and <unk> and surrounding provinces.

Western supply also remained challenged over the past year by a difficult demand picture that ultimately led to the curtailment of two more western smelters in Neuss, Germany, and new matter in Missouri.

A bit further east Russian metal continues to be just favored in western markets for Russian metal today constitute 90% of all <unk> inventories.

There have been increasing calls for restaurant aluminum sanctions in the EU and U S. Following the initial implementation of a 200% tariff on Russia and products into the U S.

Jesse Gary: There have been increasing calls for Russian aluminum sanctions in the EU and U.S., following the initial implementation of a 200% tariff on Russian products into the U.S. and an EU ban on certain downstream Russian aluminum products into the EU. On the demand side, Western world demand appears to have reached a low in Q3, driven by continued destocking across downstream users and challenging EU industrial growth. The markets saw increased demand in Q4, and we now expect an improved and growing Western demand equation in 2024. Overall, we expect that Western demand will return to its long-term growth rates as falling interest rates and improved GDP growth return to the U.S. and EU markets, and the Inflation Reduction Act and similar spending programs in the EU and elsewhere continue to drive increased aluminum demand in automotive and renewable energy applications. The largest demand side story in 2023, however, was the strength of the Chinese market, where we saw Chinese demand growth of 5% in 2023 and expect to see similarly high growth rates this year. We estimate that the Chinese market imported about 1.3 million tons of non-Chinese production last year, and we expect that to expand further this year.

And in EU ban on certain downstream restaurant aluminum products into the EU.

On the demand side Western World demand appears to have reached a low in Q3.

Driven by continued destocking across downstream users and challenging EU industrial growth.

The market saw increased demand in Q4, and we now expect an improved and growing western demand equation in 2024.

Overall, we expect that western demand will return to its long term growth rates as falling interest rates and improved GDP growth returns to the U S and EU markets.

And then inflation reduction act and similar spending programs in the EU and elsewhere continue to drive increased aluminum demand in automotive and renewable energy applications.

The largest demand side story in 2023, however was the strength of the Chinese market, where we saw Chinese demand growth of 5% in 2023 and expect to see similarly high growth rates this year.

We estimate that the Chinese market imported about one 3 million tons of non Chinese production last year, and we expect that to expand further this year.

Jesse Gary: Chinese demand growth has been driven by the broad macro trends we have long expected, namely in aluminum-intensive electric vehicles and renewable energy applications. We expect demand growth in these areas to continue to accelerate this year, both in China and the West. As we've discussed over the course of the past year, bill of demand in the U.S. and Europe has been a relatively weak point in the market, as post-pandemic de-stocking continued and increased imports of extrusions into both markets decreased domestic bill of demand. Due to the annual contract structure for billets in the U.S., we were somewhat insulated from this downturn in 2023 by higher annual contract prices set in late Unfortunately, demand conditions for billets in both the U.S. and Europe remained weak in Q4 and into Q1 of this year, which created a headwind in our 2024 billet contract negotiations and led to lower pricing that we expect will impact our Q1 results by around $10 million from Q4 levels.

Chinese demand growth has been driven by the broad macro trends, we have long expected, namely an aluminum intensive to electric vehicles and renewable energy applications.

We expect demand growth in these areas to continue to accelerate this year, both in China and the west.

As we've discussed over the course of the past year build demand in the U S and Europe has been a relatively weak point in the market at post pandemic Destocking continued and increased imports of extruded into both markets decreased domestic billet demand.

Due to the annual contract structure for built in the U S. We were somewhat insulated from this downturn in 2023 by higher annual contract prices set in late 2022.

Unfortunately demand conditions for <unk> in both the U S and Europe remained weak in Q4 and into Q1 of this year, which created a headwind in our 2024 billet contract negotiations and led to lower pricing that we expect will impact our Q1 results by around $10 million from Q4 levels.

Yeah.

Jesse Gary: Despite these near-term headwinds, we continue to anticipate very constructive long-term bills of demand trends in both the U.S. and Europe, as Automotive Lightweighting and Renewable Energy Applications for Increasing Aluminum Consumption. We expect this trend to support significant long-term demand expansion for primary aluminum billet and slab in the EU and US. In addition, as you can see on slide seven, we expect that the pending U.S. anti-dumping and countervailing duty trade case against extrusion imports from 14 countries will have a significantly positive impact on domestic U.S. bill of demand beginning in the second half of 2024. In August, the U.S. aluminum extrusion industry filed suit alleging dumping and illegal subsidies by countries constituting over 68% of extrusion imports The U.S. International Trade Commission has already determined that there's an indication of material injury to the U.S. industry.

Despite these near term headwinds, we continue to anticipate very constructive long term bill or demand trends in both the U S and Europe at.

That's the automotive light weighting and renewable energy applications drive increasing aluminum consumption.

We expect this trend to support significant long term demand expansion for primary aluminum billet and flat in the EU and U S.

In addition, as you can see on slide seven we expect that the pending U S. Anti dumping countervailing duty trade case against extrusion imports from 14 countries will have a significantly positive impact on domestic U S. Billet demand beginning in the second half of 2024.

In August the <unk>.

Aluminum extrusion industry filed suit alleging dumping and illegal subsidies by countries constituting over 68% of extrusion imports and over 27% of total U S extrusion demand.

The U S International Trade Commission has already determined there is an indication of material injury to the U S industry.

Jesse Gary: And in March and May of this year, the U.S. Department of Commerce is expected to rule on the preliminary implementation of anti-dumping and countervailing duties against the subject import. If implemented, the duties would immediately go into effect and are expected to have a material impact on the U.S. extrusion and billet market.

And in March and May of this year. The U S Department of Commerce is expected to rule on the preliminary implementation of anti dumping and countervailing duties against the subject imports.

If implemented the duties would immediately go into effect and are expected to have a material impact on the U S extrusion billet markets.

This is an example, when anti dumping duties were first placed on aluminum institutions from China in 2011.

Jesse Gary: When anti-dumping duties were first placed on aluminum extrusions from China in 2011, imports of subject extrusions from China immediately dropped to almost zero due to the significant relief provided by the anti-dumping and counter-billing duties, and the domestic industry accordingly took back significant market share. We would expect a similar impact from this case if duties are leveled in March and May, meaning that 27% of domestic extrusion demand currently met by the subject imports would have to be served by increased U.S. extrusion production and a corresponding increase in U.S. bill of demand. While we are not direct participants in the case, we have reviewed the case in detail and believe it is strong on the merits. If it is successful, the ADCVD duties would benefit spot billet premiums in the second half of 2024. And we have accordingly left more of our second half billet volumes open to potentially benefit from the higher pricing environment. The ADCBD duties would remain in place for at least five years, driving increased U.S. bills of demand across the period and beyond.

The subject students from China immediately dropped to almost zero due to the significant relief provided by the anti dumping and countervailing duties and the domestic industry Accordingly took significant market share.

We would expect a similar impact from this case if duties are leveled in March and may meaning that 27% of domestic extrusion demand currently met by the subject imports would have to be served by increased U S. Extrusion production and a corresponding increase in U S demand.

While we are not direct participants in the case, we have reviewed the case in detail and believe it has strong on the merits.

If successful the 80 CVD duties would benefit spot billet premiums in the second half of 2024, and we have accordingly more of our second half billet volumes open to potentially benefit from the higher pricing environment.

The CVD duties would remain in place for at least five years driving increased U S billet demand across the period and beyond.

Jesse Gary: Combining the operations, we saw strong and stable performance across our smelters in Q4, while the Jamalco refinery continued to recover from the energy-related disruptions suffered in late September. We now expect that some of the production and cost efficiencies that we expected to do in Q1 will instead begin in Q2. In Iceland, a relatively dry and cold winter has led to water levels in the nation's hydro scheme falling below normal levels, and the energy companies have accordingly issued partial curtailment orders to their industrial customers, including our Grundertngi smelter.

Turning to operations, we saw a strong and stable performance across our smelters in Q4 of the <unk> refinery continued to recover from the energy related disruptions separate in late September.

We now expect that some of the production and cost efficiencies that we would expect it to Jim alcohol in Q1, we will instead began in Q2.

In Iceland, a relatively dry and cold winter has led to water levels in the nation's hydro scheme following below normal levels in the energy companies have accordingly issued partial curtailment orders across our industrial customers, including our <unk> smelter.

These curtailments first began in early December and are expected to reduce <unk> energy consumption by approximately 20 megawatts about 3% of our total load.

Jesse Gary: These curtailments first began in early December and are expected to reduce Grunewaldtangi's energy consumption by approximately 20 megawatts, about 3% of our total load. We expect that the curtailment will finish by the end of April, but this remains subject to weather patterns and reservoir levels in Iceland. Based on the scheduled curtailment date, we expect that the curtailments will reduce Grundert-Tomge's 2024 production by approximately 3,500 metric tons. This impact is included in our Q1 and full year volume guidance. It also impacted our Q4 production levels, and you can see the impact in the volume column on our bridge on page 9. Finishing out the energy picture, energy prices in the U.S. have generally been flat, driven by a mostly moderate winter and natural gas prices near $2. A nationwide mid-January cold snap did drive about a week of very high U.S. power prices, which we expect to have a negative impact of about $5 million in Q1.

We expect that the curtailment will finish by the end of April but this remains subject to weather patterns and reservoir levels in Iceland base.

Based on the scheduled curtailment in date, we expect the curtailments will reduce <unk> 2024 production by approximately 3500 metric tons.

This impact is included in our Q1 and full year volume guidance.

It also impacted our Q4 production levels and you can see the impact and the volume column on our bridge on page nine.

Finishing out the energy picture energy prices in the U S have generally been constructive driven by mostly moderate winter and natural gas prices near $2.

Our nationwide mid January cold Snap did drive about a week of very high U S power prices, which we expect to have a negative impact of about $5 million in Q1.

Other than this week of very cold weather power prices have been very constructive and the power price forwards have fallen significantly since the cold snap, reflecting the low natural gas prices.

Jesse Gary: Other than this week of very cold weather, power prices have been very constructive, and the power price forwards have fallen significantly since the cold snap, reflecting the low natural gas prices. On the raw material side, we've begun to see many of our raw material imports begin to return to historical pre-pandemic price levels, with Coke, Pitch, and Cossack Soda prices moving most significantly downward over the past couple of months. Due to our contractual and physical inventory lags, the benefits of these price decreases will take some time to roll through our results, which Sherry will give you a bit more detail on. We do expect Koch prices, especially, to continue to moderate further over the course of this year. Finally, in light of the currently suppressed demand environment, we implemented a new cost control program designed to lower our spending while aluminum prices remain depressed. We, of course, have implemented similar programs in the past, and we are confident that we will be able to reduce costs and also our cash spending during this period.

On the raw materials side, we've begun to see many of our raw material imports begin to return towards historical pre pandemic price levels with coke pitch and caustic soda prices moving most significantly downward over the past couple of months.

Due to our contractual and physical inventory lags the benefits of these price decreases will take some time to roll through our results with Sherry will give you a bit more detail on.

We do expect coke prices, especially to continue to moderate further over the course of this year.

Finally in light of the currently suppressed demand environment, we've implemented our new cost control program designed to lower our spending while aluminum prices remained depressed.

We of course have executed similar programs in the past and we are confident that we will be able to reduce costs and also our cash spending during this period.

Dairy is leading this initiative for us and will provide you with the details.

Jesse Gary: Jerry is leading this initiative for us and will provide you with the details, in light of this environment and long supply chains. We continue to work on our Mount Holly restart plans, but do not expect that we will have any significant capital or cash requirements for the restart over the course of 2024. Terry will now walk you through the quarter and our Q1 outlook. Thank you, Jesse.

In light of this environment and long supply chains.

We continue to work on our Mount Holly restart plans, but do not expect that we will have any significant capital or cash requirements for the restart over the course of 2024.

Gerry will now walk you through the quarter and our Q1 outlook.

Thank you Jesse let's turn to slide eight to review fourth quarter results.

Gerald C. Bialek: Let's turn to slide eight to review fourth quarter results. On a consolidated basis, fourth quarter global shipments were nearly 174,000 tons, up 1% sequentially. Realized prices, however, decreased substantially versus the prior quarter, due primarily to significantly lower lagged LME prices and delivery premiums, resulting in net sales of $512 million, a 6% decrease sequentially. Looking at Q4 operating results, adjusted EBITDA attributable to Century was $57 million, an improvement of $48 million compared with the third quarter. During the period, we recorded a full-year benefit of $59 million related to the Inflation Reduction Act Advanced Manufacturing Credit Section 45 Act. Adjusted net income was $40 million, or $0.39 per share. The major adjusting items were addbacks of $7 million in costs related to the Jamalco equipment failure, $3 million for the unrealized impacts of forward contracts, and $1 million for share-based compensation. We had strong liquidity of $312 million at the end of the quarter, consisting of $89 million in cash and $223 million available on our credit facility.

On a consolidated basis fourth quarter global shipments were nearly 174000 tons.

Up 1% sequentially.

Realized prices, however decreased substantially versus prior quarter, due primarily to significantly lower lagged alumina prices and deliberate premiums, resulting in net sales of $512 million.

6% decrease sequentially.

Looking at Q4 operating results adjusted EBITDA attributable to century was $57 million, an improvement of $48 million compared with the third quarter.

During the period, we recorded a full year benefit of $59 million related to the inflation reduction Act advanced manufacturing credits section 45 X adjusted.

Net income was $40 million or <unk> 39 per share.

The major adjusting items were add backs of $7 million in costs related to the gym Alco equipment failure.

$3 million for the unrealized impacts of forward contracts.

And $1 million for share based compensation.

We had strong liquidity of $312 million at the end of the quarter, consisting of $89 million in cash and $223 million available on our credit facilities.

Turning to slide nine to explain the $48 million fourth quarter sequential improvement in adjusted EBITDA.

Gerald C. Bialek: Slide 9 to explain the $48 million 4th quarter sequential improvement in adjusted EBITDA. In total, adjusted EBITDA for the fourth quarter was $57 million. Realized lagged L&E prices and delivery premiums were significantly lower in the quarter. Realized LME of $2,182 per ton was down $55 versus the prior quarter, while realized US Midwest premium of $425 per ton was down $68 and European delivery premium of $280 per to Together, these factors amounted to a $19 million headwind in the quarter.

And total adjusted EBITDA for the fourth quarter was $57 million.

Realized lagged LNG prices and delivery premiums were significantly lower in the quarter.

Realized <unk> of $2182 per ton was down $55 versus prior quarter, while realized U S. Midwest premium of $425 per ton was down $68 and European delivery premium of $280 per ton was down $44 <unk>.

Together these factors amounted to $19 million headwind in the quarter.

Power cost increased by $1 million.

Gerald C. Bialek: Power cost increased by $1 million, realized aluminum cost was $382 per ton, $13 lower on a sequential basis, realized Coke prices decreased 9%, and realized pitch prices decreased 5%. Remember, there is a three to four month lag for alumina, coke, and pitch costs to work through our income statement. Together, alumina and other raw material costs resulted in a $14 million improvement in EBITDA. Volume Opex and Premiums Nex were headwinds of $2 million and $3 million, respectively. And as I said earlier, during the period, we recorded a full-year benefit of $59 million related to the IRA Advanced Manufacturing Credit. For additional clarification, the IRA credit was calculated at 10% of production costs incurred, excluding direct and indirect material costs. Please note that the Department of Treasury is still considering including direct and indirect materials as eligible costs. Jesse will elaborate further in his closing remarks. With that, let's turn to slide 10 for a look at cash flow. He began the quarter with $93 million in cash and ended December with $89 million.

Realized alumina costs was $382 per ton $13 lower on a sequential basis.

Realized copper prices decreased 9% and realized prices decreased 5%.

Remember there was a three to four month lag for Illumina Coke and pitch costs to work through our income statement.

Together alumina and other raw material costs resulted in a $14 million improvement in EBITDA.

Volume Opex and premiums mix were headwinds of $2 million and $3 million respectively.

And as I said earlier during the period, we recorded a full year benefit of $59 million related to the IRA advanced manufacturing credit.

For additional clarity the IRS credit was calculated at 10% of production costs incurred excluding direct and indirect material costs.

The department of Treasury is still considering including direct and indirect material as eligible costs Jesse will elaborate further in his closing remarks.

With that let's turn to slide 10 for a look at cash flow.

We began the quarter with $93 million in cash and then December with $89 million.

Gerald C. Bialek: Capital expenditures total $30 million, $22 million of which relates to the Gruner-Tongi Gasthaus project. Semi-annual interest payments were $13 million, and net debt repayments were $30 million. Working capital and other items contributed $68 million. We continue to maintain our focus on optimizing working capital, but as I mentioned last quarter, some of these savings are related to the timing of material flows, which may reverse in subsequent quarters. Let's turn to slide 11, and I'll give you some insight into our expectations for the first quarter of 2024. For Q1, the lagged LME price of $2,190 per ton is expected to be up about $8 versus the Q4 realized price. Q1's lagged US Midwest premium is forecast to be $416 per ton, down $9. The European delivery premium is expected at $222 per ton, or down about $58 per ton versus the fourth quarter, but we have seen improvement in EDPP in recent weeks, with pricing earlier this week at nearly $250 per ton. Taken together, the LME and delivery premium changes are expected to decrease Q1 EBITDA by approximately $2 million compared to Q4 levels.

Capital expenditures totaled $30 million 22 million of which relates to the <unk> project.

Semiannual interest payments were $13 million and net debt repayments were $30 million.

Working capital and other items contributed $68 million we.

We continue to maintain our focus on optimizing working capital, but as I mentioned last quarter. Some of these savings are related to the timing of material flows which may reverse in subsequent quarters.

Let's turn to slide 11, and I'll give you some insight into our expectations for the first quarter of 2024.

For Q1, the lagged <unk> of $2190 per ton is expected to be up about $8 versus Q4 realized prices.

The Q1 lagged U S. Midwest premium is forecast to be $416 per ton down $9.

The European delivery premium is expected at $222 per ton are down about $58 per ton versus the fourth quarter, but we have seen improvement in edp in recent weeks with pricing earlier this week.

At nearly $250 per ton.

Taken together, the <unk> and delivery premium changes are expected to decrease Q1, EBITDA by approximately $2 million versus Q4 levels.

Gerald C. Bialek: We expect power prices to be flat quarter over quarter despite a $5 million negative impact from the January cold snap. Looking at our key raw materials, lagged realized alumina cost is expected to be about flat. We expect a favorable impact from lower Coke and pitch prices. Caustic soda prices are trending down, as I'd like to remind you that it takes five to six months for caustic spot prices to flow through our P&L. All in, we expect lower raw material costs to contribute $5 to $10 million to EBITDA. However, weak billet demand has driven value-added premiums down.

We expect power prices to be flat quarter over quarter, Despite a $5 million negative impact from the January cold snap.

Looking at our key raw materials Ladd.

<unk> realized alumina cost is expected to be about flat.

We expect a favorable impact from lower coke and pitch prices.

Caustic soda prices are trending down as I'd like to remind you that it takes five to six months for caustic spot prices to flow through our P&L.

All in we expect lower raw material costs to contribute $5 million to $10 million to EBITDA.

The weak demand is driven value added premiums down.

Gerald C. Bialek: Therefore, we expect about a $10 million VAP impact on EBITDA in Q1. We expect volume to be a slight headwind, given the power curtailment imposed on the Nagrinder-Tangi facility. Finally, we expect APEX to contribute $5 million to EBITDA in Q1. As Jesse highlighted in his opening comments, we have developed a robust playbook aimed at navigating the current demand landscape by effectively managing costs and preserving cash flow. We actively identify areas for efficiency enhancement, exercise prudence in discretionary expenditures, and diligently pursue cost reduction initiatives, all in pursuit of establishing a sustainable and financially sound operational framework. All factors considered, our outlook for Q1 adjusted EBITDA is expected to be in a range of between $5 to $15 million. From a hedge impact standpoint, we expect no impact in the first quarter as we have very limited hedges in place. We expect a tax expense of approximately $0 to $5 million.

Therefore, I expect about a $10 million bath impact to EBITDA in Q1.

We expect volume to be a slight headwind given the power curtailment imposed <unk> facility.

Finally, we expect opex to contribute $5 million to EBITDA in Q1.

As Jesse highlighted in his opening comments, we have developed a robust playbook aimed at navigating the current demand landscape by effectively managing costs and preserving cash flow.

We actively identify areas for efficiency enhancement exercise prudent and discretionary expenditures and diligently pursue cost reduction initiatives all in pursuit of establishing a sustainable and financially sound operational framework.

All factors considered our outlook for Q1, adjusted EBITDA is expected to be in a range of between $5 million to $15 million.

From a hedge impact standpoint, we expect no impact in the first quarter as we have very limited hedges in place.

We expect tax expense of approximately zero to $5 million.

As a reminder, both of these items fall below EBITDA and impact adjusted net income.

Gerald C. Bialek: As a reminder, both of these items fall below EBITDA and impact adjusted net income. Now, referring to slide 17 for full year 2024 financial assumptions, we expect shipments to be flat compared to 2023. In line with our objective to conserve cash, we are managing spending very deliberately.

Now referring to slide 17 for full year 2024 financial assumptions.

We expect shipments to be flat compared to 2023.

In line with our objective to conserve cash we are managing spending very deliberately.

We do expect to invest approximately $10 million to $15 million in sustaining capex and about 10% to $15 million in <unk>.

Jesse Gary: We do expect to invest approximately $10 to $15 million in sustaining CapEx and about $10 to $15 million in Gemalco. In addition, investment of approximately $15 to $20 million remains on a Rice and Cass House project, which will be funded in Q1 from our dedicated Gruner-Tarngy-Cass House credit facility. The impact of the hedge book will vary with market conditions throughout the year, but to assist with anticipating these impacts on a go-forward basis, we have updated our previously reviewed financial hedge landscape, which can be found on page 19 in the appendix. Note that we have no remaining Nord Pool exposure in 2024. And now, I'll turn the call back over to Jesse.

In addition investment of approximately $15 million to $20 million remains on our <unk> project, which will be funded in Q1 from our dedicated grunert turnkey caps Taos credit facility.

The impact of the hedge book will vary with market conditions throughout the year, but to assist with anticipating these impacts on a go forward basis. We have updated our previously reviewed financial hedge landscape, which can be found on page 19 in the appendix.

We have no remaining Nord pool exposure in 2024.

And now I will turn the call back over to Jesse.

Thanks Terry.

If you turn to page 12, I'd like to finish with some additional discussion regarding section 45 X and our expected benefits they are under.

Jesse Gary: Thanks, Jerry. If you turn to page 12, I'd like to finish with some additional discussion regarding Section 45X and our expected benefits thereunder. As we discussed in December, the proposed regulations clarified many aspects of the law, but Treasury asked for comments on several others, while specifically highlighting the important role that critical minerals like aluminum play in the renewable energy and energy storage industry. First and foremost, the proposed regulations confirm the application of Section 45X to substantially all of Century's primary aluminum production in the United States. The proposed regulations also clarify that eligible costs that qualify for the 10% credit are to be construed broadly to include all costs incurred by the producer in the production of the critical minerals, other than certain direct and indirect material costs.

As we discussed in December.

As regulations clarified many aspects of the law, but treasury asked for comments on several others, while specifically highlighting the important role that critical minerals like aluminum play in the renewable energy and energy storage industry.

First and foremost the proposed regulations confirmed the application of section 45 X. That's essentially all of the century's primary aluminum production in the United States.

The proposed regulations also clarified that eligible costs the qualified for the 10% credit or to be construed broadly to include all costs incurred by the producer and the production of the critical minerals other than certain direct and indirect material costs.

Importantly, the Treasury Department also specifically notes that it is still considering adding direct and indirect material costs as eligible costs under section 45 X and requested comments regarding how such costs will be treated for purposes of the critical minerals tax credit.

We are discussing with treasury at the central nature of these materials and the significant associated costs as indeed, it would not be possible to produce U S aluminum without materials like alumina and carbon anodes.

Jesse Gary: Importantly, the Treasury Department also specifically notes that it is still considering adding direct and indirect material costs as eligible costs under Section 45X and has requested comments regarding how such costs should be treated for purposes of the Critical Minerals Tax Credit. We are discussing with Treasury the essential nature of these materials and the significant associated costs, as indeed it would not be possible to produce U.S. aluminum without materials like alumina and carbon anodes.

Our position is in line with a broad set of industry participants ranging from the critical mineral producers toward downstream customers, including automotive companies seeking to ensure stable domestic supply chains.

Overall, there seems to be broad consensus amongst industry and consumers such costs should be eligible for the tax credit and we are very hopeful that they will ultimately be included as eligible costs.

Importantly, Senator mansion, along with several of his colleagues recently submitted comments to treasury, noting that their intent is drafters, what's sort of the direct and indirect material costs to be eligible and they called on treasury to expeditiously revise the regulations accordingly.

Jesse Gary: Our position is in line with a broad set of industry participants, ranging from the critical mineral producers to our downstream customers, including automotive companies seeking to ensure stable domestic supply chains. Overall, there seems to be broad consensus among industry and consumers that such costs should be eligible for the tax credit, and we are very hopeful that they will ultimately be included as eligible costs. Importantly, Senator Manchin, along with several of his colleagues, recently submitted comments to Treasury, noting that their intent as drafters was for the direct and indirect material costs to be eligible, and they called on Treasury to expeditiously revise the regulations accordingly. If direct and indirect material costs are ultimately added to the eligible costs under 45X, we'd expect to recognize an additional annual benefit of $50 to $55 million for 2023 and similar annual amounts for 2024 Any potential increases in future production would also be eligible for the production tax credit and would be expected to increase our annual benefit on a roughly pro rata basis to the amount of increased production.

If direct and indirect material costs are ultimately added that's eligible costs under 40 buybacks, we would expect to recognize an additional annual benefit of $50 million to $55 million for 2023, and similar annual amounts for 2024 and going forward.

Any potential increases in future production would also be eligible for the production tax credit and would be expected to increase our annual benefit on a roughly pro rata basis to the amount of increased production.

We will continue to update you as we receive more guidance from the Treasury Department.

We look forward to your questions today, and we'll turn the call over now to the operator.

If you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove that question. Please press star followed by two again to ask a question press Star one.

As a reminder, if youre using a speakerphone. Please remember to pick up your handset before asking your question. We will pause here briefly is questions that are registered.

First question is from the line of Lucas pipes with B Riley. Your line is now open.

Matt: We will continue to update you as we receive more guidance from the Treasury Department. We look forward to your questions today, and we'll turn the call over now to the operator. If you'd like to ask a question, please press star followed by one on your telephone keypad. If, for any reason, you'd like to remove a question, please press star followed by two.

Thank you very much operator, good afternoon, everyone.

My first question is following up on the on the 45 X.

Commentary.

Specifically.

I understand there is there is a process.

For the review of the direct and indirect cost and including that in that and the benefit but I'm wondering if you could maybe elaborate on.

Matt: Again, to ask a question, press star one. As a reminder, if you're using a speaker phone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. The first question is from the line of Lucas Pipes with B. Reilly.

Kind of what the process looks like from here.

What's the potential timeline, what is the IRS looking for it to make a determination.

Lucas Pipes: Your line is now open. Thank you very much, operator. Good afternoon, everyone.

Thank you very much.

Sure Lucas.

First of all I, just like to say, we're very thankful for the program and the proposed regulations clearly have a material benefit for century and also for U S aluminum production.

Jesse Gary: My first question is following up on the 45x commentary, and specifically, I understand there is a process for the review of the direct and indirect costs and including that in the benefit, but I wondered if you could maybe elaborate on kind of what the process looks like from here, what's the potential timeline, and what is the IRS looking for to make a determination on those? Thank you, for Lucas. First of all, I'd just like to say we're very thankful for the program and the proposed regulations clearly have a material benefit for Century and also for U.S. aluminum production. To your point about process, we are working with Treasury on the proposed regulations, which, as I mentioned in my comments, included several questions for industry and other participants about which costs should be included as eligible. There's obviously been a lot of support coming in from industry and also from some of the drafters of the bill, which is obviously important to the ultimate intent of the law. So we do think there's good potential for more benefits to come, but it will obviously depend on the process. So these.

To your point on process, we are working with treasury on the proposed regulations, which as I mentioned in my comments.

Included in several questions for industry and other participants about what's cost should be included is eligible.

There's obviously been modest support coming in from industry.

Also from some of the drafts of the Bill which is obviously important to.

To the ultimate intent of the law.

So we do think there's good potential for more benefit to come.

It will obviously depend on the process.

These.

Regulations as we call them our proposed regulations.

And the process will be there so a comment period.

A number of comments have already been submitted and there also will be a hearing.

And then after that and Treasury and the IRS will take that feedback back and we'll also issue either another set of proposed regulation or set of final regulations, there's no prescribed timeline there.

Jesse Gary: Regulations, as we call them, are proposed regulations, and the process will be there's a comment period, for which a number of comments have already been submitted, and there also will be a hearing, and then after that, Treasury and the IRS will take that feedback back, and we'll ultimately issue either another set of proposed regulations or a set of final regulations. There's no prescribed timeline, so we'll just have to wait and see when we see the next set of proposed or final regulations. Thank you. And do I remember correctly that some of the hearings are tomorrow and do you have a view on or do you know when the comment period might close? Yes, the initial comment period is already closed, Lucas, and the hearing is, in fact, tomorrow.

So, we'll just have to wait and see when we see the next set of proposed or final regulations.

Yeah.

Thank you Anne.

Remember it right.

Some of the hearings are tomorrow and.

Do you have a view on do you know when the common period might close thank.

Thank you.

Yes. The initial comment period has already closed Lucas.

And the hearing is in fact tomorrow.

Very helpful. Thank you and then I.

I wanted to ask about Haas well.

I'm curious kind of if you.

Sure sure your views on where that asset.

Jesse Gary: Very helpful. Thank you. And then I wanted to ask about Hoswell.

Sit on the U S cost curve.

Jesse Gary: I'm curious if you could share your views on where that asset could sit on the U.S. cost curve with lower energy prices more broadly with the 45x credit. There was a recent announcement about a curtailment of the smelter in the Midwest. So I'm kind of curious what might be similar or different in Hoswell compared to, idled, or maybe, again, more broadly on the cost curve. Thank you.

Lower energy prices more broadly with a 45 ex credit.

A recent announcement about curtailment of the smelter in the Midwest, So kind of curious.

What.

Might be similar or different in hospital compared to two.

To that asset.

Idled or maybe again more broadly on the cost curve. Thank you. Thank you very much.

Sure Lucas good question.

Jesse Gary: Good question. Yeah, so we were very sad to see the announcement that the New Madrid smelter in New Madrid, Missouri, closed earlier this year. But obviously, each and every smelter in the US has its own mix of costs and circumstances, and it's difficult to really make broad generalizations or comparisons across them. With respect to Hawesville specifically, we have obviously seen power prices in the Midwest return to attractive levels, mainly driven by the low price of natural gas, but also as additional renewable energy is built into the grid. It's actually quite rewarding to see just how green the overall Midwest power environment has become. So with respect to Hosville specifically, I think, as we've said before, it'll be a holistic decision based on many factors.

Yes, So we were very sad to see the announcement that the new metric smelter in <unk>, Missouri.

Closed.

Earlier this year.

But obviously each and every smelter in the U S has its own mix of costs and circumstances.

And it's difficult to really make broad generalizations are comparisons across them.

With respect to Huntsville, specifically, we've obviously seen.

Power prices in the Midwest.

Return towards attractive levels, mainly driven.

By the low price of natural gas, but also as additional renewable energy has built in the grid.

It's actually quite rewarding to see just how green the overall Midwest power.

<unk> has become.

So with respect to hospital, specifically I think as we've said before it will be a holistic decision based on many factors obviously the power price situation is helpful.

Jesse Gary: Obviously, the power price situation is helpful, and when we have final guidance on the IRA credits, that will also be very helpful towards making that decision. But we'll evaluate all factors at the time, including, you know, our corporate allocation capital, power supply, LME Outlook, and restart costs. Of course, our first priority, as we said before, will be restarting at Mount Holly.

And when we have final guidance on the IRA credits that will also be very helpful towards making that decision.

But we will evaluate all factors at the time, including our <unk>.

Allocation of capital power supply <unk> outlook.

And restart costs of course, our first priority.

Jesse Gary: As I mentioned, we continue to work on that and make some progress. Thank you very much for that. I'll try to squeeze one quick one in on Jamalco. Unfortunately, I'm doing so little for theCUBE today, so I might as well wrap things up here tonight as well. So if you go to the Sacrament of Blessing websites below, there are channels where you can watch the footage from Target at night. I've made one channel access available in ESEOTY, so if you want to click on it, you can access it as well.

As we've said before we'll be restarting at Mount Holly as I mentioned, we continue to work on that.

And make some progress.

Sure.

Great. Thank you very much for that.

Try to squeeze one quick one in on Ontic Nalco.

First.

Could you provide some color as to the contribution of <unk> to Q1 EBITDA.

Jesse Gary: Could you provide some color as to the contributions of Jamalco to Q1 EBITDA on an attributable basis and then the 10 to 15 million CAPEX for 2024. Is that kind of a good steady state number for your interest in the asset? Yeah, so obviously, as we continue to work on Jamalco and bring it back to its full potential, which, as I said before, we're quite confident that, over time, we will return the asset to producing in the second quartile of the global cost curve. But we did have a few headwinds in Q4 and into Q1, when there were some delays in the restoration of some of the high efficiency boilers, and we continue to have some instability coming out of the energy-related disruptions we had towards the end of Q3. So we now expect some of those production and cost efficiencies that we previously talked about to be achieved in Q2 rather than Q1. But we do expect Jamalco to be roughly break-even on an EBITDA basis in Q1. Obviously, there's still some of the quarter to go.

Attributable basis, and then 10.

15 million Capex for 2024.

Is that kind of a good steady state number for Europe for your interest in the asset. Thank you.

Yes.

So obviously.

We continue to work on to Melco and bringing it back to its full potential which as I've said before we're quite confident over time, we will return the asset to producing in the second quartile of the global cost curve.

But.

We did have a few headwinds in Q4 and into Q Q1, when there were some delays in the restoration of some of its high efficiency boilers.

And we continue to have a little instability and coming out of the energy related disruptions, we had towards the end of Q3.

So we now expect some of those production and cost efficiencies that we had previously talked about to be.

<unk> achieved in Q2, rather than Q1.

But we do expect <unk> to be roughly breakeven on an EBITDA basis. In Q1, obviously there are some some of the quarter to go still.

Jesse Gary: And then, as we see the production efficiency improvements take hold, we think that EBITDA generation will improve in Q2 and beyond. Sorry, and then to your CapEx questions, Lucas, yeah, 10 to 15 reflects some of those restoration projects that we have in place in the powerhouse that we've talked about before, so there's a little bit of a mix of investment and sustaining CapEx in there, Lucas, so we'll just have to watch that, and we'll continue to guide you as we go forward on that CapEx breakdown in future periods. I really appreciate all the color.

And then as we see the production efficiency improvements take hold we think that that EBITDA generation will improve in Q2 and beyond.

Sorry, and then to your Capex to your Capex question Lucas.

Yes, 10 to 15 reflects some of those restoration projects that we have in place.

And the powerhouse that we've talked about before.

So theres, a little bit of mix of investment and sustaining capex in there Lucas.

So we'll just have to watch that and we will continue to guide you as we go forward.

On that Capex breakdown in future periods.

I really appreciate all the color I'll turn it over best of luck. Thank you.

Lucas Pipes: I'll turn it over to you. Best of luck. Thank you. Thank you, Lucas.

Thanks Lucas.

Thank you for your question.

Matt: Thank you for your question. The next question is from a line by John Tumazos with Very Independent Research. Your line is now open. Thank you, Symptomatic.

Question is from the line of John Tumazos with very independent Research. Your line is now open.

Thank you.

Okay.

Paul.

Spot natural gas.

John C. Tumazos: Spot Natural Gas, well under $2 in the Henry Hub recently, two and a half cents. Power of the long term. Electricity prices are Behaving, have long-term prices are falling. Is this an opportune time? to contract wind or solar renewable energy from Mount Holly or Seabury, Seabury. And if there ever was a time to think about hocus pocus, I would think it's when natural gas. Thanks, John. Good question. Unfortunately, natural gas isn't quite free yet, although I agree that it would be a good environment.

Well under $2.

Recently.

Two five cents.

How long or long term.

Electricity prices.

Behaving.

Long term.

Prices falling.

Is this an opportune time.

Two contracts wind or solar renewable energy.

For Mt Holly.

<unk> Subaru.

If there ever was a time to think about hospital I would think that's where natural gas is almost free.

Thanks, John Good question. Unfortunately in natural gas isn't quite free yet, although I agree that would be a good environment.

There's a few things going on in your question. So.

Jesse Gary: There are a few things going on in your question. So, on Midwest and US power prices generally, putting aside the cold snap we had in January, they have been very constructive, involved in the back half of last year and now certainly in the first quarter of this year, putting aside that brief week of very cold weather. So you've got the range right, you know, you've seen them trading with low gas prices in the high 20s and low 30s over the balance of 2024. And you have seen the near part of the curve come in and reduce back towards sort of pre-pandemic levels in the Midwest. On the renewable side, however, you continue to see renewable supply chains being very stretched, and Renewable Prices Remain Well Above Pre-Pandemic Pricing Levels for Renewables.

On Midwest and U S power prices generally.

Putting aside the cold snap we had in January they have been very constructive.

And bolt back half of last year and now certainly in the first quarter of this year, putting aside that brief week of very cold weather.

So you've got the range right.

<unk> seen them.

Rating with low gas prices in the high <unk> and low thirties over the balance of two.

2024 and <unk>.

You have seen the near part of the curve come in and reduce back towards sort of pre pandemic levels.

And in the Midwest.

On the renewable side. However, you continued to see renewable supply chains be various stretched.

And renewable prices remain well above pre pandemic pricing levels.

Jesse Gary: So, it's pretty dynamic out there, there's a lot of things going on, it's kind of hard to make broad generalizations of the overall energy environment, but certainly it is a bit more constructive for Seabreeze as we continue to operate there. If I can ask another question... With your 5% demand growth estimate for last year from China, does that mean Chinese exports fell last year?

For renewables, so it's pretty dynamic out there theres a lot of things going on it's kind of hard to make broad generalizations of the overall energy environment.

But certainly it is a bit more constructive for <unk> as we continue to operate there.

If I can ask another.

With your 5% demand growth.

So last year from China.

It does not mean Chinese exports.

So last year.

Yes, when you look at and you can sort of take a broader look and look at imports level, we saw about.

Jesse Gary: Yeah, when you look at, and you can sort of take a broader look and look at import levels, we saw about 1.3 million tons of aluminum going into China. So, the window was certainly open for most of the year, and that was largely based on very strong demand for EVs and renewable energy applications within China. So, then your corresponding question on exports is a bit more complex, because you did see a lot of that demand go into not just semi-finished exports, which are easier to track but more complete. Downstream demand applications, and it's a bit harder to say exactly, but what we can see is that the drivers are those long-term demand drivers for aluminum we've long talked about, which is increasing aluminum intensity in electric vehicles and increasing aluminum intensity in renewable energy and renewable energy transmission applications.

One 3 million tons.

Aluminum going into China.

So the window is certainly open for most of the year.

And largely that was based on very strong demand.

Evs and renewable energy applications.

Within within China.

So then youre corresponding question on exports is a bit more complex because you did see a lot of that demand to go into.

Not semis exports, which are easier to track, but more complete.

Downstream demand applications since it's a bit harder to say exactly.

But what we can see is that the drivers are those long term demand drivers for aluminum, we've long talked about which is increasing aluminum intensity in electric vehicles, and increasing aluminum intensity and renewable energy and renewable energy transmission applications.

Jesse Gary: Thank you. Thanks, John. Thank you for your question. There are currently no further questions registered, so as a reminder, it is star one on your telephone keypad. There are no additional questions waiting at this time, so I'll pass the call back to the management team for any closing remarks. Okay, thanks everyone for joining us, and we look forward to talking to you after Q1. Thanks a lot. That concludes the conference call. Thank you for your participation. You may now disconnect your line.

Thank you.

Thanks, John.

Thank you for your question.

There are currently no further questions registered so as a reminder, it is star one on your telephone keypad.

There are no additional questions waiting at this time, so I'll pass the call back to the management team for any closing remarks.

Okay. Thanks, everyone for joining.

And we look forward to talking to you after Q1, thanks a lot.

Okay.

That concludes the conference call. Thank you for your participation you may now disconnect your lines.