Q1 2025 ECentury Aluminum Co Earnings Call
Good afternoon.
Micaiah: Thank you for attending today's Century Aluminum Company 1st Quarter 2025 Arnie's Conference Paul. My name is Makaya and I'll be the moderator for today's call.
Micaiah: All lines will be muted during the presentation portion of the call or the opportunity for your questions and answers at the end. At this time, I'll have to pass the call over to our host Ryan Crawford investor of relations. Brian , you may proceed. Thank you operator. Good afternoon, everyone. Welcome to the conference call. Welcome to the conference call.
Speaker Change: I'm joined here today by Jesse Gary, Centuries President and Chief Executive Officer, and Peter Trivkov, Executive Vice President, Chief Financial Officer, and Treasurer.
After our prepared comments, we will take the questions.
Speaker Change: I use our website as a means of disclosing material information about the company and for complying with regulation FD.
Speaker Change: Turning to slide 1, please take a moment to review the cautionary statements shown here with respect to forward looking statements and non-depth financial measures contained in today's discussion.
And with that, I'll hand the call to Jesse [inaudible]
Thanks, Ryan, and thanks to everyone for joining [inaudible]
Speaker Change: Just before we dive into the results today, I'd like to congratulate Pete Tchaikovsky on its recent promotion to CFL.
Speaker Change: Many of you have gotten to know Pete over his last 12 years at Century. He has extensive knowledge of the company's operations and a proven track record of success in every area that he's led.
Speaker Change: I have every confidence that the expertise and leadership will continue to drive centuries long-term success as we move forward.
Congrats, Pete.
Speaker Change: Okay, I'll start today by reviewing our first quarter results and the strong market conditions we've had so far in 2025.
Speaker Change: I'll then walk through our operational performance to the quarter and some initiatives we have planned for Q2.
Speaker Change: People then take you through the details of the Q1 results and our second quarter outlook before we turn the call over for questions.
Speaker Change: Center's safety performance got off to a good start in Q1 with improved outcomes at each location versus the last year.
Speaker Change: This is rewarding to see as we continue to invest substantial time and effort towards improving the safety culture at each of our locations.
Speaker Change: Safety is our number one priority and it's fundamental to our high performance culture [inaudible]
Speaker Change: Turning to financial results, Century generated $78 million of adjusted EBITDA on the first quarter, driving a reduction in net debt of $55 million, and increasing liquidity by $94 million.
Speaker Change: He will walk you through the details here, but we are really pleased with the way the business performed and the excellent job the team did to bring working capital levels down in the
Speaker Change: Overall, continued strong alamy and rising Midwest premium offset higher energy prices in the first quarter.
Speaker Change: Realized LMEs prices averaged $2,553 in Q1 while Realized Midwest and European premiums averaged $602 and $336 in Q1 respectively.
Speaker Change: Regional premiums have seen the most movements so far in Q2, with spot Midwest premium today sitting in close day, $150 and 10, following the implementation of the Section 232 tariffs and spot any P.P. following directly $200 a ton.
Speaker Change: I'll provide some more color on the second 232 and other tariff to include the call.
Speaker Change: Firing to slide four, cold winter temperatures led to higher realized market energy practices at Seabree in the first quarter.
The prices have now returned to normalize levels in Q2.
Speaker Change: The polar vortex also led to unusually cold temperatures in South Carolina and Q1, which combined with generation outages, led Sandy Cooper to declare an emergency economic curtailment across its system, which affected Mount Hawley.
Speaker Change: While this did not result in an interruption in power supply, it did contractually allow outstantied to pass along higher emergency power rates to Mt. Holley over several days.
Speaker Change: This is an extreme event which we do not expect will occur in the future.
Speaker Change: Turn to page 5, as you can see in the top left graph, we expect constraints on new global supply to drive a global market deficit in 2025 of approximately 400,000 tons as China reaches its 45 million-tonne production cap.
Speaker Change: Bubble inventories have reached new lows of only 46 days to a barbecue too.
Speaker Change: These low inventory levels combined with continued demand growth should be supportive of higher aluminum prices as we move forward in the year.
Speaker Change: We've seen increasing demand in the U.S. following the effectiveness of the revised Section 232 Terrace on Aluminum in March, especially for domestically produced billets.
Speaker Change: Assusions shipments were up 6.7% year over year in March, as downstream customers looked to ship supply chains back to the U.S.
Speaker Change: U.S. billboard orders have remained strong so far into Q2.
Speaker Change: Turning to Aluminum, Global Supplies recover from the extreme tightness we sigh your end, with market prices returning to normalize levels over the quarter.
Spot API prices are approximately $350 today.
Speaker Change: Turning to page 6, you can see the coke, pitch, and cost of soda prices rose in the first quarter, but remain constructed at current price levels.
Speaker Change: HFO prices into Jamalco have fallen substantially recently in line with global oil prices, which should begin to roll through our results on a one-month lag basis and help to offset some of the increased toxic soda prices at the refinery.
Speaker Change: Turning to operation, our assets continue to deliver strong operating results in Q1.
Speaker Change: and I think Grinder Tonguey returned to full production levels in March, following the end of the previously announced Power of the challenge tonight.
Speaker Change: The team did an excellent job bringing the additional pot back online safely.
Speaker Change: We are also very happy to announce that we reach an extension agreement with one of the largest power providers to the Grinder Tungi Smilter, called Owen Power, to continue to supply the plant into 2032.
Speaker Change: It was a pleasure to work with Outney Harrelson and his team to reach this good outcome and we look forward to continuing working with O'Lan for years to come.
Speaker Change: Bill had ordered that a Grunutongi were a bit lower than anticipated in Q1, as demand weakness in the European market continued.
Speaker Change: We are seeing a small uptick in European billet orders as we educate too, but we will need to see this continue before we consider the trend.
Speaker Change: Please just remember that the European bill at market works a bit differently than the U.S. But the European market generally operating on a lag spot price basis versus the annual contracts we are used to in the U.S.
Speaker Change: So Grinter Tangee will be well positioned to benefit from higher-spot prices when European demand recovers.
Speaker Change: As discussed on the Q4 call, now Holy did suffer some minor operational instability in Q4, as an excursion on the carbon side of the business increased operating costs and drove slightly lower production across the planet.
Speaker Change: Timna has done a good job bringing production back to normalized levels, but it's taken a bit longer to bring the operational efficiencies back to where they should be. So this will remain a focus item as we progress through Q2.
Speaker Change: At Jamelco, we are focused on executing the major capital improvement program we have previously discussed to return the refinerage to its namesake capacity levels of close to 1.4 million tons.
Speaker Change: The major focus item for this year is the installation of a new steam power generation turbine of the plant, which will enable Jamal Code to be fully self-sufficient in its power generation and lower its cost structure by reducing expensive third-party power purchases.
Speaker Change: We remain on track to complete this project by your end and to begin realizing the cost savings in the project in Q1, 2026.
Speaker Change: Our evaluation process at Hobbs all remains ongoing, with due diligence continuing among a group of interested parties.
Speaker Change: We'll keep you updated on progress here as we move through the year and we expect to have a more full-time update on our Q2 call.
Speaker Change: See we had another excellent quartering Q1 with quarter of a quarter improvements across most operating KPIs, higher volume and lower operating costs.
Speaker Change: The continued strong performance of Seabree has given us the opportunity to bring forward some major maintenance in the carbon plant that we had originally planned for next year.
Speaker Change: During the quarter, we will take the green section of the carbon plant out of service and and refurbish the annual press and ancillary equipment.
Speaker Change: By taking matters now, it will reduce risk and improve reliability and operational performance of the carbon plant before we head into the hot summer months.
Speaker Change: The Allergy will drive a one-time increase in maintenance spend in the second quarter of about $10 million.
Speaker Change: This will obviously not repeat in Q3 or beyond, and we will reap the benefits of increased reliability and operational security of this key area of the plan over the back half of 2025 and beyond.
Speaker Change: With that, I'll turn it over to Pete to walk through the financials.
Pete Trifkovsky: Thank you, Jesse. It's great to be with all of you again and I'm really excited to be taking on this expanded role.
Pete Trifkovsky: I'll start by locking you through our financial performance for the first quarter and end with providing an outlook for the second quarter.
Pete Trifkovsky: Century delivered solid results in Q1, with 78 million in adjusted EBITDA. This is down modestly from Q4, primarily due to polar vortex-linked weather conditions impact on energy prices and one-time Aluminum costs.
and partially all set by higher all-in-metal prices.
Pete Trifkovsky: A core fundamentals of our business remain strong as we move into the second quarter.
Let's turn to slide 7 and review our Q1 performance.
Pete Trifkovsky: On a consolidated basis, first quarter shipments rose slightly, nearing 169,000 tons, an increase of 1% sequentially as all smelters were operating at their targeted utilization levels by quarter
Pete Trifkovsky: As Jesse mentioned, Iceland Power Trotelmas were fully listed in March, allowing us to ramp up our good under Tom G. Smelter back to full production.
Pete Trifkovsky: At Jamalco, we had a strong start to the year, producing our highest quarterly volume in Q1 since we acquired the refinery in 2023.
Pete Trifkovsky: Going forward, we remain focused on achieving lower cost of production as we continue to invest in our capital improvement program there, which I'll talk about in a few minutes.
Pete Trifkovsky: Ned Sales for the Quarter were 634 million, a 3 million increased due to higher metal volume and all in metal pricing.
Parsley Offset by Lower Third Party Woman of Fals [inaudible]
Pete Trifkovsky: for the quarter. We reported net income of 30 million or 29 cents per share.
Pete Trifkovsky: are adjusted at income of $37 million or $36 cents per share, including an adjustment of approximately $4 million or $4 cents per share related to the emergency energy charges at Monholy that Jesse previously discussed.
Pete Trifkovsky: Adjusted EBITDA with 78 million for the quarter. As we've discussed, the Section 232 Aluminum tariffs were increased to 25% with no country or product exemptions on March 12.
The Midwest Premium Double Tune After
from approximately 20 cents pre-announcement to nearly 40 cents post-announcement.
Pete Trifkovsky: Due to timing of the announcement, this partially benefited our first quarter result by 16 million.
Pete Trifkovsky: The full extent of the Midwest premium uplift, and any additional upside, will be realizing Q2 as pricing reflects the one-month contractual lag.
Pete Trifkovsky: Moving on, we made meaningful progress to improve our balance sheet during the quarter.
liquidity increase to $339 million, up nearly $100 million quarter over quarter.
and our cash balance stood at 45 million.
Net debt declined to $442 million.
Pete Trifkovsky: A reduction of 55 million from the fourth quarter, positioning us well for continued capital
Pete Trifkovsky: The reduction in that debt and increased cash balances were funded by strong operating performance along with working capital improvements.
Pete Trifkovsky: Overall, our Q1 results continue to reflect operational discipline and steady commercial performance.
Pete Trifkovsky: Now, let's turn to page 8 and I'll throw out a breakdown of the justity of the results from Q4 to Q1.
Pete Trifkovsky: Adjusted ebots up for the first quarter decreased 3 million to 78 million.
Pete Trifkovsky: Realized LME of 2,553 per ton was up $91 per ton versus the prior quarter.
Pete Trifkovsky: While Realized US Midwest Premium of $602 per ton was up $165 per ton and then Realized European Delivery Premium remained flat at $336 per ton.
Pete Trifkovsky: Together, higher metal prices and regional premiums contribute an incremental 36 million compared with the prior quarter.
Energy costs were higher.
Pete Trifkovsky: driven by polar vortex-linked cold temperatures that increase market prices for energy at our U.S. operations and impacted adjustity with about 18 million.
Pete Trifkovsky: Aluminum and our other raw materials was a 27 million headwind quarter of a quarter in line with our previously provided outlook.
Pete Trifkovsky: As discussed on our last call, a forced measure event at our Aluminum supplier led to a one-time financial benefit in Q4 that did not repeat in Q1.
as a result of the FM event.
Pete Trifkovsky: We procured additional aluminum spot purchases at higher prices to mitigate shortfalls from the supplier.
Pete Trifkovsky: The impact of the higher price purchases flowed through our results in Q-1 due to our live, social accounting method.
Pete Trifkovsky: We also recognize 4 million in lower operating costs and a 2 million benefit from volume and mix.
Pete Trifkovsky: Now let's turn the slide 9 for Olympic Cash Flow.
Pete Trifkovsky: We began the quarter with 33 million in cash, and 78 million of just the EBITDA provided a strong base.
Pete Trifkovsky: We also make substantial progress optimizing working capital, which contributed an additional 23 million in cash.
We strategically deploy these cash inflows across several priorities.
Pete Trifkovsky: We repaid 45 million in short term debt as we remain focused on de-leveraging the balance sheet.
We also funded 16 million of catbacks.
Pete Trifkovsky: This was anticipated and primarily focused on the Jamal School Facility, where we aim to bring a new steam turbine generator online by year end to increase power generation.
and lower production costs.
Pete Trifkovsky: We also paid $7,000,000 in normal interest and taxes in the quarter.
He continued to recruit 45 acts production tax credits.
Pete Trifkovsky: As of March 31st, we ever received above $173 million related to full year 2023, 2024, and the first quarter of 2025.
Pete Trifkovsky: We now expect to receive the first cash payment of fiscal year 23 credit during Q2.
Pete Trifkovsky: We ended in 2-1 with 45 million in cash and strong liquidity in place to support a strategy going forward.
Pete Trifkovsky: Turning to Slide 10, let's look ahead to the next 90 days. At Current Realized Prices, we expect Q2 Adjusted EBITDA in the range of 80-90 million.
Pete Trifkovsky: 4Q2, the lagged LME of $2,513 per tonne, is expected to be done about $40 versus Q1 Realized
Pete Trifkovsky: The Q2 lag US Midwest premium reflects a full quarter of the new tariff level and is expected to be $866 per ton, up $265.
Pete Trifkovsky: The European delivery premium is expected to be $220 per ton or down about $115.
Pete Trifkovsky: Taken together, the lagged LME and delivery premium changes are expected to have a 10 million increase to queue to adjusted EBITDA compared with Q1 levels.
Pete Trifkovsky: U.S. Energy Prices have eased the polar vortex-like conditions in Q1, with U.S. Midwest Indiana hub prices already down approximately 15% compared with last quarter, and we expect this to
Pete Trifkovsky: Lower oil prices will also benefit the price of heavy fuel oil, a key input at our Jamalco
At these prices, total energy tailwinds should contribute 10 million.
Pete Trifkovsky: Coat, pitch and caustic prices have all increased in recent months and are expected to result in a 5 to 10 million headwind.
Pete Trifkovsky: We expect a one-time increase to operating expenses of 10 to 15 million, split between normal planned summer labor increases, and bringing forward the green mill outage at our Sea and Recontalkie Facility that Jesse mentioned.
Pete Trifkovsky: Taking this maintenance outage now allows us to increase reliability at one of our best-performing assets over the past few years.
volume and mix to contribute a 5 million benefit.
Finally.
Pete Trifkovsky: We also include the estimated hedge and tax impacts that are recorded below the line to help model our business.
Pete Trifkovsky: We expect a 5 million headwind from real-life head settlements and a similar amount from tax expense.
Pete Trifkovsky: Both flowing through the Q2 P&O and impacting adjusted net income and adjusted earnings per share.
Pete Trifkovsky: As a reminder, our Appendix details the full hedge book and continues to show the vast majority of LME and regional premium volumes are exposed to market prices as our investors have requested.
Pete Trifkovsky: We remain well-positioned and navigate near-term market dynamics and deliver long-term value for our shareholders while executing on critical business priorities within our control.
Pete Trifkovsky: With that, I'll hand the call back to Jesse to talk in more detail about Taros.
Jesse Gary: Thanks, Pete. Just before we move to questions, I'd like to thank President Trump again for the significant actions that he and his administration have taken to restore American manufacturing and stand up for American workers.
Jesse Gary: The Section 232 tariffs have truly enabled a new future for the U.S. aluminum industry.
Jesse Gary: Following the implementation of the Section 232 tariffs, we have seen the Midwest premium rides and stabilized around $0.39.
Jesse Gary: There are some significant front-running of foreign imports ahead of the March 12th effective date that temporarily raised US inventory levels and has pressured the Midwest premium below 40 cents while those inventories are consumed.
Jesse Gary: We continue to believe that the Midwest premium will rise to the 45-50 cent range as those inventories are reduced over the next couple months.
Jesse Gary: On April 2nd, President Trump took further actions to restore the U.S. manufacturing base through implementation of the reciprocal tariffs.
Jesse Gary: We have long cried at ourselves, sourcing locally for each of our operations, and that Siberian Mount Holly, we continue to source most of our key costs and puts from American suppliers.
Jesse Gary: In response to the President's groundbreaking actions, we have now taken further steps to shorten and secure the remainder of our major supply chains consistent with intent of the reciprocal tear of program.
Jesse Gary: I'm proud to say that the team has done a fantastic job and we do not expect any material costs increases as a result of the program.
Speaker Change: As the largest producer of primary aluminum in the United States, Century is doing its part to build and secure the aluminum production that is so essential to U.S. national security needs.
Speaker Change: One complete, our new smelter project will represent the first new smelter built in the U.S. in 50 years and will double the size of the existing U.S. industry, creating over 1000 full-time direct jobs and over 5500 construction jobs.
Speaker Change: We look forward to working with the Trump administration to make this industry changing project a reality.
John Tumazos, Timna Tanners
Speaker Change: We are ready for your questions and we'll now turn the call over to the operator.
Speaker Change: Thank you. We will now begin today's Q&A session. If you would like to ask a question, please press star, followed by one on your telephone keypad. If for any reason that you would like to remove that question, please press star, followed by two. Again, to ask the question, press star one. As a reminder, if you are using a speakerphone, please remember to pick up your headset before asking a question. Will possibly why your questions are registered. Thank you very much.
Speaker Change: The birth question is from the law of Katja Jancic for the BMO capital markets you may proceed.
Alon: Hi, thank you for taking my questions. We'll be starting on the second quarter of
Alon: Just to confirm, the incremental op-ex costs of 10 to 15 million, that is one time. So in other words, in 3Q, that should reverse.
Craig? Hey Katja, that should be one time.
and Q2.
Speaker Change: Maybe just to clarify, I stopped last quarter, sold the higher Aluminum costs were also one time which were expected to reverse.
Is that not right?
because there's no benefit for a woman. I don't see it.
Yeah, that's correct. There's a couple.
Speaker Change: that's corrected as one time. And the explanation is that...
Given the significant volatility in the Illumina pricing,
Speaker Change: It mostly relates to timing of vessels sold to third parties, so we did sell a very high price vessel in Q-1.
Speaker Change: and by the time we reached our vessel that we were going to sell into Q2, the price had fallen, so that most of that difference that you're seeing there relates to timing of vessels.
Speaker Change: We saw a little bit of cost pressure at Jamalco coming through Q2 as well and those are really account for most of that $10 million there.
Speaker Change: and then maybe on the manufacturing credit receipt rule. I think you mentioned that some of that is going to be received in QQ.
Speaker Change: Can you provide how much you're expecting to receive and then how we should think of the remaining receivables when the dot-cash comes through?
Yeah, hey Katja, it's Pete.
Speaker Change: If you remember back on the past few calls, we provided an overall annual estimate of 70 to 80 million as it relates to the 45x production tax credits, which are owed to us by the U.S. government.
Speaker Change: So now, as I said on the call, we expect to receive about 60 million of our FY 23 amount in Q2.
Speaker Change: As you also may recall at the end of last year, carbon costs weren't made eligible for the production tax credit until late last year.
Speaker Change: So the remaining incremental 20 million for a total 80 million is expected later this year or early next year.
Speaker Change: And then Timma, for the rest, what you're going to be receiving through this year is always going to come in the second quarter.
Speaker Change: No, we typically file around, you know, the end of the first quarter into the beginning of the second quarter, and you could expect in normal reoccurring timeline, it will get our proceeds from that three to six months thereafter.
Pete Trifkovsky: So, what Pete's saying, Katja, you could potentially see that the 2024 amounts coming through in late 2025 or early 26th.
Speaker Change: Thank you. The next question is from the line of knit gals with the rally securities you may proceed.
Thank you. Thank you.
Alon: Thank you operator. Good afternoon everyone. First Peter I wanted to say congratulations on stepping in on the new role that's well deserved.
My first question.
Speaker Change: Great to see your net debt move down and your liquidity has moved above your target range, so I wanted to confirm whether
Reducing debt remains at the top use of excess cash and
Speaker Change: You've touched on some of this already, but are there any other cash flow considerations we should keep in mind as we try to model out the balance of the year?
Penny.
Speaker Change: No, you've pretty much got it. In the near term, we'll continue to prioritize paying down the set levels.
Speaker Change: while also continuing on the existing CAPEX programs that we've already talked to about. So, priority is those additional cash amounts come in, we'll remain bringing down that levels.
John Tumazos, Timna Tanners
Thanks for that, and...
My next one was, you mentioned...
with some cost pressures at your mouth, Co, in one cue and...
Speaker Change: I wanted to use that as an opportunity to get an update on the operations there. I mean, do you feel that there are further cost improvements to be made that might not be reflected in your guidance today? And then can you just remind us of any additional capacity and ultimately capital requirements?
Speaker Change: Yeah, absolutely. Great question. Yeah, it was relatively minor and Q1 on the cost of the stretcher side as it continues to operate well. And as we mentioned, it actually hits.
Speaker Change: Highest Quarterly Volume Levels in Q1, essentially on the asset, so the team's doing a good job, driving improvements, just a little noise on the cross-siding in Q1.
that should hopefully continue to reduce throughout the year.
Speaker Change: Over the long term, we continue to believe we'll be able to take that asset into the second quartile of the cost curve.
Speaker Change: And to do that, we need to execute on our CAPEX program there, which we will feed and I talked about the next step being the introduction of the steam generation turbine, which hopefully will be done by the end of the year. And you'll start to see the benefits of that immediately, because we'll reduce our third-party power purchases, hopefully starting in Q1 of 2026.
Speaker Change: So lots of good news to come in the future at Chimalco. We continue to think that's going to be a really good asset for us. And it's just a matter of time and executing on our CAPEX programs to get where we want to be.
Speaker Change: then to your last question which is on the volume side.
Speaker Change: It's operating near that 1.2 million ton level that we've been targeting today and with this CAPEX program over the next couple of years, we continue to believe we'll creep it up towards its nameake capacity of 1.4 million tons.
unknown: This year, I really appreciate you addressing all those questions. I know there were a few in there. Just to clarify, have you quantified the benefit on the cost side of the turbines later this year?
unknown: We haven't and as we you know get that done and as we move into 2026 and begin to talk about the 2026 outlook, we'll begin to give you a little bit more color around that.
Speaker Change: Great. All right, well guys, keep up the good work and I'll jump back in the queue for now. Thanks
Thanks.
Speaker Change: Thank you. The next question is from the lawn of John Tumazos with very independent research you may proceed.
Thank you very much.
Speaker Change: Thanks, John Great question, obviously, theres a lot of speculation out there.
Speaker Change: As I said in my prepared remarks, we actually haven't seen any of that yet to date, we've actually seen relatively strong demand, especially in the U S.
Speaker Change: As a lot of our customers have been near shoring.
Speaker Change: Their supply chains, and so thats been an especially strong on the billet demand side.
Speaker Change: And Europe has been weak but that was.
Speaker Change: For a while.
Speaker Change: Over the past couple of years, and we're actually starting to see a small uptick there not enough to call it a trend but enough to be a bit hopeful.
Speaker Change: So we continue to think at least on the premium side things look pretty good.
Speaker Change: But we're cognizant of the volatility that's out there and are watching it closely.
Speaker Change: But net net as I said in my prepared remarks, we still see a small deficit this year.
Speaker Change: And we expect that deficit to grow going forward, rather than an increase as a positive.
Speaker Change: Over the last three years of Ukraine War.
Speaker Change: There were three.
Speaker Change: I don't know the right word is incidents or episodes.
Speaker Change: When a very large deliveries of resolve metal when they then the oh, how many warehouses in Asia.
Speaker Change: Replenish supply.
Speaker Change: Since April last year, the Russo models, not eligible or produce since April last year.
Speaker Change:
Speaker Change: How would you think mechanically.
Speaker Change: Exchange inventories get replenished.
Speaker Change: Chinese deliveries were saw restarting production.
Speaker Change: Mechanically where do you think that new supply is going to arise.
Speaker Change: It's a complicated question, John and one that depends on a lot of geopolitics obviously.
Speaker Change: Just remember that the Russians are sanctioned by the U S. Today in Europe has increased sanctions on the Russians recently that will continue to.
Speaker Change: Further by.
Speaker Change: As we move into 2026 the way they are structured.
Speaker Change: So that's a difficult question on the on the Russian side, and we'll wait to see and watch how the sanction policy manifests itself.
Speaker Change: In terms of if I take your question at a broader level, where the marginal units are coming from.
Speaker Change: As I mentioned, we're actually projecting that we stay in deficit. So.
Speaker Change: We don't actually necessarily see those inventories replenishing.
Speaker Change:
Speaker Change: Quite the opposite we potentially see inventories continuing to decrease global inventories decreasing over time.
Speaker Change: And so.
Speaker Change: We see it.
Speaker Change: We continue to believe aluminum prices will continue to rise.
Speaker Change: The near to medium future and certainly over the long run.
Jesse Gary: If you can bear with me one more Jesse.
Jesse Gary: Zero looming shortage reversed and.
Jesse Gary: November to surplus.
Jesse Gary: Let's see I E. Our statistics are accurate.
Jesse Gary: Yes.
Jesse Gary: In the first quarter the surplus margin was two 2% more metallurgical alumina then.
Jesse Gary: 192 times World smelter output.
Jesse Gary:
Jesse Gary: Which is a considerable margin.
Jesse Gary: Yeah.
Jesse Gary: Do you expect.
Jesse Gary: Alumina refineries to close to balance the market.
Jesse Gary: Or do you expect.
Jesse Gary: Illumina will find its way from China, Vietnam, India.
Jesse Gary: <unk> resource capacity.
Jesse Gary: The Chinese will choose to open to produce more metal rather than close refineries.
Jesse Gary: And further theres more refineries on the drawing board in India.
Jesse Gary: Indonesia.
Jesse Gary: Even in China, which could increase the alumina surplus how do you think this plays out.
Jesse Gary: Yes over time, when you look back to the aluminum market has actually been fairly disciplined in curtailing capacity.
Jesse Gary: When the price is indicated and so our expectation would be that you would start to see closures.
Jesse Gary: At price levels.
Jesse Gary: If price levels go low enough to.
Jesse Gary: Demand that.
Jesse Gary: And.
Jesse Gary: You did see a little bit of that is the aluminum price went lower and then bounced higher more recently, so we're back around that $3 50 level.
Jesse Gary: <unk> per ton on the API.
Jesse Gary: But our expectation would be you will see closures.
Jesse Gary: Alumina price.
Jesse Gary: Continued support or to match increase in supply over time.
Jesse Gary: Yeah.
Speaker Change: Thank you ill, let somebody else ask the question congratulations on the profits.
Darren: Thanks, John Thanks Darren.
Darren: The next question is from the line of Mike Goss with B Riley's Securities You May proceed.
Mike Goss: Thanks, so much for taking my follow up here.
Speaker Change: Your <unk> guide you outlined that $5 million to $10 million hit on raw materials, but when I tried to do that back of the napkin compared to your <unk> guide using your sensitivities I get closer to an annual cap of this magnitude not a quarterly impact. So I just wanted to see if I'm missing something or if theres any.
Mike Goss: Anything in the <unk>.
Mike Goss: <unk> print that would have been different from your initial guide.
Mike Goss: Hey, Nick it's Pete I can kind of give you a quick update on that.
Mike Goss: So we've shown on the page is the coke pitch and caustic price realizations that we expect across our smelters in a refinery.
Mike Goss: Coke is starting to see.
Mike Goss: Price increases as well as pitch in caustic.
Mike Goss: So if you take the sensitivities that we have in our appendix.
Mike Goss: We can we can help with the modeling of this.
Mike Goss: For the quarter is it's at least $5 million to $7 million.
Mike Goss: For the Guy, we said five to 10 million for raw materials. So there is some other pluses and minuses within those buckets, but we try to just show you here, what we have in our sensitivities. So for the three and total coke pitch and caustic all seen some temporary price headwinds.
Mike Goss: And the sensitivities for the quarter.
Mike Goss: We can help you with the math and the modeling, but it equates to about $5 million to $7 million.
Mike Goss: Okay.
Mike Goss: No that makes sense I appreciate that and I'll take I'll certainly take you up on that.
Mike Goss: <unk>.
Mike Goss: My last one if I could.
Speaker Change: When we think about the new aluminum smelter can you just remind us of what some of the key milestones or what would be the earliest that you could deploy meaning.
Mike Goss: Meaningful capital towards the project.
Mike Goss: Yes, I think good question.
Mike Goss: We remain really excited about the project, we're working really hard the next.
Mike Goss: Two key milestones, which are linked are to finalize negotiations of the power arrangements.
Mike Goss: And then following from that and driven from that we'll be making our site selection.
Mike Goss: And then the next phase after that is actually further engineering work, which will take you into 2026.
Mike Goss: You start to see any significant capex.
Mike Goss: Spend for the project.
Mike Goss: Okay.
Mike Goss: Got it and.
Mike Goss: Just as far as debt.
Mike Goss: <unk> competitiveness I mean, we really.
Mike Goss: I can't imagine a more favorable environment for domestic.
Mike Goss: Domestic producer like century, so is there anything that could change or unwind such as such as a Canadian exemption for section 232 that would in your mind changed that the competitiveness of the project or do you feel like the project well.
Mike Goss: Stand on its own two feet, even if we were to see such an exemption.
Mike Goss: Yes, as you might imagine we're taking very long term disciplined view on the returns for our project at this site sides.
Mike Goss: And so we're not modeling for a year or two out for modeling for a very long life lifespan for where it will be at a 50 year asset once built.
Mike Goss: And so when we look at that we're looking at very long term trends.
Mike Goss: But obviously the current market environment is as great. As you said is a very constructive environment to find ourselves in when considering a project and.
Mike Goss: And that I include the political environment and the dedication of this administration towards reassuring manufacturing. So we think this is the exact type of projects that this administration wants to see and we continue to think that the policy coming out of this administration will continue to be supportive of the project.
Mike Goss: Yeah.
Speaker Change: Good to hear guys, who can't get up the good work.
Nick: Thanks, Nick.
Speaker Change: There are currently no questions registered so as a reminder, it is star one to ask a question.
Speaker Change: Hello.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: There are no waste a question at this time I would like to pass the call back over to Ryan for any further remarks.
Jesse Gary: This is Jesse I'll, just say thanks to everyone for joining the call.
Jesse Gary: And we look forward to talking to you next in August have a good summer everybody.
Jesse Gary: Yes.
Jesse Gary: Okay.