Century Aluminum Company

Ladies and gentlemen, thank you for standing by. Welcome to the Century Aluminum Company First Quarter 2024 earnings conference call. All lines have been placed on mute during the presentation portion of the call with an opportunity for question and answer at the end. If you'd like to ask a question, please press star followed by one on your telephone keypad. I would now like to hand the conference call over to our host, Ryan Crawford. Please go ahead.

Thank you, operator. Good morning, everyone, and welcome to the conference call. I'm joined here today by Jesse Gary, Century's President and Chief Executive Officer, Jerry Bialik, Executive Vice President and Chief Financial Officer, and Peter Czapkowski, 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 FD. Turning to slide one, please take a moment to review the cautionary statements shown here with respect to the forward-looking statements and non-GAAP financial measures contained in today's discussion. And with that, I'll hand the call to Jesse.

Thanks, Ryan, and thanks to everyone for joining. We made lots of progress this quarter with some exciting new initiatives, so I'll start today by quickly reviewing the improving market environment and the strong operating performance from each of our plants. Jerry will then take you through the details of our excellent first quarter results, and then I'll finish with an update on our new U.S. Greenfield smelter project and our recently announced secondary joint venture with MX Holdings. Overall, strong operational performance and declining costs drove adjusted EBITDA of $25 million in the first quarter. Jerry will give you the full details here, but we are really proud of the job our team did across our locations to operate safely and efficiently through the quarter. We have seen a real improvement in the safety culture across our plants, which is reflective of strong plant leadership and the commitment that all of our employees have made to operate safely. Turning to slide 3, market conditions remained broadly balanced in the first quarter before an improving demand picture in the U.S. and Europe, paired with continued strong demand in China, drove LME prices substantially higher in April. This pickup in demand was evident in regional premiums as well, with the European premium increasing most notably over the course of the quarter to be up nearly 50% from year-end levels. Aluminum markets also rose during the quarter, with Q1 Atlantic aluminum prices up about 10% from Q4 levels, driven by supply curtailments in Australia. In April, spot aluminum prices have followed LME higher as production disruptions in India and elsewhere have made for a tight market. In rising aluminum markets like these, we can see that most clearly the strategic value of our Gemalco acquisition and the captive supply of high-quality alumina and bauxite that it now provides for our smelters. Combined with our long-term commercial contracts, the Gemalco acquisition makes us roughly net neutral to API pricing as a company. Production at Gemalco also improved through Q1, and I'm pleased to say the refinery returned to profitability in March. Of course, the team is not resting on this achievement, and we plan to continue to drive additional efficiencies and operational improvement through the balance of the year. Turning to the global trading environment, as you can see on slide 4, global inventories remain at post-financial crisis lows, with the vast majority of available metal around the world being comprised of Russian stocks, including over 90% of all LME inventories. Long-term global trends towards near-shoring strategic mineral production, including aluminum, continue to accelerate this month with new government actions announced in the U.S., U.K., and Mexico that will impact global aluminum flows and supply into our key markets in the U.S. and Europe. Most broadly, the U.S. and U.K. announced earlier this month new sanctions on Russian aluminum and other metals, including a ban on physical import of Russian metal into the U.S. and U.K. produced after April 13th. The sanctions further restrict the ability of the London Metal Exchange and Chicago Mercantile Exchange to accept delivery of Russian metal into licensed warehouses. We would like to thank the U.S. and U.K. administrations for taking this necessary action. We firmly believe that this was the right step, and we urge the EU to take action as well to ensure a consistent approach across Western markets. elsewhere in North America, Mexico announced last week the immediate imposition of new tariffs on a number of industrial goods, including primary aluminum and other aluminum products. The new tariffs, including a 35% duty on P1020, a 20% duty on value-added products, and 25% to 35% duties on aluminum extrusions will apply to all countries with whom Mexico does not have a free trade agreement, including countries that exported over 700,000 metric tons of P1020 and value-added aluminum products into Mexico last year. While the full details of the program are not yet clear, including the applicability of exemptions and products re-exported from Mexico, the actions are expected to be supportive of U.S. delivery and value-added product premiums. In the U.S., we continue to expect that pending anti-dumping and countervailing duty trade case against extrusion imports will have a significant positive impact on domestic U.S. bill of demand beginning in the second half of this year. In March, the Department of Commerce granted U.S. extruders an early victory by imposing preliminary duties on the subsidy portion of the case. And in May, we continue to believe that Commerce will also impose additional anti-dumping duties on 14 countries. If so, the duties would go immediately into effect and are expected to add strong support to the US extrusion and billet markets. As a reminder, we did hold back some second half billet volumes for spot sales in anticipation of improving US market conditions and a more constructive pricing environment. Finally, we continue to discuss with the US Treasury Department the potential to add direct and indirect material costs as eligible costs under Section 45X of the Inflation Reduction Act. In late February, I testified at the joint Treasury and IRS hearing regarding this issue, noting specifically the essential nature of these material costs to aluminum production. Our position is in line with testimony and comments submitted from a broad set of industry participants. ranging from critical mineral producers to our downstream customers, including automotive companies seeking to ensure stable domestic supply chains. If direct and indirect material costs are ultimately added as eligible costs, we expect to recognize an additional annual benefit of 50 to 55 million for 2023 and similar amounts for 2024 and going forward. Any increases in future production at our existing or new U.S. smelting sites 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. During the operations, we saw strong and stable performance across our smelters in the first quarter, and our gemelko refinery returned to stable operations and reached profitability in March. In Iceland, the previously announced 20 megawatt energy curtailment did drive lower volumes from Grundertagning Q1 as expected. When the power curtailments were initially announced, they were expected to finish by the end of April, but we now expect that they will continue until the end of May, as ISIN has continued to experience an abnormally cold spring, leading to lower snowpack melt loss and reservoir levels. This impact is included in our Q2 guidance. In better news, we did cast our first billet out of our new green billet cask house earlier this month. We are now producing trial orders for a European customer base and expect to qualify with our key customers over Q2 and Q3 before ramping production for normal commercial sales in the fourth quarter and beyond. We are very excited to begin supplying this much needed natural low-carbon billet into the European marketplace. Finishing out the energy picture, energy prices in the U.S. continue to be constructive, driven by a moderate spring in natural gas prices below $2. Given the continued constructive energy markets and recent uptick in LME, we did make the decision to de-risk our Seabree energy exposure a bit and hedge forward a small portion of Seabree's power price exposure as well as the corresponding amount of metal price exposure over the next 12 months. On the raw material side, we have finally begun to see many of our raw material imports reach pre-pandemic price levels, with Coke and caustic soda prices both falling below $400 per metric ton. 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 of more detail on in a bit. Finally, at Mount Holly, we made good progress during the quarter towards completing the necessary engineering and procurement plans to enable the potential restart of the remaining 25% of production that is not operating today. As we've discussed before, our experience with these restart projects that it is best to be thorough in the planning stage rather than to rush the restart and potentially create operational and cost issues down the line. We are hopeful that we will have additional updates for you on our Q2 call later this summer, but we do not expect that we'll have any significant capital or cash requirements for the restart over the course of 2024. Gary will now walk you through the quarter and our Q2 outlook.