Century Aluminum Company

Hello, everyone. Thank you for attending today's Century Aluminum Company third quarter 2024 earnings conference call. My name is Sierra and I'll be your moderator for today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, press star one on your telephone keypad. I would like to pass the conference over to 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, Jerry Bialik, Executive Vice President and Chief Financial Officer, and Peter Kropkowski, 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 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. Before we get started today, we are very sad to report a safety incident that resulted in a fatality at our Mount Holly smelter. The loss of a team member is devastating to all of us at Century, and it is especially painful given our collective commitment and focus on safety. Our late colleague's family will remain firmly in our thoughts and prayers. This event reinforces the need for us to critically examine how we operate and conduct ourselves and commit to making needed improvements without condition. It will require dedication and leadership from every part of our organization and a personal commitment from each and every one of us. OK, I'll start the call today by reviewing the strong current aluminum and aluminum market conditions before turning to our excellent third quarter performance. I'll also discuss the additional benefits we will receive under the new Section 45X guidance before Jerry takes you through the detailed financial results. I'll then wrap up and open the call for questions. Century produced excellent results in the third quarter, generating adjusted EBITDA of $104 million, which includes the impact of the updated 45X guidance. Overall, improving realized aluminum prices, both at the LME and regional premium level, and falling carbon prices drove increased profitability in the quarter and will continue to benefit our fourth quarter performance. As a reminder, LME prices rolled through our results on a three-month lagged basis, so the benefit from recent spot prices above $2,600 per ton will not positively impact our financial results until Q1 of next year. Turning to slide four, global aluminum prices were largely range bound during the third quarter before Western Central Bank actions and Chinese stimulus drove both the LME and regional premiums higher. In late September, China announced a number of monetary and fiscal stimulus programs that drove an immediate improvement in global aluminum prices, which rose to average $2,600 per ton in October. Turning to page five, Global aluminum demand has already been at record levels in 2024, driven by strong global trends towards electrification and lightweighting. Overall, we estimate that 2024 global demand growth of 3% will accelerate further in 2025 as Western markets begin to improve on the backs of central bank action and Chinese demand growth continues to accelerate as stimulus programs and funds are dispersed. Meanwhile, aluminum supply remains challenged, with China approaching its 45 million ton production cap and limited announced new projects outside of China. We believe demand growth will continue to outpace supply in 2025 and for years to come, moving the market back into deficit. With inventories already near multi-year lows, these supply deficits should continue to create a favorable aluminum price environment in the coming years. Turning to the bauxite and alumina markets, the spot Atlantic alumina price today stands at $715 per ton, an all-time record. Alumina prices continued their upward march in Q3 and into Q4 as a number of market disruptions paired with low alumina inventory levels globally have created a very tight market. There have been a number of supply disruptions this year in Australia, from the Quinana refinery curtailment force majeure events and regulatory issues in bauxite permitting at a number of other Australian refineries. We've also seen refinery disruptions in India driven by both regulatory and operational challenges. On the bauxite side, China has become increasingly reliant on the seaborne bauxite market, given a 16% decrease in year-to-date Chinese bauxite production, following continued declines in domestic ore quality and increased safety and environmental inspections from regulators. Both the bauxite and aluminum markets have recently been impacted further by supply disruptions out of Guinea. where one of the largest exporters announced a halt to bauxite shipments earlier this month following export permitting issues. To our knowledge, this issue remains unresolved and highlights how sensitive the bauxite and aluminum markets remain to geopolitics, with Guinea alone accounting for roughly 30% of global bauxite production and around 70% of Chinese imports. Remember, Century no longer has exposure to spot alumina prices following the acquisition of our controlling interest in Jamalco. With all of our smelters, alumina requirements source directly from Jamalco or under long-term LME-linked supply contracts. Needless to say, we are very happy to have Jamalco in our asset portfolio in markets like this. Turning to page six, you can see that in the U.S. and Jamaica, our major raw material price inputs continued to be constructive. Natural gas storage levels remain well situated heading into the winter season, with inventories significantly above last year and near five-year highs, leaving the forward curve well below $3 throughout the coming winter months. Gas prices at these levels should be supportive for continued low IndieHub energy prices well into next year. Turning to operations, we saw strong performance across our smelters in the third quarter. Operations at Seabury and Mount Holly remained stable in Q3, which is a testament to our operating teams during these very hot end of summer months. With respect to our Hawesville facility, we have received a number of significant third-party inquiries regarding potential redevelopment of the site. The site has several unique attributes, including its energy infrastructure, that make it attractive for potential acquirers, including, among others, its potential for AI data center development. While we still believe the site has significant value as an option for restart and higher aluminum price environments, we've engaged financial advisors and launched a formal process to evaluate strategic alternatives and potential value to help us in our overall evaluation of the site. We will keep you updated and on progress here. In Iceland, low rainfall and snowmelt over the summer months have left reservoirs below normal levels and led power suppliers to announce curtailments, including Grindertangi, through May of 2025. We currently expect these curtailments will reduce our power consumption by about 30 megawatts in Q4. Volume at Grindertangi should be flat in Q4 versus Q3 as these curtailments were implemented in the third quarter. The financial impact of the curtailment is included in our outlook on page 11, and our updated full-year volume guidance is in the appendix of this presentation. At Jamalco, the refinery is fully recovered from the impact of Hurricane Beryl in early July. The team did an excellent job quickly restoring the plant to normal production levels and completing required repairs on the port facilities, which returned to normal service in mid-September. I'd like to congratulate the GMALCO team for their exceptional management through the hurricane and its aftermath. Completing the port repairs quickly, safely, and without injury is really quite an achievement. Turning to page seven, late last month, the Department of Treasury published final regulations implementing section 45X of the Inflation Reduction Act, which provided additional clarity on the eligibility of certain of our costs for the 10% production tax credit. We are pleased that the final rules added direct and indirect materials as eligible costs for the production tax credit, as we and others had requested in our comments. For aluminum production, the most significant costs that are now eligible are coke, pitch, and other operating supplies. From these newly eligible categories, we realized an additional benefit of $22 million in 2023 and $13 million year to date in 2024. Jerry will walk you through the details in a moment. The final regulations left open the question as to whether Illumina will be an eligible production cost, reserving this question for further consideration with updated guidance to be published at a later time. We will continue to work with the Treasury Department regarding inclusion of Illumina as an eligible cost for 45X, as there is strong justification that Illumina should ultimately be eligible for the tax credit. If Illumina is included, that would increase our 45X credit by about $30 million annually. Jerry will now walk you through the details on 45X, the quarter, and our Q4 outlook.