Century Aluminum Co Q4 FY2022 Earnings Call

Good afternoon. Thank you for joining our Fourth Quarter 2022 Earnings Conference Call for Century Aluminum Company. My name is Megan, and I will be your moderator. I would now like to hand the call over to our host, Peter Trpkovski from Century Aluminum. Peter, please proceed.

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 Bialek, Executive Vice President and Chief Financial Officer; and Shelly Harrison, Senior Vice President of Finance and our Treasurer. After our prepared comments, we'll 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 statement 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.

Thank you, Pete, and thanks to everyone for joining. I'll start off today by quickly reviewing our 2022 performance before discussing the improving market conditions we have seen so far in 2023. Jerry will then take you through the details of the fourth quarter and full year results, and then I'll finish with an update on the Grundartangi casthouse project. Turning to slide 3, 2022 was a very volatile year in the commodity markets. Aluminum prices reached 30-year highs in the spring, driving strong financial performance across Century's businesses in Q1 and Q2. However, market conditions deteriorated over the back half of the year as high global inflation was met with rising interest rates, resulting in a significant strengthening in the U.S. dollar and pressuring aluminum prices downward. At the same time, the war in Ukraine and the resulting energy crisis drove power prices to unsustainable levels across the world. All totaled, Century produced adjusted EBITDA of $144 million last year. In Q4, adjusted EBITDA was a loss of $12 million, which is an improvement of approximately $24 million over Q3 as the benefits of improving energy markets and cost-cutting measures across our business improved results. We finished the year with strong liquidity of $245 million. Our team completed several long-term projects last year, including the restart program at Mt. Holly, which returned the smelter to 75% capacity. We also completed the first phases of our U.S. casthouse debottlenecking programs, which increased our capacity to produce value-added products by 20,000 tonnes. To mitigate record high energy prices, we made the difficult decision in June to curtail our Hawesville smelter. Since the curtailment, the team at Hawesville has done a good job reducing holding costs while maintaining the assets in a condition that would allow for a restart in the future. We intend to be disciplined in our approach and will wait to see energy costs and LME prices reach and sustain levels that will enable the profitable operation of the smelter for the long term. 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 reduce injuries by 10% over 2021 levels. We hope to significantly improve on this trend in the coming year. Market conditions for Century's businesses have improved significantly so far in Q1 and continue to trend in a positive direction as we emerge from winter. If you turn to Slide 4, you can see the global supply-demand balances remained in deficit last year. This was driven most significantly by another year of energy-driven production curtailments in China, where low hydro reservoirs drove curtailments in several provinces. Global aluminum balances have now been in deficit for the last five years, with the COVID-impacted year in 2020 being the only exception. We currently estimate that approximately 2.5 million tonnes of Chinese capacity is offline due to energy curtailments in Yunnan, Sichuan, and Brizo, with an additional 500,000 to 1 million tons of capacity at risk in the near term due to continued water shortages. This is now the third year in a row of significant winter energy shortages in China, suggesting that Chinese production may be subject to increasing seasonality going forward, as the country seems to be consistently short energy across the winter months. Given these continued Chinese production headwinds, we expect global markets to remain in deficit this year with risks leaning towards larger deficits should further capacity cuts in Yunnan materialize or restarts in Sichuan and Brizo continue to be delayed. With global inventories averaging below 50 days, LME prices should respond favorably if additional supply curtailments confirm. In our markets in the U.S. and EU, supply deficits widened last year, as high energy prices drove smelter curtailments, especially in Europe, where 50% of remaining capacity has been curtailed due to high energy costs. Fortunately, a relatively warm European winter has allowed EU energy prices to moderate somewhat, but while lower prices have helped sustain downstream aluminum demand, both spot and forward EU energy prices remain well above levels needed to drive widespread smelter restarts. As you can see from the graph on slide 5, EU energy prices remain in contango above $150 per megawatt hour, with significantly higher prices expected to return later in the year. One of our Icelandic energy contracts does have some exposure to EU energy prices through Nord Pool; however, we have hedged 95% of the remaining exposure at 30 Euros. From 2024 onward, we do not have any Nord Pool or other EU energy market exposure. Iceland's energy markets remain well supplied in 2023, with hydro reservoirs near average levels across the system. U.S. energy prices moderated in Q4, with Indy Hub averaging around $60, a 30% reduction over Q3. Price declines have accelerated significantly so far this year as record U.S. natural gas production, paired with increasing renewable generation and recovering coal production have combined with a warmer than average winter to drive energy prices significantly lower. Indy Hub prices are now back below pre-crisis levels for January, averaging $37 per megawatt hour, and February averaging $29 month-to-date. While spot prices have declined significantly, Indy Hub forward prices remain in contango, with the fourth trip approximating $41 for the balance of 2023. Significantly improved supply and demand fundamentals have recently driven coal prices lower, with U.S. natural gas reserves and utility coal stockpiles now sitting at 17% and 40% above year-ago levels, respectively. Increasing natural gas reserves and continued record production could continue to pressure forward prices downward and begin to make power price hedging more attractive as we move into spring. Turning to regional premiums, strong aluminum demand in both the EU and U.S. has driven premiums higher so far this quarter, with the spot Midwest premium about $0.29 per pound, a 40% increase over Q4 levels, and EU duty-paid premium returning to levels above $300 per ton. This trend has continued to affirm our long-term strategy to focus our production in these two strong markets, which allow us to better serve our customers and benefit from the strong premiums. As a reminder, all of our remaining Midwest premium hedges matured in Q4, so we will realize the full cash benefit of increasing premiums in both the U.S. and Europe this quarter and going forward. One area of relative weakness in the market has been in spot billet demand. While annual contract prices have remained well above historic levels, we did experience a measurable decline in spot billet orders in November and December, as our customers looked to destock their inventories. This has been buffered somewhat by relative strength in our high-performance aluminum construction markets and continued resilience in automotive demand. This destocking process appears to have bottomed in January, as we've seen increasing month-over-month orders in both February and March. We anticipate further improvement in April orders. The expected impact of this destocking process is included in our Q1 outlook on Slide 9, and Jerry will walk you through the impact on our Q4 results in a minute. Despite these near-term headwinds, we continue to anticipate very constructive long-term billet demand trends in both the U.S. and Europe, as electric vehicle substitution drives increasing aluminum consumption. As we've discussed in the past, electric vehicles use 200 pounds more aluminum on average than an internal combustion vehicle, leading to even larger increases in primary aluminum consumption. As the secondary internal combustion engine block is replaced by value-added primary aluminum intensive components like battery trays and crash systems, we expect this trend to support significant long-term demand expansion for primary aluminum billet and slab in the EU and U.S. Turning to operations, we saw strong and stable performance across our smelters in Q4 while also exceeding expectations on our cost and headcount reduction programs. This strong operating performance combined with production creep programs at Seabury and Grundartangi and completion of the Mt. Holly expansion project allowed us to offset a significant amount of production loss from the partial curtailment, but total shipments last year were down 16,000 tonnes from 2021 levels. In the U.S., we finished our first stages of our casthouse debottlenecking projects, increasing our billet and plant capacity by approximately 10,000 tons each. We will start the next phase of these programs in 2023, which we expect will expand our total billet and plant capacity by an additional 10,000 tons each by the end of 2024. Paired with the expected completion of the Grundartangi Villa casthouse by the end of this year, we should enter 2024 with the ability to sell approximately 80% of Century's total production in the form of value-added products, including billet slab, foundry alloys, or natural low-carbon aluminum. On the raw material side, we continue to see slow decreases in coke prices in Q4 while pitch prices remain stubbornly elevated in both the U.S. and Europe. We expect coke prices to slowly moderate over the course of this year as Chinese supply is expected to increase following the relaxation of COVID protocols. Jerry will now walk you through the quarter and our Q1 outlook.

Thank you, Jesse. Let's turn to slide 6, and I'll walk you through the results for the fourth quarter. On a consolidated basis, Q4 global shipments were down about 2% quarter-over-quarter, driven by the Hawesville curtailment and partially offset by the completed Mt. Holly restart project. Realized prices decreased substantially versus the prior quarter, due primarily to significantly lower lagged LME prices and delivery premiums, resulting in a 60% decrease in sequential net sales. Looking at Q4 operating results, adjusted EBITDA was a $12 million loss, an improvement of $24 million compared with the third quarter. Adjusted net loss was $31.3 million, or $0.31 per share. In Q4, the major adjusting items were $82.9 million for the unrealized impacts of forward contracts, $5.4 million related to the excess power capacity charges associated with the Hawesville smelter, and $2.2 million for share-based compensation. We had strong liquidity of $245 million at the end of the quarter, consisting of $54 million in cash and $191 million available on our credit facilities. Now, turning to Slide 7 to explain the $24 million fourth quarter sequential improvement in adjusted EBITDA. Realized lagged LME prices were slightly better than anticipated in our outlook provided during the last call. Fourth quarter realized LME of $2,308 per ton was down $330 versus the prior quarter, while realized U.S. Midwest premiums of $470 per tonne were down $168, and European delivery premiums of $499 per tonne were down $89. Together, these factors amounted to a $79 million headwind in the quarter. Realized alumina cost was $397 per tonne, $99 lower on a sequential basis, contributing $36 million to EBITDA. Moderating power costs added $53 million in line with expectations. Finally, volume was off a bit, but our global cost savings initiatives, including the Hawesville procurement action and other headcount reductions in efficiencies, contributed $80 million in incremental benefit as expected. We expect these efficiency programs also to benefit 2023 results and have reflected those assumptions in our Q1 outlook, which I will speak to in a moment. In total, adjusted EBITDA for the fourth quarter was a loss of $12 million, which again is a $24 million improvement sequentially. Let's turn to Slide 8 for a look at cash flow. We started the quarter with $65 million in cash and ended December with $54 million. CapEx spending totaled $17 million, of which $13 million relates to the Grundartangi casthouse project. Semiannual interest payments were $11 million. Hedge settlements, net borrowing, and working capital contributed $13 million, $12 million, and $5 million, respectively. Now let's turn to Slide 9, and I'll give you some insight into our expectations for the first quarter. For Q1, the lagged LME of $2,350 per ton is expected to be up about $45 versus Q4 realized prices. The Q1 lagged U.S. Midwest premium is forecast to be $560 per ton, up $90, and the European delivery premium is expected to be $275 per tonne, down about $225 per tonne versus the fourth quarter. Lagged realized alumina is expected to be $395 per tonne, down slightly. Taken together, the LME, delivery premium pricing and alumina changes are expected to decrease Q1 EBITDA by approximately $5 million versus Q4 levels. Our prices have decreased substantially from what we experienced during the fourth quarter. In fact, Indiana hub and Nord Pool markets are down 45% and 30%, respectively, in Q1 compared to Q4. We expect this reduction in total energy costs to contribute approximately $32 million of improvement to EBITDA compared with Q4. Coke and pitch prices remain above historical averages, but we expect sequential improvement in realized coke prices to be about $110 better in Q1 at $670 per tonne. Realized pitch prices remained stubbornly high at $1,550 per tonne, or about $140 higher than Q4. Together, we expect coke and pitch to contribute about $5 million to EBITDA improvement compared with the fourth quarter. Finally, we expect a headwind for mix and other factors of between $5 million to $10 million, mainly driven by the near-term weakness in billet sales that Jesse mentioned earlier. All factors considered, our outlook for Q1 adjusted EBITDA is expected to be in a range of between $10 million to $50 million. From a hedge impact standpoint, we expect a realized gain of about $5 million in the first quarter. We expect tax expense of approximately $5 million, and as a reminder, both of these items fall below EBITDA and impact adjusted net income. Now referring to Slide 15 for some full year 2023 financial assumptions. We expect shipments to decrease by nearly 69,000 tonnes, down about 9% versus 2022, primarily due to the curtailment of Hawesville, partially offset by growth at our other three smelters. From a cash standpoint, we expect to invest about $15 million to $20 million of sustaining CapEx in 2023. In addition, we expect to invest approximately $60 million to $75 million in our fully financed Iceland casthouse and $5 million to $10 million in other CapEx. The effect 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 17 in the appendix. Note that we have no remaining Midwest premium hedges, and for Nord Pool, we are 95% hedged in 2023. With that, I'll turn the call back over to Jesse.

Thanks, Jerry. If you turn to slide 10, I'd like to give a quick update on our Grundartangi Casthouse project, which, when finished, will produce 150,000 tonnes of low carbon natural billet. The project will also increase our total foundry alloy capacity by 60,000 tonnes to a total capacity of 120,000 tonnes. All of this production will have the capability to be cast as natural low-carbon aluminum, which has total scope one, two, and three emissions of less than four times its CO2 per tonne of aluminum — among the lowest carbon footprints in the world and less than 25% of the industry average. We expect to complete the casthouse by year-end, with its first commercial sales expected in January 2024. Our team has done an excellent job keeping this project on budget and on track through the difficult marketplace environment over the past 15 months. Europe today is over 1 million tonnes short of domestic billet production, with over 300,000 tons of European billet capacity curtailed in the last two years. Given the shortage, the Grundartangi Casthouse will be well timed to supply European customers who would otherwise be left to import higher carbon billet products from the Middle East or India. We have already seen strong interest from our existing customer base to purchase billet from Grundartangi and expect to host customers in Iceland in the back half of the year to finalize sales and qualification of our products. We believe that we will have no issue placing this billet with high-quality customers in the European market and that natural billet will receive an additional green premium in the marketplace. We look forward to your questions today, and we'll turn the call over now to the operator.

Thank you. Our first question comes from David Gagliano with BMO. Your line is now open.

Hello, thanks for taking my questions. I appreciate the guidance as always and I'm going to ask the usual questions about sort of annualized run rate EBITDA generation. If I do the math on Slide 9, $10 million to $15 million is the outlook for the first quarter. Then I compare the spot prices, and I use the sensitivities, I think on Slide 16. The conclusion we're coming to is if you use spot pricing, quarterly EBITDA generation goes to maybe $25 million to $30 million or $100 million to $120 million annualized. Based on adjusting for spot for what's available, is $100 million to $120 million annualized a reasonable run rate in the world that we're in now, and what are, aside from restarting, some of the additional EBITDA boosters that we should expect as the year progresses?

Yes, hey, David, thanks. Thanks for the question. As we've said in the past, we're going to provide expectations for one quarter out in general for modeling purposes. We've given you the sensitivities as your reference. Obviously, we'll be back in just about a month, only a month now, and talk about Q2. But if we continue some of the trends we've discussed already, you can start to see some improvement on a number of fronts. First, we're already starting to see our sales recover from the customer destocking of inventories you mentioned earlier. We expect that to ramp up and should hit our full run rate sometime in late Q2 early Q3. Second, you mentioned the pricing convention with respect to revenue as the lag spot prices, so you can use sensitivities to update that. And we've seen retail premiums come up in both the U.S. and EU. So that's yet for the results. We also expect further cost pressure to moderate. So energy prices continue to price below what we had in Q1; there are signs that other raw materials, like coke, should start to alleviate now as well. And then if you just look at EBITDA, it obviously still reflects the market price for our exposure. So once you factor in the 30 Euro per megawatt hour hedge, you shouldn't see further improvement to hedging from our guide as those prices continue showing contango. Then, if we start to see some curtailments in China, as I discussed in my prepared remarks, you could see a response in LME prices, which will start to drive results. Then going forward from there, because I think you’re asking a little bit broader question. Obviously, the Grundartangi Casthouse is going to have a material positive impact on the business. We think we will be amongst the lowest cost billet producers in the world with that casthouse, and when you pair it with being amongst the lowest CO2 footprint in the world, we think that will have a very nice impact on margins at Grundartangi, and we think all that billet will be in very high demand, especially in the European market. So maybe there's some thoughts you can redirect me further, but as we look forward we see a very nice future and some really nice opportunities in these two markets in the U.S. and EU as we move forward.

Okay, that's a helpful qualitative list, and a number of those have actually been quantified in the math that I just went through. But some of them weren't. So just maybe asking again of the ones that are that you mentioned on that list that are not quantified. It seems like volume mix and other may have more upside potential in the near term. Can you quantify potential order of magnitude on EBITDA uplift for those two things as we get beyond the first quarter?

We don't really want to speculate as to where pricing will go in some of those prices as they have been much more volatile for the past 12 months. And obviously, where coke prices have been historically, there is no real reason or fundamental change why we can't start to approach those long-term historical levels. So you could start to model that in a bit; I think you can model out the run rates there. On the mix side, as we said, the pricing for annual contracts has not changed much from last year, and it’s primarily a volume destocking impact over the quarter. So if you start to look towards the volume levels we saw last year, that will give you a little bit of a sense of where the upside could be there. And again, on the long term, we'll come back and talk more about the Grundartangi Casthouse project as we get closer to next year, in terms of its impact on the business and profitability. But as I said, I think that's the material upside for us, and one that we are really excited about.

Great. Thanks. I will turn over to somebody else. Thanks.

Thank you, David. Our next question comes from the line of Lucas Pipes with B. Riley. Your line is now open.

Thank you very much, operator. Good afternoon, everyone. I think you mentioned the potential for energy hedging in the prepared remarks, and I just wanted to make sure I understand that strategy properly. Is that related in any way to Hawesville as well? Or is it more opportunistic for locking in what you might deem to be attractive energy prices now that power prices have corrected? Thanks, and thank you very much for your perspective on this.

Sure, Lucas, thanks. Well, it's relevant most immediately for us because that's where our largest market exposure lies at this point. As I mentioned, we have seen those Indy Hub prices come down quite significantly, and the forwards are just a little bit more stubborn as they come down. So when we look at that, you see a fairly expensive risk premium built into the forward pricing right now. But we continue to believe as you look at natural gas storage in this country, natural gas production in this country, and as this has obviously come off significantly and paired with increasing renewable generation, especially as some of these new projects start to hit and stronger coal production on the back end and utilities — if you remember, this past year, we were a little short going into the winter — this year, they look much better situated, and coal prices are quite high. So we continue to think that risk premium may collapse a little bit and come closer to spot, which could provide some opportunities for us. So most relevant for us as we look to Hawesville going forward, that is also something that we can consider there. So on the Hawesville side, as I said, the market conditions are definitely better than when we made the decision to curtail, but we would like to see both energy and metal prices reach and sustain levels that enable the profitable operation for the long term.

Okay, that's helpful. I appreciate that. I may come back to Hawesville later. In the presentation, you highlight opportunistic M&A and noted rather. I wondered if you could maybe comment on what sort of opportunities you've been looking at. Of course, I wouldn't expect you to share specifics, but it'd be helpful to get a sense for the type of transactions that could make sense. Thank you very much.

Yes. I think you're referencing the comment on the capital allocation page in the appendix. Obviously, as we look at capital allocation, and we've talked about this at some length in the past, we've got some targets that we'd like to hit before we look at how we use that cash flow going forward. I think our immediate focus is going to be, as cash flow improves as we go into this year, to put that on the balance sheet and start to improve from where we are. But as the next step, once we hit those targets, and as we approach those, we'll definitely come back and talk to you more. We've laid out our view on how to use the capital going forward. To your specific question on M&A, as we've seen in the past, we are looking at opportunistic M&A; these will usually be smaller bolt-on transactions as we see assets become available that have attractive long-term returns and fit within our general footprint and strategies that we've laid out. So, nothing really more exciting than that. But when the opportunity is there, we are ready to act and complete transactions that offer those long-term returns.

Okay, I appreciate that. Thank you. And I’ll have to find one on Slide 20. You lay out the volumes of value-added products, with the increase in ’24. Is there a good approach to quantifying how this would translate into revenue? Would appreciate your color on value-added product pricing to revenue. Thank you.

Sure. I think generally, if you look at this, obviously, the bigger gain is coming as the Grundartangi Casthouse comes online. I think you can sort of count on most of that billet going into the European market, and you can take a look at the premiums that we've seen in the European markets on billet over the past couple of years. Notably, that market has become much shorter, and it's about a million tonnes short today with 300,000 tons of billet capacity coming offline over the past 18 months. So since we've started that project, the market opportunities for it with our customers have actually gotten more attractive. So when looking at revenue, you can count on that additional 150,000 metric tons at Grundartangi and the other big increment being the 60,000 tonnes of additional foundry alloy capacity coming from Grundartangi as well. So, again, you should be able to look at European market prices. Obviously, they fluctuate, and I'm not going to speculate where they will be in 2024. But that should give us a good sense of the additional revenue opportunities. From a margin perspective, as I said earlier, I think you can count on this asset being a brand new modern casthouse built in low cost environments, making us amongst the lowest cost producers. So you can use that to think about how the margin may look.

I will sharpen my pencil on that. I appreciate the call. I'll turn it over for now, and best of luck.

Thanks, Lucas.

Thank you, Lucas. Our next question comes from the line of John Tumazos with Very Independent Research LLC. Your line is now open.

Thank you. Just looking at your cost of goods sold per pound shipped, excluding depreciation, it calculates to a $27.6 improvement or the cost decline from the September quarter. Is there any mix effects that might have been influencing that less alloy value-added product? And is it a reasonable expectation that power and other costs would improve in the March quarter, maybe not $27.6 but at least half that much?

Yes, John, thanks. It's a good question. I think you're right to point to energy; the majority of that impact is going to be on the energy side. As Jerry went through, we also saw much better alumina costs reading through the results, and marginally lower coke price affecting that mix as you mentioned. We expect to have continued improvements, really not far off the magnitude that you mentioned. We should see incremental coke improvements but probably roughly flat, and then a little bit of course; we are natural gas consumers, and so Henry Hub reducing.

So maybe not $27.6, but at least half that much is a good guess for the March quarter?

Yes. I think that's a good prediction.

Sometimes in the investment business, we don't know whether to buy or sell. Maybe we sell half a position or a quarter of a position, incrementally a little bit at a time. It would seem like with gas falling almost $2 a million, it's probably pretty close to the bottom. It could go negative, like crude oil did three years ago, because there's no storage capacity, but it's a pretty decent price. Why hasn't Henry Hub power fallen below $3.5 a kilowatt hour? It had been roughly proportional to the fall in the gas price and other rises and falls fluctuations.

Yes, we agree with you, John on this. So it appears that there's a higher risk premium embedded in the market than we've seen in years past. If you just mark the gas price, and you can also look to follow coal prices as well. And I mentioned references to the coal stockpiles in utilities. You start to see that the marginal cost of energy production, in actuality, has gone down quite significantly. And of course, with a product like energy which can't be stored, you see that reflected in spot prices. And so the sub-$30 energies that we told you about Indy Hub for February start to reflect and look like those lower Henry Hub and lower thermal coal prices as you discussed. So on balance, we think that's mostly risk premium, and probably a lot due to the volatility we've seen in the past year. But we think that probably continues to collapse as we move forward into the year, and storage continues to increase. We start to have a little more certainty about what 2023 looks like. So I think, on balance, we're in agreement with your statement.

So is this a good enough price to possibly hedge a quarter of the power you use?

Yes, as I think I mentioned in my prepared remarks, that's definitely something we're going to look at as we go into summer, and we watch these forward prices, and hopefully they start to collapse. And a little bit of that risk premium starts to exit as we move a little bit of —

Now only one part of the equation. But power is pretty low. And it certainly seems possible that Hawesville could return as long as Hawesville is selling and houses are being built.

Yes, on Hawesville like I said earlier, I think we're going to be disciplined here and make sure that we’ve exited what's been an extremely volatile environment for the past 18 months. So we will see that energy and metal prices both reached the same levels that work, and we can be sure that if we take the effort and costs to restart Hawesville that we'll see the returns and it'll be profitable over the long run for us. But certainly, the trends are favorable as you mentioned, as energy prices have started to return towards normal and LME remains at relatively constructive levels.

So one of the earlier questions was about M&A, and I always imagine like Century selling out, selling the company to another entity with a stronger balance sheet — whether the volatility better and be a better credit for renewable energy supplier to do a project financing off your purchase contract buying, you would buy power from them. Is that the way you think of M&A? Or are you actually thinking about going out and buying things; your balance sheet. Your earnings have been a little volatile. So I hadn't imagined that you'd be shopping for acquisitions?

Yes, John, I'm mostly going to avoid this question. But as you might imagine, we think there are very positive long-term opportunities for Century, both in our current setup, and we also think there are a number of opportunities for the business as we go forward. We've already mentioned the Grundartangi Casthouse. We've got potential to restart the remaining capacity at Mt. Holly. Hopefully, we see market conditions that enable the long-term restart of Hawesville. So we're excited about this business, and we plan to be here for a good long time.

Thank you, John. There are currently no further questions.

Okay, well, we thank you all for the time — sorry. Go ahead. We'll take it. Go ahead.

I apologize. Our next question is from the line of Lucas Pipes with B. Riley. Your line is open.

Thank you for taking my follow-up question. I appreciate it. I know that was last minute. On the M&A side, you mentioned bolt-on transactions, and sometimes it's hard to define. Would a smelter be considered a bolt-on, for example?

Yes, I think that's the type of transaction you've seen from us before. Actually, our entire footprint at one point or another was a bolt-on smelter transaction — each and every one of the operating smelters. And then we've added value where we could, whether that be an expansion at Grundartangi or a billet casthouse at Grundartangi or a billet casthouse at Seabury and Mt. Holly. That's an area we think we have some expertise in and that we can add value. So I think that's the type of transaction that I mean when I refer to bolt-on transactions if such opportunities were to arise.

I appreciate that. And then circling back on Hawesville. You noted that economics are better today than they were when you made the idle decision, and you're looking at clarity on margins. Is it clarity on margins, or are you looking really for a wider margin and a greater margin of error to restart the facility? I'm just trying to get a better sense of what could trigger a decision to restart the facility. Thank you very much for the additional clarity.

Yes, sure. I think probably the key thing you're looking for there is really both energy and metal prices reaching levels that work from a profitability standpoint. But also, we need to see some period of sustainability at those levels. So really, the energy price environment has been quite significant. It wasn't six months ago, obviously, that we saw high energy prices. While we are quite confident that when you look at energy storage levels in the U.S. that we do see conditions that should keep energy prices lower for longer, we would like to be prudent and ensure that those levels will confirm for some period of time. So really, we need both factors to reach those levels and then sustain them for enough time that we can be confident before we make that decision.

That's helpful. Thank you. And can you remind us what would be a reasonable level of restart costs for Hawesville to kind of return to near full capacity utilization?

Yes. We'll give you some direct guidance on that when we get closer to making that decision, but what I would say is, you've recently seen when we started a number of lines at Hawesville back in 2018. Just as a reminder, in that instance, we relied on all the pot lines as we brought them back up. This time around, we would not have to do that. So it would be materially cheaper this time than what you saw for us in 2018. But we'll give more direct guidance as we get closer to making that decision.

That's helpful. Thank you. And then turning to Slide 9 in the outlook, you noted the headwind of $10 million to $5 million negative with volume mix. Looking out to Q2 and the remainder of the year, what direction could this turn positively? I would appreciate your color on that.

Yes, sure. I think Jerry has mentioned that the majority of this is really mix and has to deal with the inventory destocking event we spoke about earlier. We have already started to see that improve, with month-over-month orders increasing in both February and March. We would expect the same in April. There are actually a number of our customers that have a March 31 calendar year, so we're looking forward to them reentering the market in April. So that's one area that we think could materially improve and have already started to see improve as we head into Q2, but really, it's probably going to see the most improvement as soon as you get into the middle or back half of the year.

Okay, all right. I appreciate the color, and again, best of luck. Thank you.

Thank you, Lucas. There are no additional questions waiting at this time. So I'll pass the conference back over to the management team for any closing remarks.

Thank you, everyone, for your questions today. We'll be talking to you again very soon.

That concludes the Century Aluminum Company fourth quarter 2022 earnings call. Thank you for your participation. I hope you have a wonderful day.