Century Aluminum Company (CENX)

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Century Aluminum Co (CENX)

Q1 2011 Earnings Call Transcript

May 3, 2011, 5:00 pm ET


Shelly Lair - IR

Logan Kruger - President, CEO

Wayne Hale - COO

Michael Bless - CFO, EVP


David Gagliano - Credit Suisse

Brett Levy - Jefferies & Company

Sal Tharani - Goldman Sachs

Tony Rizzuto - Dahlman Rose

Lloyd O'Carroll - Davenport & Company



Ladies and gentlemen, thank you for standing by and welcome to the first quarter 2011 earnings call. At this time, all lines are in a listen-only mode. Later there will be an opportunity for your questions and instructions will be given at that time. (Operator Instructions). I'll now turn the conference over to your host, Shelly Lair. Please, go ahead.

Shelly Lair

Thank you, [Cathy]. Good afternoon, everyone, and welcome to the conference call. Before we begin, I would like to remind you that today’s discussion will contain forward-looking statements related to future events and expectations, including our expected future financial performance, results of operations, and financial condition.

These forward-looking statements involve important known and unknown risks and uncertainties, which could cause our actual results to differ materially from those expressed in our forward-looking statements. Please review the forward-looking statement disclosure in today’s slides and press release for a full discussion of these risks and uncertainties.

In addition, we have included some non-GAAP financial measures in our discussion. Reconciliation to the most comparable GAAP financial measures can be found in the appendix to today’s presentation and on our website at www.centuryaluminum.com.

I'd now like to introduce Logan Kruger, Century's President and Chief Executive Officer.

Logan Kruger

Thanks, Shelly. Thank you all for joining us today. So let's get started on slide number 4. Market conditions continued to improve during the last several months with the pace of economic activity increasing in most regions.

China, India and Brazil continued to post robust results, which have left to growing concerns related to overheating and actions by these governments to attempt to reduce inflationary pressures.

We continue to note a consistence and now seemingly serious effort on the parts of the central government in China to reign in the expansion of the aluminum sector. These programs have, in the past, produced mixed results as capacity continues to be bought without approvals from the central government.

As you would guess, it remains to be seen whether this iteration will produce more tangible results, but I would note that the frequency and the seriousness of the government's communication has been increasing.

I'd also point out to the obvious political activity taking place across much of the Persian Gulf in the Middle East. In addition to China and India, the East regions have represented significant growth in primary aluminum capacity during the recent past.

Continued instability in this part of the world could have further dampening effect on the growth or supply.

Despite substantial inventories around the world, physical metal remains tight in many regions. Financing transactions play an obvious part in propitiating this condition as do the logistics of removing metal from warehouses. Both of these factors are subject to dynamic influences and we are watching them carefully.

Primary aluminum production continues to be subject to persistent cost pressures, the largest of which relates to the price of oil. Mike will detail the impact that the strain has and will continue to have on all of us.

Wayne will provide detail on our operations during the past several months but I will just make a few brief comments. In summary, I am pleased with our recent performance. Safety and productivity performance has been good.

We have progressed on several important projects, such as the restart of the first potline at Hawesville and the reinstallation of the transformer at Grundartangi, which was damaged last year.

Wayne will detail a few [frozen] starts we are experiencing with the line at Hawesville restart but these are typical and we are confident we will get through them during the next few months.

We are moving forward with modest but high impact and low risk investment programs at both Grundartangi and Hawesville. I will comment at the end of our remarks on the status of the Helguvik project.

Let's move on to side number 5. The alumina cash price averaged $2500 per ton in the first quarter of 2011, the highest quarterly level since the third quarter of 2008. Prices are currently above $2700 per ton.

The recent strength in pricing is being driven by a variety of factors, including improving demand, a weak dollar, high energy prices and a strong investor sentiment towards all commodities.

Aluminum spike prices remained firm over the quarter and are in the range of $410 to $420 per ton. This market is forecasted to remain in balance in the near term with prices around these current levels.

Aluminum demand remains strong in Europe and North America due primarily to the continuing improvement in the transportation sector. In China, demand remains strong driven by continued infrastructure spending and urbanization.

Both India and Brazil are also expected to drive aluminum demand as the construction and industrial sectors continue to grow in these regions.

In addition, the aftermath of the recent Japanese earthquake remains a concern for demand in the short term but activity is expected to quickly recover as reconstruction begins to accelerate within those countries.

We may note that a similar impact in the US due to the recent [widespread] infrastructure damage caused by tornados may have a similar effect.

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