Century Aluminum Co (CENX) 2016 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the first-quarter 2016 earnings call. At this time, all lines are in a listen-only mode and later, we will conduct a question-and-answer session. (Operator Instructions). And as a reminder, today's call is being recorded. I would now like to turn the conference over to our host, Peter Trpkovski. Please go ahead, sir.

Thank you, Kerry. Good afternoon, everyone and welcome to the conference call. Today's presentation is available on our website, www.centuryaluminum.com. We use our website as a means of disclosing material information about the Company and for complying with Regulation FD.

I would also 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 statements disclosure in today's slides and press release for a full discussion of these risks and uncertainties.

In addition, we included some non-GAAP financial measures in our discussion. Reconciliations to the most comparable GAAP financial measures can be found in the appendix to today's presentation and on our website. And now, I'd like to introduce Mike Bless, Century's President and Chief Executive Officer.

Kerry, I believe Mike is in listen-only mode according to our monitor. Can you please see if he can be a speaker at this time? Apologies, everybody. Michael is in a different location than the rest of us at the moment.

We apologize for that. As Pete said, I'm actually in South Carolina today where I will update you on the situation at Mt. Holly in just a few moments. And so when we do get to Q&A, please bear with us while we make sure we get the right responder to your question. So again, I apologize for that and thank everybody for joining us today. We appreciate you being here.

If we could turn to slide 4, please, I will give you a quick rundown of what we've been working on since we spoke with you in late February. Shelly, as normal, is going to talk to you in just a few moments about the trend in the marketplace, but let me just make a couple comments to put the points I'm about to make into some context.

Since we talked to you a couple months ago, we've see no change in the market trends. The demand-side picture around most of the globe remains favorable. Putting aside the risk of a recession caused by any number of external shocks, we think growth continues to look okay in much of the world.

China, of course, remains the wildcard from both a demand and a supply standpoint. As you've seen if you've looked at the data, Q1 saw consumption in China slightly above expectations. As you know, this is always a volatile quarter due to the holidays in China in the early part of the year.

The [shifi] price has performed well above the LME and this is due to both physical market tightness that's been reported and we believe significant speculative activity in the marketplace. Nevertheless, the market remained in significant surplus during the first quarter and we see upwards of 1.5 million tons ready for restart during the balance of this year.

In addition to that, there are new projects that are scheduled to come onstream and given the shifi market price performance, we believe all of this is coming.

The exports that are necessitated by this overcapacity have, of course, decimated our industry in the US that supports the primary industry. We've now studied this carefully at a very detailed level and we are absolutely convinced that massive subsidies exist and those subsidies are in direct violation of global trade laws. We are now working with relevant parties and expect some serious action soon. I will provide some more detail on that later.

Turning inside the Company, the operating performance at each of the plants was largely consistent with the expectations we gave you in late February. As you will remember, we needed to confirm we could run especially the US plants at the cost structures assumed when we moved to the new operating configurations during the second half of the year. This was particularly true first at Hawesville, where we reduced capacity by 60% in the second half of the year and also at Mt. Holly, where we reduced capacity by 50% just at the end of the year.

As you know, the reduction and the curtailment at Mt. Holly was required directly by our inability to achieve a competitive power contract, and again, I will update you on where we stand there in just a few moments. We are pleased to report that all the plants performed well and consistent with our expectations. And I will provide some detail on the operations in just a few moments.

At a consolidated level, the plants' operating performance produced financial results that were favorable to our expectations. Pete will give you -- I'm sorry -- Rick will give you more detail on the financial results in just a couple moments, but what you'll see is a significant improvement versus Q4, positive EBITDA and net cash flow, free cash flow during the quarter. And I might remind you most of our sales are priced on a two-month lag, so the results that you are seeing this quarter are well before the recent run-up in the aluminum price.

Bottom line, we're convinced the strategy we've put in place is sound. The Company as currently configured should produce reasonable results in the current environment as we've designed, and we believe we are set up very well to prosper when conditions do improve.

Now let me talk about Mt. Holly. Let me just remind you where we are coming from. We've been buying 75% of the power requirement for Mt. Holly from market sources and 25% directly from the generation of the local power company in South Carolina. As those of you who follow the Company for some time know, this arrangement has been in place in various forms since mid-2012. Regrettably, it produces a weighted average price that simply doesn't work. The weighted average price we are paying today based on that split, 75% market, 25% direct from the power company here in South Carolina, that weighted average price puts Mt. Holly in the fourth quartile of global power prices for smelters.

Again, as you know, this would otherwise be a very competitive plant due to its modern technology and an extraordinarily abled group of employees. Regrettably, however, the power price simply makes the plant uncompetitive and thus not viable over the long term. For these reasons, in the second half of 2015, we proposed being allowed to buy 100% of our power from market sources.

We'd still be directly served by the power company. All the power is transmitted to the plant and sold to us by the local power company, so we are not talking here about deregulation or direct retail access or anything like that. We'd continue to pay the local power company a transmission fee to transmit the power to the plant, that's at their standard transmission rates. This arrangement, again 100% of market power with a transmission rate, would get Mt. Holly close to the median on the global power price curve.

Regrettably, as you know, the power company rejected our proposal last year and so now we are seeking a last attempt to find a workable solution and thus, we decided to try a legislative solution. And in this respect, regrettably, at the end of the year, we had to cut 50% of the plant's capacity given the uncompetitive power price. We just couldn't suffer the losses that we were bearing.

We've been engaged in this legislative process over the last couple months. We've not yet found a solution, but what we have seen is very good engagement from legislators and other key constituencies. We think everybody gets it. We think everybody sees the critical nature of Mt. Holly to the employees, to the local community and to the state at large. And in that respect, we are continuing to look at every available option, both legislative and otherwise.

In the interim, we've bought market power through August to allow a full investigation into every potential alternative; and for the same period again through August, we've brought forward the natural gas requirement and sold forward the LME at the recent favorable prices. This to take the commodity risk off the table while we are looking for a solution to the power contract.

We are obviously running out of time. Again, this is an excellent plant in every way other than the power price. We've got a truly energized, engaged and productive team of employees. It's now the most modern smelter in the US, so it's got good efficiencies, good usage of power, good usage of carbon, etc., etc., good current efficiency. It's got a world-class casthouse making a suite of value-added products and an excellent group of customers.

For all these reasons, we are doing everything we can to find a path forward, but at the end of the day, as you all know, the plant must have a competitive power price or it simply won't work over the long term. And with that, I'd like to turn it over to Shelly to talk about the external environment. Shell.

Thanks, Mike. If we could move along to slide 5, please, I will provide some comments here on the industry environment. The cash LME price averaged [$15.15] in Q1. This reflects a 1% increase over Q4, but compared to Q1 of last year, this is a 16% decrease. We've recently seen a nice run-up in LME prices and today, we are right around $16.50 per ton.

Chinese prices in Q1 rose at a faster pace than the LME with Shanghai prices up 4.5% as compared to the fourth quarter. Regional premiums in both the US and Europe have softened a bit over the course of the first quarter. The Midwest premium is currently at $0.08 per pound and the European duty paid premium is $130 per ton.

In Q1, we saw an additional 500,000 tons of capacity come offline. This means that the US has lost 50% of its remaining capacity over the last two quarters. Meanwhile, the recent increase in the Shanghai price is resulting in meaningful restarts of curtailed volume in China. Chinese investments in new smelter projects, the expansion of existing facilities continue despite its already oversupplied alumina market.

In the first quarter of 2016, global aluminum demand grew at a rate of 5% as compared to the year-ago quarter. Year-over-year production was relatively flat as a result of the curtailments in late 2015. But as I mentioned previously, a significant portion of that recently curtailed capacity in China is already in the process of being restarted. Most industry experts continue to expect the global aluminum market to be reasonably well-balanced in 2016 with a large surplus in China resulting in record export levels.

Okay, just a couple quick comments on the alumina market before I hand it back to Mike. Alumina prices climbed steadily over the course of Q1, increasing from around $200 per ton at the end of Q4 to their current level of about $255. That's still down almost $100 per ton from early 2015 when spot prices were trading around $350. Overall, the global alumina market is expected to see a deficit of just over 1 million tons in 2016. With that, I will hand it back to Mike.

Thank you, Shelly. If we could turn to slide 6, please. I will comment as I normally do about the operations. As a reminder, the chart is set up to compare the quarter that just ended with the prior quarter, so Q1 over Q4 here.

As you will see, we've had a good quarter in the operations generally. Most importantly on safety, you see the excellent performance in the US plants. I might remind you this is after a very good fourth quarter and all of 2015.

In Iceland, that result is a little bit misleading. We only had one recordable incident in the first quarter. That was though after an incident-free Q4. We are really pleased with the results across the Company. This was a result of much attention and hard work by all the employees, but we all know, all of our colleagues know that one needs to remain diligent and continue to improve in this area. That's the only acceptable performance.

Turning to production, as you see, Hawesville is down 7%. This is largely a result of the fact that we did curtail the production during the fourth quarter, so we only reached the 40% of capacity during the fourth quarter. We also were slightly below at Hawesville expectations for production during the quarter. We had a couple sales more offline on average during the quarter than we would normally have. We regained this as of late March and regained a full pot compliment, of course, at the 40% production. That's two pot lines.

Very importantly, our high purity production at Hawesville started off the year favorably and has now reached really strong levels and so, obviously, that's critical to the performance of the plant. That's the result of excellent management of those pot lines.

As you see, no surprises on production at the other plants. Mt. Holly, of course, is a direct result of the curtailment action. As a reminder, that didn't happen until late in December.

Moving down the slide to production metrics, as you'll see, off a little bit at Hawesville. That's again due to the efforts to get the pot count back to the full level at the two pot lines. The other plants, as you can see, looked good.

And lastly, on conversion costs, as you can see, Mt. Holly was up slightly. That's only due to the fact that the curtailment occurred so rapidly at the end of December. The plant is running very well over the last couple months. As you'll see, the other plants are favorable. Sebree especially is operating really well. We are extraordinarily proud of the team there. And again, you can see Grundartangi continues to perform well across the board. And with that, I will turn it over to Rick and ask him to comment on the financial results.

Thanks, Mike. If we turn to slide 7 of the presentation, I will provide some details here on the financial performance for the quarter. Our net sales were down 17% from the fourth quarter, reflecting unfavorable market conditions and lower sales volume due to the curtailment activities.

Looking at the market impact on a two-month lag basis, the average cash LME price was down 5%; however, the Midwest premium increased to almost 17% resulting in a Midwest transaction price decrease of 3% quarter-over-quarter. Realized prices in the US were down 1% reflecting the decrease in the Midwest transaction price offset by a higher percentage of value-added product shipments in the first quarter when compared to the fourth quarter.

For Iceland, the all in two-month lag LME and European duty paid premium decreased approximately 3% in the first quarter consistent with the decline in realized prices. On a consolidated basis, global shipments were down 14% in the first quarter of 2016; North American shipments were down 27,000 tons driven primarily by the decisions made in the fourth quarter to further curtail Hawesville reducing to 40% capacity and to reduce Mt. Holly to 50% of its capacity.

Mt. Holly shipments were down approximately 25,000 tons. About half of it is fourth-quarter shipments while Hawesville shipments were down approximately 2000 tons quarter-over-quarter.

Sebree shipments were essentially flat when compared to the fourth quarter of 2015, as Mike noted, as the facility continues to run at 100% capacity. While North American shipments were down 27,000 tons, production was only down 25,000 tons from the fourth quarter. The additional decline in shipments is because we did not have the same sellthrough of inventories that we had in the fourth quarter of 2015.

Iceland shipments were down 3% reflecting timing of revenue recognition during the first quarter. Production in Iceland was essentially flat when compared to the fourth quarter.

Turning our attention to operating profit for the quarter, we are reporting an adjusted EBITDA this quarter of $2 million, an increase of $30 million when compared to the $28 million loss reported in the fourth quarter. Lower raw material costs increased EBITDA by approximately $14 million during the quarter led by a significant decline in alumina costs relative to the fourth quarter.

Lower all-in pricing, including the impact of a declining LME on Iceland power, partially offset by regional premiums reduced EBITDA by approximately $5 million for the fourth quarter -- from the fourth quarter, rather, of 2015. Favorable power costs at our Kentucky operations added approximately $4 million to EBITDA in the first quarter as we continue to benefit from historically low market costs. As a reminder, every $1 per megawatt hour impacts EBITDA from our Kentucky operations by approximately $5 million per year, assuming the current configuration of Hawesville at 40%, Sebree at 100% of capacity.

Power costs at Mt. Holly reduced EBITDA by approximately $1 million. As we discussed in the last call, this reflects the impact of purchasing 100% of Mt. Holly power requirements for the Santee Cooper generation in the month of January as we transition to our new arrangement with Santee Cooper. We moved to a 75% and 25% Santee Cooper generation mix for the remainder of the quarter, and as Mike noted, we've secured market power through August 2016.

Net lower sales volume as a result of curtailment actions on unfavorable pricing resulted in a benefit to EBITDA of approximately $12 million. Lastly, we experienced approximately $6 million in lower spending and better fixed cost absorption at our North American operations as the inefficiencies associated with the curtailment activities of the fourth quarter are behind us.

Collectively, these items resulted in a net $30 million increase in EBITDA during the first quarter, which contributes to an adjusted loss per share of $0.23, an increase of $0.30 when compared to the $0.53 loss we reported last quarter.

Moving on to liquidity, there were no outstanding borrowings under our revolver other than letters of credit. We ended the quarter with $126 million in cash and $87 million of availability under our revolving credit facilities. As a reminder, these facilities are secured by both accounts receivable and inventories and availability under the revolver will fluctuate as our working capital levels move during the year.

During the quarter, we also negotiated an extension of the $50 million Iceland revolving credit facility agreement through 2018, a two-year extension.

Please turn to slide 8 and we will take a look at cash during the quarter. Cash increased during the quarter by $11 million. We received $12.5 million during the quarter as the final purchase price adjustment under an earnout provision on the Mt. Holly acquisition. Capital expenditures for the quarter were $4 million and we continue to expect capital spending for the year to be approximately $20 million.

Reduced working capital benefited the quarter by $3 million as we leveled out inventory in North America to match current operating configurations, partially offset by inventory build in Iceland in anticipation of the expiring tolling contract. We do anticipate a working capital build in the second quarter as the last Iceland tolling contract expires. We made estimated tax payments of $3 million in the quarter and we also -- as a reminder, we will also make our semiannual interest payment of approximately $10 million coming here in the second quarter.

Lastly, let's take a look at our consolidated cash breakeven point. When we last spoke, we gave you our estimated consolidated cash breakeven of $1,450 per ton. As an update, our current estimate of the consolidated breakeven is approximately $1,550 per ton. The $100 per metric ton increase is entirely attributable to market factors, half attributable to reduced premiums from the CRE forecast of the current spot and the other half attributable to a 15% increase in alumina prices since we last spoke in February.

The consolidated cash breakeven point as usual is the LME equivalent number that represents cash flow after maintenance, capital expenditures, cash taxes, interest expense, SG&A and pension contributions, but excluding any discretionary capital spending. With that, I will turn the call back over to you, Mike.

Thank you, Rick. If we could just turn to slide 9, please, everybody. I will make a couple quick comments about what we will be working on here over the last couple of months and then we will get right to your questions over the next couple months.

Okay, as you would expect, our priority here over the next couple months is to find a solution for Mt. Holly's long-term power requirements. As we've said, the plant competes favorably on every product and cost level other than the power price. But as you know, our fourth-quarter power cost renders the plant simply uncompetitive and not viable over the long term.

We need only to get this plant to around the median on the global power cost curve to make Mt. Holly viable through the cycles. We are looking at many options, as I said, both legislative and otherwise. Today, it's difficult to predict exactly how the situation will resolve. We are really proud of our employees at Mt. Holly. They've been working safely, productively and with great determination during an uncertain period and we are thankful to them for that. Given what they've made of this plant, the stakes are simply too high not to exert every effort to find a solution, and that's exactly what we are doing, so more to come.

Turning to the Kentucky plants. As you've seen, both Hawesville and Sebree are in good shape. Hawesville has now reached the full pot count and high purity production is strong, and Sebree is operating very well. For these reasons, we are looking now preliminarily at the next phase of development for these plants. This on the one hand could include additional production capacity at Hawesville bringing back another line or more as the high purity is badly needed in the US. It could also include investment in additional value-added products at Sebree.

Another option that we've been looking at could be a significant expansion of the Kentucky plants through the movement of production equipment from Mt. Holly. We've done a preliminary engineering study and the results were interesting enough that we are now doing a more detailed analysis. Obviously, we'd only contemplate something like this in the worst case if we weren't able to find a way to make Mt. Holly competitive.

The consideration of investments in the US plants are as you would expect at an early stage given the uncertainty in the external environment, but we do want to be ready when the time comes.

In addition, we continue to refine the analysis of a value-added casthouse for Grundartangi. The product is certainly needed in Europe. We think Grundartangi would be a very competitive billet producer. It would also add efficiencies in other ways to the existing casthouse operation and we continue to be confident that the issue is not if, but when this investment makes sense.

And lastly, we will continue to advance our fair trade efforts. We are convinced as ever, as I've said, that illegal subsidies are the direct cause of harm to the US industry. We are also convinced they are not going to go away unilaterally. And so thus we must pursue the enforcement of trade laws and we believe we are coming close to seeing some decided action. And with that, Pete, I think we can ask the operator to turn it over for questions.

Thanks, Mike. Kerry, if you can go ahead and turn it over to questions, please?

(Operator Instructions). Jorge Beristain, Deutsche Bank.

My question was just on -- I can appreciate you are on a public call, but is there a dropdead date with Mt. Holly beyond which you cross the rubicon? And secondly, is any of the outlook at Mt. Holly in any way dependent on the global aluminum price? In other words, if we saw another 20% rally in aluminum, would that change your stance, or you are talking about making it competitive through the cycle and that's why you need to get the power price?

Yes, you answered the question on the second one, but I will add some more. But on the first, the answer is yes, Jorge. As we've said, we don't like operating the business -- and of course, the most important aspect of the business, it goes without saying, is the power -- on such a short-term basis.

Just as a reminder here, we are operating under this new contract with the local power provider and it's a three-year contract, but we have a two-month right -- we have the right to terminate with two months notice. In that respect, as I've said, we've bought power through August, so it's a bit long-winded, but the short answer to your question would be we only have power through August 31, so we need to find a solution here over the next couple months or we are looking at a decision which we don't want to contemplate at the beginning of July of whether we need to give that notice or not.

On the second part of your question, Jorge, as I said, you've answered it. The reason we are so intent on getting at least to the midpoint is, and you follow commodities so, of course, you know this, is if you are at the midpoint, you have confidence that you can survive through the cycles. You are going to make money when the price is above the long-term median, whatever that is these days, and you probably suffer some losses -- you will suffer some losses when you are below. But if you are at the median and you've got a plant with Mt. Holly's efficiencies and costs, you know that you are going to survive and you are going to make reasonable returns over the cycle.

And so where the price goes, whether it goes down $100 from where it is today, $150 to use your -- or up another $100 -- that's very short-term thinking. We need to solve this for the long term or else, in our opinion, we are simply kidding ourself. The plant isn't competitive without a competitive power price. We are quite convinced we are looking at it the right way.

Okay. Fair enough. And just a follow-up. Has the recent Chapter 11-ing of one of your competitors caused any changes in the market that you are aware of in terms of perhaps they are changing their operating rates or there's the expectation that they will have lower costs going forward because of perhaps having some of their debt restructured. Could you make any comments to that effect?

Just so I'm sure, Jorge, about whom you are talking. Are you talking about Noranda?

Yes.

Okay. So let me take it one by one. On the smelter, as you may know, it's completely shut and as far as we know -- and all we know is based on what they've said publicly. There's really no -- certainly not any near term -- I don't wish to speak for them, it wouldn't be my place -- but just reading what they've said, there's certainly no, at the very least, near-term intent to reopen that smelter, so it's completely shut. It's been completely shut since sometime in March. I can't recall exactly when the last pot line regrettably came down and so it's really an N/A answer to your question for the smelter.

They continue to be a very good supplier of us -- to us -- of alumina from the Gramercy alumina refinery and so there we've seen no change at all. We continue to enjoy a good commercial relationship with those folks. They run a good business. They produce a good product. We continue to take it. They continue to perform under the contract. So there, there's really been no change. So I guess that's a long-winded way of answering your question. We really see no change at all either in the marketplace or as it relates directly towards us.

Okay. Thank you very much.

(Operator Instructions). Dave Gagliano, BMO Capital Markets.

Thanks for taking my questions. Just a couple of quick ones. First of all, on the -- most of it is tied to the [$1,550] updated cash flow breakeven figure. What are the assumptions for alumina and the Midwest premium embedded in that figure?

Pete or Rick, please go ahead.

Sure, so embedded in the breakeven, we are essentially using current spot or when we spoke in February, we referenced the CRE forecast, which also aligned to that spot rate today. So the adjustment is just to get us to current market rate.

Okay. So like a $250 alumina, something like that? In that zone?

Yes.

All right, all right. Okay. And just to round out that part of the question, were there any other changes -- when I look at the slides from last quarter, slides 11 and 12 for the full-year 2016 targets, any other changes, volumes, CapEx, anything else?

No other changes.

And David, just to reinforce, if I may, what Rick said, you probably caught it, in that breakeven, there are no, inside the Company, no operational changes. We are still, as I said, on the exact internal cost structure. The only changes, as Rick noted, about half of that $100 is the markup of the alumina price from $220 to $250, i.e. current spot, and then the markdown to current spot Midwest and EU duty paid.

Okay. Thanks. And then just in the first-quarter results, what was the average alumina price that actually flowed through results?

Rick, I will leave that to you.

The average actual for the quarter was $220, but obviously the impact on the results lagged.

Right. So there is the lag factor there. I don't have an average actual price. During the period, that $220 is impacted by inventory and as we saw throughout last year, we are lagging. That's why we had such a benefit in the first quarter here. We will see increase to prices in the second quarter.

David, it's the corollary to the point I made about the lag on the realized aluminum prices. So all of that is yet to come. That ought to be, if we run the business right, a net benefit, of course.

Okay, that's what I was trying to get at.

Yes, yes, absolutely.

Yes.

All right. Great. Thank you very much.

(Operator Instructions). Tony Rizzuto, Cowen and Company.

Glad I got in right underneath the gun here.

Tony, we are not looking to run out of the room. We are here for the duration.

I know that. Listen, my question is on trade, and recently, we saw the USW petition the ITC for Section 201 relief. There was a conference call with Leo Gerard and the senator from Oregon. A few days later, the action was dropped and it appears due to lack of support from industry players. And I guess my question to you, Mike, is without the full support of the industry, what can we really expect, what can really be accomplished, and perhaps you can give us some further color as to what's going on out there?

Absolutely, Tony. That's a very good question and let me specify the major difference between a 201 case on the one hand and the WTO subsidies case that we are seeking to have the government bring on the other hand. They are vastly different things.

First, let me comment -- we applauded the steel workers for bringing that case. We weren't a part of it in any way, but, of course, we were rooting them on. A 201 case, as I think you know having followed steel and other things, it's a pretty -- I will use a term that maybe is overdoing it a bit -- it's a pretty draconian thing. They are brought very, very rarely and sometimes by practitioners of trade, it's called putting up a wall. So it ignores -- and underscore these words -- ignores the source of the problem -- and I will get back to that in a second because that's what we are targeting, of course, in the subsidies case -- and just says, look, metals flowing in -- and we think the remedy ought to be some combination of tariffs and/or quotas to address that, and that's why I think you have probably seen it makes sense to see opposition because it doesn't discriminate in terms of where the metal is coming from. And so if you are somebody who's bringing -- sending metal into the US from any country, Canada, for example, this targets you.

The case we are bringing, or seeking to have brought, I should say, is very different. It's a case in front of the WTO. It's specifically targeting the source of the excess exports out of China and ultimately imports into the US and that's the illegal subsidies that are being given in China -- that aren't available to others -- that are being given in China to Chinese producers in contravention to global trade laws, WTO rules.

As we all know, China has been a WTO member for 15 years now, and so it attacks the source of the problem rather than the result. So it's -- I'm repeating myself now, Tony, I apologize -- it's a very different construct.

Mike, can you give us an idea as to the timing here and what we should be looking at or is this imminent? Can you put some framing around that?

I wish I could answer the question. If it were our decision alone, it would have already happened. Of course, the case has to be brought by our government. It can't -- the steel workers, of course, had standing to bring a 201 case under the laws. This needs to be brought by our administration and so it's really up to them to decide whether it's a case that should be brought and then they bring it.

We've been very encouraged, as we said a couple of months ago, and we can continue to say that with sincerity by their interest in this, by the work they are doing on it, by their reaching out to us for data and such. But, at the end of the day, it's not our call and so we just have to continue -- we are continuing to work with them, but we are convinced they get it, they understand it. Without putting words in their mouth, it's just a question at this point as to whether it's brought and when. I would say, Tony, to speculate, if it's going to be brought, it should be within the next couple months.

And to your knowledge, Mike, this is something that has uniform support out there?

I don't know, Tony. I wouldn't want to lead you astray there. We've talked to a lot of people. Our task force only has two other members, as you know. That's the United Steel Workers and [Brazeway], which is a fine extrusion company. It's a customer of ours. And we've talked to lots of other folks as to what the support or lack of support would be if a case like this were to be brought. I wouldn't want to speculate. That would be -- it wouldn't be doing anybody any good.

I can understand the sensitivities. On the last call, I do remember us having a conversation that you indicated that there could be some similarities to what happened in the 1990s with this intra-government MOU. And I take it, unless I am off-base here, but I take it that this is something that is going on right now amongst a variety of players in different Western countries that have a similar concern. Is that correct?

From what we understand, you take it correctly. There's a -- I don't want to say universal because that's a big word -- but there's a broad degree of recognition of the source of the problem. It's out there for the world to see. We've spent a lot of time detailing it, but even if one doesn't do that, all one has to do is read the annual reports quite frankly and press releases of the producers and you'll see it put forth in loving detail.

Thanks very much, Mike, and all the best too in securing that additional power you need at Mt. Holly.

Michael Gambardella, JPMorgan.

Good afternoon. Just wanted to follow up on this whole trade case issue because, to me, it seems like there is a huge difference between steel filing a trade case and aluminum filing a trade case in the sense that steel, especially in the US, is a very US-centric business in terms of the producers. With the exception of ArcelorMittal, they were all domestic companies. You don't have multinationals.

And with aluminum, I would think that some of the major players, namely Alcoa, have interests in China and wouldn't want to disrupt that. Can you talk about the differences there and in terms of filing a trade case against Chinese producers in what is clearly a global market as opposed to in steel where you have the vast majority of the producers are US-based companies, not global multinationals.

Sure. I think I appreciate the difference there, Mike, as you've described it. US trade law is pretty straightforward. If a contra-available illegal subsidies are causing harm to US industry, there is basis for the United States to bring a case before the WTO. It's pretty straightforward.

As to other producers and the opinions that they may or may not have, it's not my place -- I hope you wouldn't wish me to, they wouldn't speculate about what their opinions may be, whether they might support this or not. That's outside my right to talk about quite frankly, or my ability.

Understand. All right. Thank you.

(Operator Instructions). John Tumazos.

Thank you. With the very low level of US aluminum production, the four aluminum refineries in Louisiana and Texas must have a little more room. The Sherwin refinery of Glencore has gone through reorganization. Noranda has obviously lost their smelter customer. Alcoa has taken Point Comfort down. Are there opportunities in the current market to have better raw materials terms, whether it's from the refineries or via $2 natural gas, which is highly favorable?

Thanks, John. I would agree with your last comment. $2 natural gas, given the importance of the gas price to refine bauxite into alumina is a good thing if you are an alumina producer. I'm not sure I would agree with your comment that it's necessarily better. That's going to depend, of course, at any given time on -- led by gas, but other commodities like caustic and bauxite pricing.

What your alumina cash cost is of production, of course, versus the world spot price or any other contractual price that one can negotiate. And so that changes every day. If I understand your question, sure, as you would expect, we are looking at all of these situations. As I said, we are a very happy customer of Gramercy. We've been for a long, long time. As you well know, we used to be a part owner and so we'd be very happy to continue to be a customer and -- but we are watching the situation closely because there's a lot of factors at play.

I'd say watch this space. We are clearly -- I want to assure you, if that's the root of your question -- that we are tuned in and paying attention. But for right now there's really nothing to be done and continue to take product from both of those plants as we are contracted to do.

(Operator Instructions). We have no one in queue at this time.

Okay. Thank you, Kerry. Thank you to all of you on the phone for joining us this afternoon and we look forward to speaking with you again in late July. Take care.

Thank you. And ladies and gentlemen, that does conclude our conference for today. You may now disconnect.