Century Aluminum Co (CENX) 2022 Q4 法說會逐字稿

Good afternoon. Thank you for attending today's Century Aluminum Company Fourth Quarter 2021 Earnings Call. My name is Megan, and I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to our host, Peter Trpkovski with Century Aluminum. Peter, please go ahead.

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; Gerry Bialek, Executive Vice President and Chief Financial Officer; and Shelly Harrison, Senior Vice President of Finance and/or 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 1. 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 over to Jesse.

Thanks, Pete, and thanks to everyone for joining. I'll start today by quickly reviewing our 2022 performance before discussing the improving market conditions we have seen so far in 2023. Gerry will then take you through the details of the fourth quarter and full year results, and then I'll finish with an update on our 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 downwards. At the same time, the war in Ukraine and resulting energy prices drove power prices to unsustainable levels across the world. All told, Century produced adjusted EBITDA of $144 million last year. In Q4, adjusted EBITDA was a loss of $12 million, which was 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% of 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 restart in the future. In assessing whether the conditions for restart have been met, we intend to be disciplined in our approach, and we'll 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 0 workplace injuries, our team should be proud to have reduced 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 the positive direction as we emerge from winter.

If you turn to Slide 4, you can see that global supply and 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 4 of the last 5 years with the COVID impacted year in 2020, 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 Guizhou 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 risk leaning towards larger deficits should further (inaudible) capacity cuts in Yunnan materialize or restarts in Sichuan and Guizhou continue to be delayed. With global inventories averaging below 50 days, LME prices should respond favorably if additional supply curtailment is confirmed. 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. While one of our Icelandic energy contracts does have some exposure to EU energy prices through Nord Pool, we have hedged 95% of the remaining exposure at EUR30. From 2024 onward, we do not have any Nord Pool other EU energy market exposure. Iceland energy markets remain well supplied in 2023 with hydro reservoirs near average levels across the Atlantic 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, with 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 forward strip approximating $41 for the balance of 2023.

Significantly improved supply and demand fundamentals have recently driven forward prices lower, with U.S. natural gas reserves and utility coal stockpiles, now respectively sitting 17% and 40% above year-ago levels. Increasing natural gas reserves and continued record production could continue to pressure forwards down towards spot levels 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. have driven premiums higher so far this quarter, with the spot Midwest premium above $0.29 per pound, a 40% increase over Q4 levels and EU duty paid premium returning to levels above $300 per ton. This trend is continued affirmation of our long-term strategy to focus our production in these 2 short markets, which allow us to better serve our customers and benefit from these 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 look to destock their inventories. This has been buffered somewhat by relative strength in our HVAC markets and continued resilience in automotive demand. This destocking process appears to have bottomed in January as we have 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 Gerry 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 have discussed in the past, electric vehicles use 200 pounds more aluminum on average than an internal combustion vehicle with an either larger increase in primary aluminum consumption as the secondary-based internal combustion engine block is replaced by value-added primary aluminum intensive components like battery trays, HVAC 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 a 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 Sebree and Grundartangi and completion of the Mt. Holly expansion project allowed us to offset a significant amount of the production loss from the Hawesville curtailment with total shipments last year, down just 15,000 tons from 2021 levels.

In the U.S., we finished our first stages of our casthouse debottlenecking projects, increasing our billet and slab 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 slab capacity by an additional 10,000 tons each by the end of 2024. Paired with the expected completion of the Grundartangi billet casthouse by the end of this year, we should enter 2024 with the ability to sell approximately 80% of Century's total production as value-added products in the form of billet, slab, foundry alloys or Natur-Al low carbon aluminum.

On the raw material side, we continue to see slow decreases in coke prices in Q4, while pitch prices remained stubbornly elevated in both the U.S. and Europe. We do expect coke prices to slowly moderate over the course of this year as Chinese supply is expected to increase on the relaxation of COVID protocols.

Gerry 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 prior quarter due primarily to significantly lower lagged LME prices and delivery premiums, resulting in a 16% 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 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 our last call. Fourth quarter realized LME of $2,308 per ton was down $330 versus prior quarter, while realized U.S. Midwest premiums of $470 per ton were down $168 and European delivery premiums of $499 per ton were down $89. Together, these factors amounted to a $79 million headwind in the quarter. Realized alumina cost was $397 per ton, $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 curtailment action and other headcount reductions and efficiencies contributed $18 million of 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, again, 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, $13 million of which relates to the Grundartangi casthouse project. semi-annual interest payments were $11 million. hedge settlements, net borrowing and working capital contributed $13 million, 12 and $5 million, respectively.

Now let's turn to Slide 9, and we'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 at $275 per ton or down about $225 per ton versus the fourth quarter. Lagged realized alumina is expected to be $395 per ton, 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.

Power 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 cost 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 ton. Realized pitch prices remained stubbornly high at $1,550 per ton 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 from mix and other factors of between USD5 million to USD10 million, mainly driven by the near-term weakness of billet sales that Jesse mentioned earlier. All factors considered, our outlook for Q1 adjusted EBITDA is expected to be in a range of between USD10 million to USD15 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 tons, down about 9% versus 2022, primarily due to the curtailment of Hawesville, but partially offset by growth at our other 3 smelters. From a cash standpoint, we expect to invest about USD15 million to USD20 million of sustaining CapEx in 2023. In addition, we expect to invest approximately USD60 million to USD75 million in our fully financed Iceland casthouse and USD5 million to USD10 million in other CapEx. The impact 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, 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, Gerry. 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 tons of low-carbon Natur-Al billet. The project will also increase our total foundry alloy capacity by 60,000 tons to a total capacity of 120,000 tons. All of this production will have the capability to be cast as Natur-Al, our low-carbon aluminum brand, which has total Scope 1, 2 and 3 emissions of less than 4 tons of CO2 per ton of aluminum, amongst the lowest carbon footprint in the world and less than 25% of 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 inflationary environment over the past 15 months.

Europe today is over 1 million tons short of domestic billet production with over 300,000 tons of European billet capacity curtailed in the last 2 years. Given the shortage, the Grundartangi casthouse will be well timed to supply European customers that 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 to high-quality customers in the European market and that Natur-Al 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.

(Operator Instructions) Our first question comes from the line of David Gagliano with BMO.

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. USD10 million to USD15 million is the outlook for the first quarter. And then I compare it to the spot prices and I use the sensitivities, I think on Slide 16, I think it is. The conclusion we're coming to is if you use spot pricing, quarterly EBITDA generation goes to maybe USD25 million to USD30 million or USD100 million to USD120 million annualized based on adjusting for spot for what's available, USD100 million to USD120 million annualized, is that a reasonable run rate in the world that we're in now? And aside from restarting Hawesville, what are some of the additional EBITDA boosters that we should expect as the year progresses?

David, thanks for the question. As we've said in the past, we're going to provide expectations for 1 quarter out in general for modeling purposes, we've provided you with the sensitivities as you referenced. Obviously, we'll move back in just about only a month from now, 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 mix improve from the customer destocking of inventories as we 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 it lag spot prices. So you can use sensitivity to update that. And we've seen mutual premiums come up in both the U.S. and EU. So that's yet to flow through the results. We also expect further cost pressure moderation. So energy prices continue to price below what we had in Q1. There are signs of 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 remaining Nord Pool exposure. So once you factor in the EUR30 per megawatt hour hedged, you should see further improvement to hedging from our guide as those prices continue to show contango. And then if we start to see some China curtailments, as I discussed in my prepared remarks, you could see a response on the LME side, 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 impact to the positive on the business. We think we'll be amongst the lowest cost billet producers in the world with that new casthouse. And when you pair it with big amongst the lowest CO2 footprints in the world as well, 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 2 U.S. and EU markets 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 I would just maybe ask it again. Of the ones that you mentioned on that list that are not quantified, it seems like volume mix and other maybe that line and maybe coke and pitch have more upside potential in the near term. Can you quantify potential order of magnitude on EBITDA uplift for those 2 things as we get beyond the first quarter?

I don't really want to speculate as to where pricing will go on some of those. We do think coke prices are going to relax, but it's been much more stubborn than maybe what we thought for the past 12 months. obviously, where coke prices have been historically, and there's no real reason, no fundamental change and reason why we can't start to approach those long-term historical levels. So you can start to model that in a bit, and I think you can model out the run rates there.

And on the mix side, as we said, the pricing on the annual contracts for this year on the billet side were not so different than last year. It's mainly been 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 then again, on the long term, we'll come back and talk more about the Grundartangi casthouse as we get closer to next year in terms of its impact on the business and the profitability of the business. But as I said, I think that's a material upside for us and one that we're really excited about.

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

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 the strategy there properly. Is that related in any way to Hawesville or is it more opportunistic for locking in what you might deem to be at attractive energy prices now that power prices have corrected? Thank you very much for your perspective on this.

Sure, Lucas, thanks. Well, it's relevant most immediately for Sebree because that's where our largest market exposure lies at this point. And 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 forwards right now. But we continue to believe, as you look at natural gas storage in this country, natural gas production in this country and Henry Hub has obviously come off significantly and pair that with increasing renewable generation especially as some of these new projects start to hit and stronger coal production on the back end in utilities. If you remember, this past year, we're a little bit short going into winter. This year, they look much better situated and coal piles are quite high. So we continue to think that forward (inaudible) collapse or that risk premium may collapse a little bit and come closer to spot, which could provide some opportunities for us. So most relevant for Sebree as we look to Hawesville going forward, that is also something that we can look at there. So on the Hawesville side, as I said, market conditions are definitely better than we made the decision to curtail. But we would like to see both energy and metal prices reach and then 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 or you noted rather. And 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 would be helpful to get a sense for the type of transactions that could make sense.

Yes. I think you're referencing the comment on the capital allocation page in the appendix. And obviously, as we look at capital allocation, and we 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 and improve the balance sheet from here. 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 sort of our view on how we'd use that capital going forward.

To your specific question on M&A, I think we said in the past and I stand by it is if we are looking at opportunistic M&A, we'll further look what you've seen from us in the past, these are usually probably going to 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. And so nothing really more exciting than that. But when the opportunity is there, I think you've seen it from us in the past, we're ready to act and complete transactions they offer those long-term returns.

Okay. I appreciate that. And I'll ask a final one on Slide 20. You lay out the volumes from value-add products. with the increase in '24, is there kind of good approach to quantifying how this would translate into revenue? I would appreciate your color on value-add product linked to revenue.

Sure. I think generally, if you look at this, obviously, the big gain is coming at the Grundartangi casthouse comes online. And I think you can sort of count on most of that billet going into the European market. And so you can take a look at the premiums that we've seen in the European markets on billet over the past couple of years. I think notably, that market has become much shorter, it's about 1 million tons short today with 300,000 tons of billet capacity coming offline over the past 18 months. So since we started that project, the market opportunities for it with our customers has 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 tons of additional foundry alloy capacity coming out of Grundartangi as well. So again, you should be able to look at European market prices. Obviously, they fluctuate. So I'm not going to speculate where they will be in 2024, but that should give you a good sense on the additional revenue opportunities. And from a margin perspective, I think, as I said earlier, I think you can sort of count this asset being a brand-new modern casthouse built in a low-cost [low-cal] being amongst the lowest cost producers. So you can use that to think about how the margin might look.

I will start with my pencil on that. I appreciate the color. I'll turn it over for now and best of luck.

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

Thank you. Just looking at your cost of goods sold per pound shipped excluding depreciation. It calculates to a $0.276 improvement or cost decline from the September quarter. Is there any mix effects that might have been influencing that less alloy less value-added product? And is it a reasonable expectation that power and other costs would improve in the March quarter, maybe not $0.276, 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 Gerry went through, we also saw much better alumina costs running through the results and marginally lower coke price of 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 [Ala] probably roughly flat. And then a little bit, of course, we are natural gas consumers. And so Henry Hub reducing (inaudible).

So maybe not $0.27, but at least half that much is a good guess for the March quarter...

Yes, I think, that's a good...go ahead, John.

Sometimes in the investment business, we don't know whether to buy or sell and maybe we sell half a position or 1/4 of a position incrementally a little bit at a time. It would seem like with gas falling almost to $2 a million, it's probably pretty close to the bottom. It could go negative like crude oil did 3 years ago because there's no storage capacity, but that's a pretty decent price. Why hasn't Henry Hub power fallen below $0.035 a kilowatt hour, it had been roughly proportional to the fall in the gas price and other rises and falls and fluctuations.

Yes. We agree with you, John, on this. So it does appear that there is a higher risk premium embedded in the forward Indy Hub prices than we've seen in years past. As you mentioned, if you just mark the gas price, and you can also look to falling coal prices as well, and I mentioned references to the coal stockpiles in utilities. You can start to see that the marginal cost of energy production in actuality has gone down quite significantly. And of course, with the products like energy, which can't be stored, you see that reflected in spot prices. And so the sub-$30 energy that we told you about at Indy Hub for February starts to reflect and look like the 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 and we start to have a little more certainty about what 2023 looks like. So I think on balance, we're an agreement broadly with your statement.

So is this a good enough price to maybe hedge 1/4 of the power you use in Sebree?

Yes. As I think I mentioned in my prepared remarks, it'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...

(inaudible) one part of the equation, but power is pretty low and it would certainly seem like it's possible that Hawesville comes back. As long as autos are selling and houses are getting built.

Yes. On Hawesville, as 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're going to see that energy and metal prices both reaches the same levels that work and that we can be sure that if we take the effort and cost to restart Hawesville and that we'll see the returns and it will 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 relatively, 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 weather the volatility better and be a better credit for renewable energy supplier to do project financing off your purchase contract, you would buy power from them? Is that the way you think of M&A? Or you actually think about going out and buying things to your balance sheet? Earnings have been a little volatile, so I hadn't imagine that you'd be shopping for our acquisitions.

Yes, John, I'm mostly getting put on 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's a number of opportunities for the business as we go forward. We've already mentioned the Grundartangi casthouse, and 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 registered. (Operator Instructions)

Okay. Well, we thank you, everyone, for the time... Sorry, go ahead. We'll take it. Go ahead, Lucas.

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

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

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

I appreciate that. And then circling back on Hawesville. So you noted economics better today than they were when you made the idling decision and you're looking for looks like a little bit more just clarity on, 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 for what could trigger a decision to restart the facility.

Yes, sure. I think probably the key thing you're looking for there is it's really both reach 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 decline here has been quite significant. It wasn't until 6 months ago, obviously, that we saw high energy prices. And while we are quite confident that when you look at energy storage levels in the U.S. that we do see market conditions that should keep energy prices lower for longer here. That's something you might understand. We'd like to be prudent and make sure that those are going to confirm for some period of time here. So really both reach those levels and then importantly, sustain those levels for a period of time that we can be confident before we make that decision.

That's helpful. 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 as we start a number of lines of Hawesville back in 2018. And just as a reminder, in that instance, we basically had to reline all of the pots in those 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 around than what you saw from us in 2018. But we'll give more direct guidance as we get closer to making that decision.

That's helpful. And then turning to Slide 9 and the outlook. You noted the headwind USD10 million to USD5 million negative with volume mix other, looking out to Q2 and the remainder of the year, order of magnitude, which direction could this turn positively, I would appreciate your color on that.

Yes, sure. I think, as Gerry had mentioned, the majority of this is really mix and really has to do with that billet destocking event we spoke about earlier. And we have already started to see that improve. And month-over-month orders are up both in February and then again in March. And we would expect to say in April, there's 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. And so that's the one 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 is to get into the middle or back half of the year.

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, and 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.