Century Aluminum Company (CENX) Q3 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the Century Aluminum Company Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] I would like to now hand the conference over to your speaker today, Peter Trpkovski. Thank you. Please go ahead, sir.

Thank you very much, April. Good afternoon, everyone and welcome to the conference call. I am joined here today by Mike Bless, Century’s President and Chief Executive Officer; Craig Conti, our Executive Vice President and Chief Financial Officer and Shelly Harrison, our Senior Vice President of Finance and Treasurer. After our prepared comments, we will take your questions. As a brief 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 of today’s presentation, 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. With that, I will hand the call to Mike.

Thanks, Pete. Thanks to all of you for joining us this afternoon. We appreciate your time. As always, if we could just flip to Page 3 please, I will take you through a quick rundown of the last couple of months. At first, the plan to continue to operate without any interruption, most importantly, the safety performance has been really good across the whole company during the last couple of months and we are really pleased and proud of this achievement. Running these plants safely and sustainably is always more challenging in an environment that’s different than people are accustomed to. Even the daily scheduling and execution of the work needs to be done consistent with our health and safety protocols and human nature says that simply people are at risk of focusing on too many other things versus the job at hand in a complex environment like we are dealing with today. All that means is that we will continue to remain vigilant everyday and the bottom line, with the health environment at all the locations remains under control. That said, we have got no intention at all to throttle back in the foreseeable future on any of the protocols we put in place back in March and April. And in fact, as you would expect, we are prepared at any time to tighten things up as the public health situation near any of our operations dictates. In just a couple of minutes, Pete is going to give you some detail on the industry balance pricing and other fundamentals, but let me just make a couple of quick comments now on what we are seeing directly on the ground. Our end-markets in the U.S. have continued to improve over the summer and into the fall. Most of the sectors are near or even above their levels of January and February, obviously before the impact of the health crisis. For example, the automotive and durable goods and machinery markets have fully recovered. This is all consistent with the data that you have seen more broadly. Packaging and consumer sectors have remained quite strong. Construction, on the other hand, has a bit further to go with residential quite strong and relatively weaker activity on the commercial side. In Europe, we are seeing more or less the same trends yet as you have seen the general recovery is behind that of the U.S. It goes without saying that all of this is at risk to development on the public health situation over the coming months. Looking at our own specific customers, we see similar trends. If you take our six largest value-adding product customers, for example, that group has broad exposure to automotive, to construction, to communications amongst other sectors. As we previously told you, the daily sales rate for that group of customers was down 35% in Q2 over Q1. In Q3, it was up 45% over Q2. And thus far, order rates for October and November are up a further 10% versus Q3. So we’re now moving at a rate that’s up 60% over the Q2 low and actually up 5% over the first quarter. You obviously had some degradation towards the end of the first quarter as the pandemic began to have effect. Moving along, our third quarter financial performance came in as we expected as we forecast the lower realized metal prices, coupled with higher seasonal power prices drove the vast majority of the drop in quarter-to-quarter EBITDA. As you well know, our sales contracts are priced on a two to three-month lag and in that context, the realized cash LME during the quarter was $1,550 per ton. As I said, seasonal power prices were higher as usual over the summer. More than the rest of the decline in EBITDA came from our decision to start catching up on the relining of cells at the Kentucky plants. As you’ll recall, we ceased all relining activity at these plants during the first few months of the pandemic and a variety of other items taken all together actually improved profit a bit. The financial picture, of course, is much stronger at current commodity prices, and Craig will go into detail on all of this in just a couple of minutes. Let me just make some remarks about Mt. Holly. You have obviously seen the warn notice we were regrettably fourth to issued last week. We were shocked to see the South Carolina Court’s ruling in the litigation between the city of Goose Creek and Santee Cooper. We talked to you about this, of course, over the year. First, our analysis indicated that Goose Creek had every right under both federal and state law to form a utility and to serve Mt. Holly. And then FERC agreed fully in its order issued in August, and importantly, the determination in its order said it was made with reference to both federal and state law. Lastly, the actual hearing in front of the judge strongly suggested, in our opinion, that Goose Creek’s position with the correct one. When the court’s order was finally issued 2 weeks ago, it said regrettably, the opposite. The city has asked the judge to reconsider the ruling, and if that’s not granted, Goose Creek has informed us that they plan to appeal. The city has told us they will ask the court to move quickly, but the appeal process would likely take at least a year to fully play out. Just to go back and most of you that have been following the company know all this, but as a reminder under the arrangements we have had over the last couple of years, Mt. Holly has been buying 75% of its electric power requirements from the competitive wholesale market and 25% from Santee Cooper’s on resources. Mt. Holly also paid Santee Cooper transmission fees for the power brought in from the third parties. The third-party rate for the 75% of the plants power requirement is very competitive, as we have said. It’s frankly just on par with what we pay at the Kentucky plants. The 25% we buy from Santee Cooper is regrettably the killer; it comes at 2x the delivered price of the third-party power and, thus, the weighted average price is simply uncompetitive. The evidence that the market price is competitive can easily be seen in the status of the Kentucky plants. As you know, we’ve doubled the capacity of Hawesville and added filling capacity at Sebree during the last two years; total investment of over $100 billion. And at 100% market power and at full capacity, Mt. Holly’s cost structure and revenue profile would be actually superior to that of the Kentucky plants. Regrettably, the opposite, of course, is true at the current blended power price. Just to give you a sense, Mt. Holly’s year-to-date 9-month EBITDA has been a $10 million loss and the plants will also be unprofitable in the fourth quarter. Looking at next year, importantly, the loss would be worse. On the 1 year, the average metal price, of course, should be higher, at least if you look at today’s forward prices, but this is much more than overcome by the requirement to begin relining cells even to maintain production at 50% of capacity. As you know, due to the uncompetitive power price, we haven’t relined any cells at Mt. Holly for over four years. Over the last several weeks, we have been in direct discussions with Santee Cooper and we are also speaking with all the relevant constituencies, including local, state and federal authorities. We are really hopeful now that all the parties can come together and find a common sensible solution that’s there at all. First and foremost, this includes no harm done to any other Santee Cooper customer. At stake here are 300 direct jobs and 600 to 700 additional jobs currently supported by the plant, along with half a billion of annual economic activity in South Carolina. That’s with the plant at current hot capacity. So achievement of that competitive price would allow us to restart the second potline and rebuild alignments and continuously operating, which, as I said, needs a rebuild. We would not only preserve the current jobs, but of course, it would add a further 300 jobs and an additional 600 to 700 support jobs, and then you’d get to realize the full billion dollar annual economic impact in South Carolina. It’s obviously a complex situation, but one that can truly be solved overnight with a rational logical approach. And with that, I will turn it back to Pete.

Thanks Mike. If we move on to Slide 4, please, I will briefly take you through the current state of the global aluminum market. The cash LME price averaged just over $1,700 per ton in the third quarter, which was up approximately 14% or about $215 per ton from the second quarter as we saw a strong recovery on the global economy in the quarter. Industry conditions continue to improve and the LME price has averaged approximately $1,800 per ton for the month of October, and that is a right above where the current price is sitting. In the third quarter, regional premiums averaged approximately $0.13 per pound in the U.S., a 5% increase quarter-over-quarter and approximately $120 per ton in Europe, an increase of 2% from the prior quarter. Current spot prices are around $0.13 per pound in the U.S., Midwest, and about $130 per ton in Europe. In the third quarter of 2020, global aluminum demand was down about 3.5% compared to the third quarter of 2019. In the world, excluding China, we saw a demand contraction of approximately 11.5% from the prior year quarter. This was a significant recovery from what we saw in the second quarter as manufacturing activity in the U.S. and Europe continue to improve. In China, we saw demand growth of 3% as compared to the prior year quarter. Global production was approx – was up – excuse me – up approximately 2% in the third quarter as compared to the previous year. We saw approximately 4.5% production growth in China versus the same quarter last year, which is offset by about 1.5% decline from the rest of the world in the same period. As demand continues to strengthen in our markets, we have seen LME price, continue to rally to levels pre-pandemic. We continue to see strength and support in the LME price, driven by a weaker U.S. dollar, low interest rates and global manufacturing expansion led by the U.S., China and Europe. Briefly looking at our key raw materials, the alumina index price averaged approximately $275 per ton in the third quarter, which is right about where the spot price is today. And with that, I will hand the call over to Chris.

Thanks, Pete. Let’s turn to Slide 5, and I’ll take you through the results for the third quarter. On a consolidated basis, global shipments were down 3% quarter-over-quarter and realized prices were down 5%, primarily as a result of lower lagged LME in regional projects. Looking at operating results, adjusted EBITDA was a loss of $31.4 million this quarter, and we had an adjusted net loss of $64.4 million or $0.67 a share. In Q3, the primary adjusting items were $15.4 million for the net realizable value of inventory, $8 million for the unrealized impacts forward contracts and $1.2 million for the early extinguishment of debt. Our liquidity remained solid with $169 million of funds available via a mix of cash on hand and credit facilities. As we will discuss in our cash spread shortly, in addition to refinancing our long-term debt and extending the maturity of our revolving credit facilities, we paid down about $45 million of short-term borrowings in the third quarter as our end markets continued to improve. Let’s turn to Slide 6 and I can walk you through our quarter-to-quarter bridge of adjusted EBITDA. As we forecast on our last call, lower lagged LME prices and delivery premiums, coupled with seasonal power cost increase, comprised the majority of the EBITDA reduction versus Q2 levels. The Q3 realized LME of $1,550 per ton was down $80 per ton from Q2 levels of realized European delivery premiums of $107 per ton were down $34 per ton over the same period. U.S. Midwest premiums were largely flat quarter-over-quarter. Average domestic energy prices were up over 15%, while the norm full price, which we referenced for approximately 30% of our Atlantic power needs, was up about $4.50 per megawatt hour. Finally, as Mike mentioned earlier, we began to catch up on previously deferred potlines at our Kentucky plants, which, as you may recall, we paused at the onset of the pandemic. This catch-up spend amounted to $6 million of Q3 cost and will normalize as we proceed into the fourth quarter. Looking ahead to Q4 specifically, the lagged LME of $1,725 per ton is expected to be up $175 per ton from Q3 realized prices. The Q4 realized U.S. Midwest premium is forecast to be $300 per ton or up about $50 per ton or up about $50 per ton, and the European delivery premium is expected at $125 per ton or up about $20 per ton versus the third quarter. Realized alumina is expected to be $290 per ton or up about $10 per ton versus prior quarter. Taken together, the LME, alumina and delivering premium pricing moves are expected increase Q4 EBITDA by about $35 million to $40 million versus Q3 levels. As a reminder, these forecasts contain at least one month of un-priced LME and delivery premiums. We have assumed the un-priced months at current spot values. Additionally, we expect a more levelized pot reline spend versus the higher levels required to catch up in Q3 given the cessation of cell relines through mid-summer of this year. We expect the reduced spend will increase sequential EBITDA by about $5 million in the fourth quarter. Finally, realized power prices are expected to rise based on current forward curve projections, particularly in Europe, and will negatively impact Q4 EBITDA by about $10 million versus Q3. Please keep in mind that we buy power on the day ahead market and we still have 2 months of un-priced purchases assumed in this incremental impact. In sum, we expect these items in isolation will equate to an approximate EBITDA increase of $30 million to $35 million versus Q3 levels. Okay. Let’s turn to Slide 7, and we’ll take a quick look at our major cash flow items over the last quarter. We started the quarter with $174 million in cash and ended June with $81 million. Refinancing costs associated with our $250 million note were a $9 million usage in the quarter. As a reminder, the newly refinanced notes mature in 2025. In addition, we paid down the vast majority of our outstanding U.S. revolver, which was the largest driver of our $45 million repayment usage. Finally, normal shipment timing drove a small working capital usage of $5 million during the third quarter. This concludes our prepared remarks. Thank you for your time and attention. I would like to turn the call back over to April to begin the question-and-answer session. April?

Thank you, sir. [Operator Instructions] And your first question comes from the line of David Gagliano from BMO Capital Markets. David, your line is open.

Hey, David, we can’t hear you. You might be on mute there. Still can’t hear you, David.

Hey, I think Lucas is in queue we can go on to that question and hopefully David can get back into queue.

And David, if you want to re-queue, we can try you again. And next question is from Lucas Pipes from B. Riley Securities.

We are not hearing, Lucas, either.

Let me try something here. And Lucas, if you can re-queue as well and we will go back to David. David, you line is open.

No, we still can’t hear them.

Let’s turn to John. John, your line is open.

Hey, but we have a backup line or anything else that we could try to give those questions.

Give me one moment, I will try something else. Okay, David, I have your line open, see if we can hear you now. Give me one moment.

I believe everybody on the call could hear us asking the questions, except – just for what it’s worth, but nevertheless, I just had – I really wanted to drill down a little bit. I may have missed it on the prepared remarks, I apologize. But on the Mt. Holly situation, what are the next steps and near-term? And what’s sort of the – I guess, what you would say drop and dead date when you have to make a decision to completely idle the facility or go up to 100%?

Sure, David thanks. It’s Mike. And apologies to you and also thanks for staying with it. Next, I think your question is in order. So as I have said, next steps are – we’re in discussions with Santee Cooper. Obviously, they’re going to – just based on the circumstances, they are going to be a supplier or the supplier or a major supplier in this coming year. And so we are in productive discussions with them, which is encouraging in and of itself, of course. The answer to – and that’s really, that’s really, at this point in time, to answer your question, the next step. Hard to predict where those go. And answer to your second question, if we get to, let’s call it, the end of the month of November, pardon me, that’s the time where you really have to start the early shutdown of the reduction cells of the pots. It goes without saying these plants work and how these businesses work. Each successes day and week gets more difficult. There’s product that will be produced in January and February, hopefully, that we haven’t sold yet. We have customers who are very concerned. We have employees, most importantly, and families in the community, who are very concerned. We have to order commodities, all those things can be dealt with. It’s not easy, but they can all be dealt with and we have contingency plans for everything on the hope and assumption that we can find a path to a competitive power price.

Okay. And then on the resumed potline, pot reline spending, presumably, I guess, at the Hawesville, I’m not sure though, but is there a plan to – can you remind me again what the plan is with regards the sixth potline at Hawesville? And does that potentially mitigate or offset if Mt. Holly does shut, thinking about that?

Sure. No, no. I will answer your two second – there is no connection between the two. And so this is a key point on re-launch for the Kentucky plant. There is a short-term issue, which is behind us, as Craig said, and a medium-term issue. The short-term issue is simply that we stopped relining cells, I don’t remember when it was, March or April, but during the early days of the pandemic. Somewhat because it’s got a financial cost to it, but mostly because we were concerned about, at that point in time, about having enough people to just run the cells and we didn’t want to take any risks. In essence, we didn’t want to have any activity inside those plants that wasn’t just intended to running the plants every day, setting carbon, tapping metal, etcetera, etcetera. So you know how it is, about one-fifth of the cells fail every year on a schedule, and that’s their economic or their practical life. And so you’re having a couple of cells fail every week. So we had a bunch of those built up. We had to just – we had a backlog of those. And we got that done in the third quarter. And as Craig said, that’s behind us. On the rebuild of the final potline there, we’re ready to go. And there’s some long lead time supply that you need, collective cast houses and some other cell relining materials. And so those would be a couple of months to get in. And if you were to ask, what are you waiting for? The answer is the obvious one. We’re just waiting for a little bit more stability here. 2 – 3 weeks ago if you would have asked us, we would have said, pull the trigger right after Christmas. Today, I think we’re just all going to do some watchful waiting here on the situation over the coming couple of months that probably goes without saying.

Okay, alright. That’s helpful. Thanks.

Thanks, David.

[Operator Instructions] And the next one is from Lucas Pipes. Please go ahead.

Hey, good afternoon, everybody for what it’s worth just second conference call today where there were technical issues so maybe something brought into the system. But I wanted to ask another question on Mt. Holly. Back of the envelope, it appears that maybe like around $1 billion in economic activity is on the line over tens of millions of dollars of electricity costs. I wonder if that seems roughly accurate? And then secondly, just to follow-up on David’s question. Not so much on the timing, but just kind of what are the options on the table here? Is it really just coming to an agreement, Santee or shutting down or are you – even though this municipal option kind of fell through, are you still considering third, fourth, fifth options here at this time would really appreciate your answer? Thank you.

Thanks, Lucas. In answer to just your first question, yes, the study was done by a professor at the University of South Carolina. It’s not our study. And that – the study came up with – it was, to be specific, $985 million was the annual economic activity that is in South Carolina that’s produced by the plant. So your understanding of the situation, I thought you put it, frankly, succinctly and well. Number two is, you’ve got it right on the back end – on the – pardon me, on your second question as well. At this point in time, it is all about coming to an agreement that works for the supplier that works with Santee Cooper and that they feel is fair and equitable. And of course, that can get us to a competitive price so we can rebuild those potlines and get the plant back to full capacity and make a reasonable economic return, of course, over the cycle. And so that really is it. In terms of our partners at Goose Creek, of course, we will watch with interest the legal proceedings and the reconsideration request and then the appeal of that if the first isn’t granted. They’ve been great partners. They’re important neighbors. Their city, it’s a lovely city that backs right up onto our site there. I don’t know if you know, but we have almost 5,000 acres, of which only 300 is used for the plant itself in the required buffer zone, dispersion zones. So there’s quite a lot of interesting things that could happen there over the years and the city has been great partners and will continue to be in many respects. Asking your question, I can’t – I don’t want to speculate about what you might have in mind, third or fourth or fifth options, but at that point, that really is it. I don’t want to oversimplify it but there are a lot of complexities in the current situation. But that’s it as it sits today.

That’s very helpful. And I wish you and everybody as well. Best of luck. I wanted to – in my second question, kind of get a little bit of a clearer understanding on the current state of Canadian import tariffs. There was a little bit of back and forth over the past quarter. Just wanted to make sure I understand and investors understand kind of what’s the status quo? And alongside this question, there has been a little bit of volatility in the Midwest premium. Would you be able to comment on that in the outlook from here? Thank you very much.

Of course. Thanks for the question. So on the first part of your question, the current situation is as follows. The USTR put out an announcement, gosh I can’t – I would guess, gun to my head 4, 5, 6 weeks ago. Let’s call it, 4 weeks ago, plus or minus. And that announcement said that Canadian imports of primary aluminum, unwrought, would be exempted from the tariff after September 1 as long as imports met or were lower than certain threshold amounts that USTR included in that release. You saw it was shy of 100,000 tons on a monthly basis, which would have been, which will be or would be, I should say, a meaningful significant rate reduction from the other run rate over the last year. There was –yesterday or two days ago, I can’t recall now, the official – the present official proclamation confirming that was issued, but it was simply a repetition of what USTR put out four or five weeks ago. You may ask, are the imports going to be below that threshold? And the answer is no one knows yet. Those data for September won’t be published for another two weeks or so. And so we will see. The market, to your point, one could look at the movement in the Midwest and take the position that the market perhaps believe that the imports are coming down, metal is very tight. If you were to ask traders and customers, most importantly, they would say there are not a lot of problem units in the U.S., specifically, especially, in the Midwest. You have seen the Midwest premium pickup here to a posted level of just a little bit shy of $0.13, $0.127, $0.1275 and that’s up from a low of mid-8’s before the tariff came back on Canada and then came back off. So it’s up significantly since then. It’s off from the recent high that it reached of around $0.15 and so the market for the delivery premium has, as you cite, strengthened here over the last three or four weeks.

Very helpful. I appreciate all the color and best of luck and thank you.

Thank you so much. Appreciate that.

The next question comes from the line of John Tumazos from Very Independent Research.

We realized that Century bought a lot of the assets very economically often for the value of working capital. So there is negative goodwill, in most cases, or big discounts to real value. Your $899.4 million of net PP&E, could you just explain how much is Mt. Holly? How much is in Kentucky, how much is in Iceland, how much is the carbon anode plant or real estate so we get a flavor of what would be the financial exposure if you idled or abandon Mt. Holly?

Sure, John. Right. John, so this is Craig. Thanks again for the question. I won’t break down the whole balance sheet, but just to give you the sense for Mt. Holly, the gross PP&E there is between $150 million and $175 million. And that is again, gross on a net basis, it’s roughly half of that.

So you can recall, John, it’s Mike. Thanks for the question. The purchase price that we paid for half of the plant 6 years ago was just a little over $50 million. So that puts Craig’s quantification into context.

So it might be – I am just thinking out loud, in South Carolina, 5000 acres of timberland, it’s just timber would be worth about $2,000 an acre or $10 million I am assuming the buffer land around their loblolly pine. But this is on the bay, and it’s a beautiful area and developable. So there is a chance that the idle land is worth more for development, and you are carrying it as an aluminum smelter?

John, that – your point is well taken. It’s lovely land. It’s right in the middle of a very fast-growing area. As I said, Creek has been exploding. It’s a really well-run municipality that’s really grown right up to, if you been to the plant, to the sort of south – from the south up to the west border of our property there. And there is other industry around, some good partners and customers of ours. So a good chunk of that land, as you say, is developable, but right now, we think the best use of that property is under a competitive power price to run that smelter. I mean that’s – that – under the competitive power price, if you want to just get very economic about it, that’s the highest NPV. You could get a power price canyon the same ZIP code as our delivered price in our Kentucky plants over a cycle, that plant produces a nice economic value. And so that is what we are going for there. And that’s what makes economic sense for the shareholders in our strong view.

Mike, even in the current recession, tough climate, your operating cash flow of $33 million was more than the CapEx of $11 million, which all things considered, is better than U.S. Steel or a lot of other companies. You borrowed a little bit of money and did some re-financings could you explain the practical reasons why you were a small net borrower in the nine months, even with the positive cash flow?

Sure. That is a great question, John, and thank you for the comment. There were two reasons. One is, as you may recall, in the second quarter, when did we draw on those revolvers, early in April. Thanks, Craig. In April, so early in the second quarter, we drew down on those revolvers. We didn’t think we would need the liquidity, or the cash, let’s call it, we always have the liquidity, I suppose, so that was a bad word. We didn’t think we need the cash but as we all remember, just thinking back to 2008, 2009 and concern post Lehman and about bank’s ability to fund and whatnot, we just – the borrowing costs there, or the funding costs, there are extremely low. So we took down that cash. And as Craig said, we paid off roughly half of it in the third quarter and roughly – pardon me, we will likely do the rest coming up here soon. On the other, it was our one public debt one term debt issue was coming up to its one-year from maturity. It was due on the 1 of June 21. And again, this is taking yourself back to the April, May timeframe. No one knew sort of where this thing was going. And we thought, again, out of an abundance of caution, it made sense for the shareowners to pay a bit of a premium, insurance premium, there is the way we looked at it to get that note refinanced. And so that’s what we did. There is obviously fees attached to that tender. We had a tender for the outstanding issue, we could have called it that the economics are slightly better to tender for it. And that’s why you see him put all that together and stir it up and you see that net position that you correctly described.

Thank you very much and good luck.

Thank you so much, John.

And your next question comes from the line of Paretosh Misra from Berenberg. Please go ahead, your line is open.

Great, thanks for taking my question. I was just curious, are there any major moving parts in your cost structure as you look at next year, at least the first half, I mean, except for all the things for which you provide sensitivities? And I guess related to that, have you given any thoughts on your alumina supply for next year? What kind of pricing structure are you contemplating right now?

Thank you, Paretosh, for the question. You want to – Craig, go ahead on the cost structure?

Yes, sure. So for the cost structure, I will split it into two pieces. So for the balance of the year, it should be very much like we talked about when we came out in April. As we look out to 2021, we really use our Q4 call, which we will do in January, to lay out any big changes. I think if you look from the third and fourth quarter, as we talked about, we continue to see power forwards increase. That trend could just as easily – I mean it’s pretty far in the future for our power forward, so that could just as easily revert. So I don’t anticipate any major changes coming in 2021 that have visibility to today, certainly be back to you in January for the rest.

From an operations standpoint, the big one would be assuming we are able to find a solution on Mt. Holly, as I have said, there has been no pot relining expense in that cost structure, Paretosh over the last couple of years and as, unlike some of our peers – GAAP allows you the treatment. And unlike some of our peers, we expense – we expense rather than capitalize that pot rebuild cost and so it will be a big dose of that in our cost of sales next year and a smaller amount in 2022; assuming that we can solve the power problem. So that would be the major mover amongst the plants. And answer to your second question, yes, we have concluded the negotiations for the vast majority of – frankly, for all of our – the vast majority, I should say, of our alumina supply in 2021 and even more so than 2020, the vast majority will be percentage LME priced. I can’t really quote the specifics, but what we have decided to be the fair value range of alumina as a percentage of LME. And we have said it before, I will say it again, we wouldn’t agree to any contract that wasn’t priced in that range that we define as fair value.

Got it. Great. That’s great color. And then I guess the other – I don’t know if you covered that, and I apologize if you already did. Any color you could provide on share premiums that you are seeing in the market? And any – I guess, any discussion you have had recently for next year as to how to think of that, that part of the pricing?

Yes, that is a great question. Yes, I mean the short, simple answer is they are back to about where they were, frankly, 12 months ago as we were concluding. There was another contract for this year, for 2020. I mean commodity and billet premiums went from sort of – these are all delivery prices now above the Midwest, of course. They were sort of eight to ten, plus or minus, 12 months ago. They went to 0, truly 0 or very – a little bit above 0, and they are back to high, high single digits right now. And that’s kind of what we are expecting without any major changes based on the situation today.

Got it. Alright. That’s all I had. Thanks Mike and good luck with the negotiations at Mt. Holly.

Thank you so much. We really do appreciate that.

That’s all the questions I have at this time.

Okay. We – again, we appreciate the interest, everybody has very good questions, and I hope everybody is continuing to keep safe. We will talk to you soon. Take care.

This concludes today’s conference call. Thank you for your participation. You may now disconnect.