Alcoa Corporation (AA) Earnings Call Transcript & Summary

Good morning, everyone, and welcome back to the GS Metals and Mining Conference. I'd like to welcome you all to our first fireside discussion today with Alcoa. Joining us is Bill Oplinger, Executive Vice President and CFO of Alcoa. But before we dive into the Q&A, I'd like to open it up to Bill for some opening remarks before going through some prepared questions. From the audience, please feel free to submit any questions you may have in the question box below and we can certainly answer them throughout the course of the session today. And so with that, Bill, over to you.

Thanks, Emily, and I appreciate you having us here for the virtual conference. Hopefully, we'll be able to get back together next year in a physical conference. A couple of key things that I just wanted to open with. We recently did an Investor Day. Any investor that is interested in the company should look at those presentations. I'll highlight a couple of key messages that came out of those presentations. Tim Reyes, our Chief Commercial Officer, gave a market outlook that, if I were to summarize it, is favorable in the near term and in the longer term. There's a few market dynamics that are converging in the alumina market that we believe make for better dynamics in the long term. For instance, the Chinese supply is -- the Chinese become much more focused around electric intensity and carbon production, and that limits Chinese supply, in our view. And general decarbonization trends across the industry will result in steeper cost curves, which steeper cost curves should be positive for the industry, and really a drive for green products. So Tim does a good job of reviewing that. We also have a section there on how well we've been operating over the last few years and just the overall operating discipline that we have within the system that's provided by our Chief Operating Officer. But probably most importantly out of all, our Innovation Officer discussed 3 technologies that we're working on. The first is the ELYSIS technology, which is the joint venture with Rio Tinto. It's a zero-carbon process for generating -- for making aluminum, and we have a discussion there. We also talked for the first time ever about ASTRAEA. ASTRAEA is a process that we are developing that takes scrap and converts it into ultra-high purity aluminum. And then thirdly, we discussed what we call the refinery of the future, which is a suite of process improvements that decarbonize the alumina refining business. So it uses mechanical vapor recompression, which we've announced already, and potential electrical calcination, which takes a portfolio of refineries that we have that's the lowest carbon-producing portfolio in the industry and will make it even lower carbon. And the important thing to know out of all those things is that the company is in a significantly different position today than it has been over the last 5 years. Some of the issues that our company started with 5 years ago have been largely solved. The portfolio is in better shape. We announced a portfolio review back in 2019, and we've executed consistently on that portfolio review. In addition, the balance sheet is in much better shape than it ever has been. Proportional net debt is below our target range. We announced returns to shareholders in the third quarter earnings release, so we've initiated a dividend. We have 2 active stock buyback programs. So the company is really positioned for success over the next few years as we develop these new technologies. So Emily, that's what I had for opening comments.

Great. Thanks, Bill. And I think in my earlier remarks this morning, I did say that Alcoa, today, is unrecognizable and definitely not the Alcoa that we've seen in the past. So it's been an incredible journey, and it's fascinating to see how both the macro and the micro is certainly shaping up in your favor.

Thank you.

Of course.

Maybe with that sort of backdrop, let's start big picture, actually. Let's talk about the aluminum markets. It's been fairly volatile over the last couple of months, but maybe start through on the demand side of the equation. Aluminum is clearly very important for the green transition and the lightweighting of vehicles. How do you guys think about what you're seeing for demand, both nearer term and longer term. Are there any impacts from the Chinese property markets potentially slowing next year? What are the sort of puts and takes in the Alcoa equation?

Lots of puts and takes. So if we think about -- near-term demand has been very good in 2021, double-digit demand growth globally. Every major market, every major industry, we're seeing some level of demand growth in 2021. Demand in our industry has never really been much of a problem. It's been, to some extent, the supply side of the equation. But let me stay on the demand side. if you step back and consider that aluminum is a big part of the solution of decarbonizing the world. Aluminum is used where you need strength or you need lightweight applications, and so aluminum is a big part of the solution going forward. Some of the places that you see that very, very specifically is in automotive applications. We think that in electric vehicles, whether they're battery electric vehicles or hybrid electric vehicles, per-use application is about 100 kilograms of more aluminum used in electric vehicle versus internal combustion engine vehicle. So we see demand growth in the automotive space continuing. In the near term, there has been some issues in demand in automotive. We've been able to get through that because we've been able to transfer some of those products into continuing high-margin products in other parts of the industry. So as you then consider the long term, we continue to see, as I said, demand growth in automotive. The property and construction industries, continued strong demand growth over the long term. And packaging has been a great part of the business also. So really see this confluence of factors that, in the near term, are generating strong demand coming out of pandemic. But also longer term, as we see the decarbonization of the world, we think that demand will be strong for aluminum.

That's helpful. And then maybe switching gears to the supply side. A part of the reason why the aluminum markets haven't been in such a great position historically is because there has been a very -- has been great oversupply of aluminum in the world. Maybe talk a little bit about how that is changing. There's clearly been some capacity constraints in China that we've seen recently that has put pressure on pricing. And then maybe talk about a little bit about sort of the restarts that Alcoa has recently announced. And is there a potential that we see more of that happening ex China?

So the recent dynamics in the market, there's -- as I said, on the supply side, there's really been a number of factors that have driven supply constraint. And we're seeing a lot of that in China, for instance. In China, there's 2 primary factors that we believe will drive constraints on future production. The first is the focus around electric generation and the use of electricity, the generation of carbon. So we believe that, that focus, the decarbonization of China will drive them toward reducing increased supply. And in the near term, what we're seeing is the dual-control system on electricity usage and intensity and consumption has driven them to constrain supply. So it's the combination of the long-term carbon decarbonization in China and the near-term focus on electricity usage. Something like 80% of their capacity is coal-fired. That's just not sustainable in a decarbonized world. Another recent phenomenon, a very recent phenomenon. Just a month ago, we put out our view of capacity underwater with metal prices at $3,000 a ton. Back on October 15, we said that, globally, with the exception of the Spain smelter in our portfolio, there is no capacity that's cash negative. Just fast-forward a month with metal prices having come down, our view is that around 1/3 of the Chinese smelting capacity is currently cash negative at today's prices. So even with what is historically fairly strong aluminum pricing with high input costs, high electricity costs in China, 1/3 of that capacity, we believe, is cash negative. Now let me transition to some of the restarts that we've announced. Two restarts that we've announced. The first is down in Brazil. It's a great facility. It's a facility that's good technology, has great workforce in place because it's co-located with the refinery. The U.S. dollar is very strong. But the real key to us restarting that facility down in Brazil, the Alumar facility, is that we were able to get a midterm power contract, 100% renewable, so it's a renewable energy contract that is very competitive. Positions that facility to be able to run for a long time and generate good returns. It will take us about a year to restart it. I think we put out an estimate of around $100 million of restart costs, but it's a great facility. And as I said, it's co-located with the refineries, so very low transportation costs. And then lastly, we have some bad credits that we're able to monetize. It's just kind of the icing on the cake to restart that facility from a cash perspective. In the case of the Portland restart, those are spots that are in addition to the facility -- in the facility that had been curtailed for quite a while. Given the current market economics and the fact that we are also able to get a short-term power contract that solves for the restart of those spots, we went ahead and decided to go ahead and restart those. Globally, when producers like us are considering restarts, you have to consider it takes time. Generally, to restart a line, it takes up to a year to restart a line successfully, and it takes money. And you've seen from our ABI restart, the Portland restart in 2017, the Warrick restart and now the Alumar restart, they generally cost about $100 million. So as suppliers are considering future restarts, that's what's being baked into their analysis, I believe.

Great. And then maybe shifting gears to alumina. I think a lot of our investors are aware that you're an aluminum producer, but alumina can be a little forgotten. We've also seen a fairly meaningful rally but a little bit of a pullback in alumina pricing. What do you think has driven that? And how should we think about the alumina markets over the next 12 months?

You bring up a good point. Investors should understand. And as you get to know us better, we're long in bauxite, we're long in alumina, and we're long in aluminum. Bauxite and alumina, we are part of a joint venture with Alumina Limited, but we're still long in all 3 products. So we like that long position as we go forward. What's going on in the alumina market. In the near term, we saw, in the September, October time frame, and this is not unusual for the alumina market, the dynamics of the alumina market are such that inventories can't be effectively kept. Alumina doesn't store well. So when you see a near-term supply issue in alumina, you can see very quick run-ups in alumina pricing. So what we were seeing in the September and October time frame, in the Atlantic region, there was a couple of supply constraints that occurred. First of all, the Jamalco facility had a fire at their powerhouse that took about 1 million metric tons off-line. We had an issue down in Alumar, where our unloader had a failure. So we're in the process of remedying that. And then another supplier had an issue due to hurricanes. So the Atlantic was short. In the meantime, the Pacific, we saw some curtailments in China. That drove a period where prices were very high. And some of those constraints in the near term have been resolved. We're back up and running in Alumar. We've got full capacity up and running at our Alumar facility. So that's taking a little bit of pressure off the Atlantic region. Prices have come back down to about $400 a ton.

Great. Maybe coming back to the company itself, and I think capital allocation is a bucket that -- is a topic that we do want to talk about where you've made significant process. Let's start with the balance sheet. I think over the last 12 months, the balance sheet has changed very significantly, helped by strong alu pricing. You've made some pension -- additional pension contributions. You were successful with your asset sales program. I believe, previously, you did have a cash target for the balance sheet. I think that was about $1 billion. You had a net debt target of $2 billion to $2.5 billion. Maybe talk us through how you're thinking about those pieces, and then we'll touch on your announcement from earlier this morning and what you've been doing with the pensions as well.

You're now allowed these multipart questions?

I'll come back and remind you if you forgot.

I had to take a note on that. I could talk all day about the balance sheet, and I'm just super proud of the progress our company has made on our balance sheet. While I could talk all day about our balance sheet, I think we're going to stop talking about our balance sheet in the future because our balance sheet is largely fixed. At one point, our company had roughly $3.7 billion of proportional net debt. When we think about proportional net debt, that's the sum of funded debt, pension, OPEB netted out against cash, all of which is our share. We back out the impact from Alumina Limited on those pieces. So we had a high of $3.7 billion. Our proportional net debt ended up at $1.7 billion at the end of the third quarter. Given current market conditions, it is improving upon on that. So the balance sheet of the company is in great shape. Funded debt of, what, roughly $1.8 billion pension, and OPEB has come down sharply. We've been laser-focused since really November 2, 2016 trying to fix the pension, and we could talk for hours about how we work to fix the pension. But as of today, our U.S. pensions are greater than 95% funded. Our qualified plans are in great shape, and you saw the announcement today of a further annuitization. I'll get to that in a second. When it comes to the broader question around capital allocation, we've cleared the runway over the next 4 or 5 years of major spend on pension and to a lesser extent on OPEB. So not a lot of big contributions in the pension like we've made over the last 5 years. We don't need to make those over the next 5 years. In addition, we don't have maturities -- debt maturities until 2027. So between now and 2027, no large debt maturities that are coming due. So that allows us to start to -- essentially, we've changed our capital allocation program. We said, "Hey, we want to maintain a strong balance sheet." The balance sheet today is strong, and it allows us to focus on the last 3 parts of capital allocation. First is returning cash to shareholders. Again, these are not in any particular order. Second is repositioning the portfolio. Repositioning the portfolio does cost money from time to time. We've been able to fund that over the last 5 years with asset sales, but that is a second capital allocation priority. And the third is positioning the company for growth. In the Investor Day, we laid out a series of technologies, 3 technologies that will position our company to really succeed in the future, and we want to position ourselves to be able to capture that growth in the out-years. Now let me come back to the announcement that we made today. We announced another $1 billion of annuitization out of our U.S. pensions. The thinking there is that we still have a fairly large gross liability. Our net liability has gotten very small on the pensions side because our pensions are largely funded. But with having that gross liability, there's still risks associated with that gross liability, and we're derisking the plan. So $1 billion goes to Athene, and they will manage that pension liability going forward. In the rest of the asset portfolio, we are transitioning our asset portfolio to be more focused on hedging the interest rate risk and therefore inoculating the rest of the asset portfolio and taking further risk out of the gross liability. So it's been a relentless focus. It's great to get another $1 billion off the balance sheet. And the annuity market has been very competitive, so the pricing looks very good, very happy with it.

Maybe as a quick follow-up before we move on to the other 3 buckets of capital allocation. With the annuitization, I know you mentioned a P&L impact in the press release. But anything as it relates to cash flows that we should be thinking about?

No. We have over $1 billion of prefunding balance that's included in those numbers that we gave you as far as a 95% funded ratio in the U.S. plans, and we're using a little bit of prefunding balance as part of that annuitization. But we will have, after this is done, still over $1 billion of prefunding balance built into the plan. So we have tremendous amount of flexibility built into the pension assets today.

Great. And then moving on to capital returns. This is something that people have been very excited to hear at the third quarter result last month. Maybe talk through how we should be thinking about the decision to do both the dividend and the buyback program. From an internal perspective, any thoughts around a target yield or payout ratio that can help frame out how investors should think about the execution of that buyback program?

A lot of thought went into it, as you can imagine. And let me give you the background of the thinking. We're in a cyclical commodity business. And right now, prices and cash flows are strong. We wanted to send a signal with the capital allocation -- with the capital returns that we announced. First signal that we wanted to send is that by having a dividend, we are trying to tell investors that we are committed to returning money to investors through the cycle. And we believe that our portfolio is stronger today than it was 5 years ago and that our balance sheet is significantly stronger than it was over the last 5 years, having a dividend assess the market that we think we can pay that dividend through the cycle. We wouldn't have announced it if we didn't feel confident that we could pay it through the cycle. The buyback is -- gives us the flexibility to return cash to shareholders over time as we see cash flows come in. and we can return that to shareholders via the buyback system. And we had $150 million remaining on the first authorization. We've authorized -- we've received authorization from the Board for an additional $500 million, and we will execute that as the market allows us.

Great. That's very helpful. We do have a question from the audience just related to the balance sheet for now, so we'll might take that. Can you speak about your conversations with the ratings agencies so far? Do you have a path or a target to achieve investment grade?

Yes. Let me explain how I think about rating -- the ratings and investment grade. I've been pretty consistent about this over the last 5 years. We target an optimal WACC. We look at what the -- what we believe is an optimal WACC, and we therefore target an overall indebtedness level to minimize that WACC. That changes over time because the industry changes, but we're very focused on reducing our cost of capital, simply because we think that maximizes firm value. If that results in us being investment grade, that's great. We would be happy, if that was the case. If it results that we're a BB+ where we are today, that's fine, too. We're not overly focused on becoming investment grade. I think our balance sheet today, I think our market fundamentals, I believe the way we've positioned this company should make it an investment-grade company, but that's not for me to say. That's for Moody's and S&P. And we target running the company with the lowest cost of capital. And if they say we're investment grade, that's great. If not, that's fine, too.

Fantastic. Shifting gears to growth. I think at the Investor Day a couple of weeks ago, it was interesting to hear some of the new opportunities that your new balance sheet has now afforded you to take a look at. So I think you've got growth spend that's currently baked into your estimates reverting to about $75 million to $100 million per year, and you've also outlined your sustaining CapEx plans as well for the next 3 years. I think some investor comments from some of our investors conversations, however, I think you've also discussed those 5 new innovation projects: ELYSIS, your MVR, your refinery electric calcination, ASTRAEA and HPA. And then I think some of the concerns that we've been receiving from investors is how should we really think about the sequencing and the cadence of all that spend. Is 2024 the start of a new CapEx cycle? Do all of these projects hit at the one time? How is Alcoa thinking about the capital outlay, not just in the next 3 years, but over the 5 to 10 years?

Wow, a lot of questions all baked into a single question. The -- we put out an estimate of return-seeking capital that will be between $75 million and $100 million, depending on what year it is. Those projects -- and just I'm going to clarify one word you used. And those are not necessarily specifically growth projects. They're return-seeking projects. So when we look at those return-seeking projects, they can be cost savings. They can be incremental creep production. So it's potentially both of those. These are fairly small projects. They are fairly high-returning projects. Typically, you see an IRR greater than 20% on these projects, and so we will continue to invest in those. We'll continue to invest in creep opportunities in plants that are very well positioned on the cost curve. So you've seen us talk about potentially creeping parts of Quebec. We invested in a furnace, a recycle furnace in motion up in Norway. So in plants that are low on the cost curve, we will continue to invest in high-returning projects on creep. You hit on the 5 technology programs that we have, and I would classify them slightly differently, but let me talk about each one. We have ELYSIS. It's the partnership with Rio Tinto, zero-carbon technology progressing towards a 2024 time frame where we will have a commercialized package. We have ELYSIS operating today in Quebec, and they're operating effectively. And so we will be ramping up the size of those cells over time with a target of having a 2024 commercial package. We announced ASTRAEA. ASTRAEA is a huge technology change that will revolutionize the post-consumer scrap industry when it works. And the view on ASTRAEA is that we're able to take Zorba, which is a dirty scrap and convert it into ultra-high purity aluminum. And so that's a project that we'll be working on over the next few years. In addition to that, we've announced the refinery of the future. The refinery of the future has a couple of projects underneath it. The first is electric calcination, and the second is mechanical vapor recompression. Mechanical vapor compression, we're a little bit farther along on that technology. It's a proven technology outside of the alumina refining industry, and it allows us to decarbonize the refining process. Same situation in electric calcination. It's a little bit further off into the future. We have the lowest carbon alumina product out there, lowest carbon-emitting alumina product because we're largely gas-based. We're looking to take that and actually take the carbon intensity down through those 2 processes. And lastly, you alluded to our investment in a high-purity alumina venture. We see high-purity alumina as a very fast-growing, higher-margin market that is a natural adjacency to what we do in our refining process. I would say, as we consider those 5 -- 4 or 5 technologies and projects, each have very well-defined stage gates, and each will be seeking financial returns. We're not necessarily doing these just to lower our carbon footprint. We think we can generate strong financial returns on all of those projects. And then the culmination question you asked is, does it mean 2024 is a new CapEx cycle for us. We'll see. If all of these processes work, if all of these technologies work, I think our investors will be thrilled for us to spend money on them because they'll have great financial returns.

Great. So I think just to summarize at this point in time, the return-seeking CapEx is the $75 million to $100 million. And then as we -- as you proceed through different parts of commercialization and things that make financial sense, at that point in time, those additional investments may be made.

And just to put a fine point on it, very disciplined stage gates on all of those projects, dispassionate financial review of stage gates of those projects, and we'll make the right decision.

Fantastic. Maybe shifting into portfolio repositioning. I know you mentioned you're still about halfway through both the alumina and the aluminum side of the portfolio repositioning there. But if you're able to discuss the San Ciprián smelter, I think that's a process that is underway. Any sort of update that you'd be able to provide as to how the San Ciprián smelter decision-making process is tracking? And any rough time line in place to rate your resolution there?

Let me take the San Ciprián question first and then go back to the review. San Ciprián, the situation in the San Ciprián smelter is that the energy situation in Spain just fundamentally makes it unviable to smelt aluminum in Spain. That plant is unviable today with the energy where it's at, and we need to have a solution for curtailing that facility. We've been working toward that solution, but we don't have a solution yet for getting that facility curtailed. We -- and when I say that facility, I'm specifically meaning the smelter in this case. And we put out an estimate that the fourth quarter would be about $100 million impact from the higher energy costs in Spain. So just fundamentally, that facility, the smelter is unviable, and we need a resolution of that. We continue to work on that, and there is no time frame, Emily, for us to have it resolved. So we'll update you with more information as it becomes available. We then go back up to the review question. We announced a 4 million metric ton refining review, a 1.5 million metric ton smelting review back in 2019. We've consistently executed on that. We curtailed the Intalco smelter. We repowered the Portland smelter, and so we continue to take action there. I want to make sure it's clear to you and to everyone who's listening. A lot of times when people talk or companies talk about a portfolio review, it automatically means closure or curtailment. That's not the case. In our case, it can be fixed close or sell. And we've shown the ability to do all 3. We announced -- as part of the review, we announced the restart of Alumar, the Alumar smelter. So that was one where it was curtailed. We reviewed it, financially viable to run the smelter now that we have an energy contract that is low cost and low carbon. So we'll continue with that review over time and more actions, more announcements in the future.

Great. And then last one we have on capital allocation is just around M&A. I know you've got a fairly attractive organic pipeline announced, but anything that you would be considering from an inorganic growth perspective?

We consider everything that is out there. We'll look at opportunities to create value for our shareholders. We've not been very busy on the acquisition side over the last 5 years. We've done a divestiture or 2 over the last 5 years. But wouldn't rule it out, Emily, but very focused on the 3 things that are in our capital allocation model, right? So returning cash to shareholders, repositioning the portfolio and positioning the company for growth. Doesn't rule out M&A but focused on doing those 3 things.

Great. Now shifting to something more exciting, and that's, I guess, ESG. Alcoa does sit very favorably on the carbon intensity curve relative to the global average aluminum smelter. Maybe talk us through your positioning there. What gives you such a great position in that curve? And then I'll come back with follow-up questions.

The ESG story is a lot of fun to talk about for Alcoa because we're just really naturally well positioned, and we can talk for a long time. A lot of times, people focus on the E part of ESG, but the S and the G part process is just as strong. When you consider the E part of ESG, well positioned from a carbon perspective in refining. And we've laid out a pathway to get better positioned, well -- pretty well positioned from a smelting perspective. In the near term, we're looking to go from 78% renewable energy to 85% renewable energy. We get there by doing things like the Alumar restart, which is 100% renewable energy, wind contracts in Norway. So we repowered the Norwegian facility up in the northern part of Norway using wind contracts, so well positioned. It culminates, on the east side, with an announcement of an ambition towards a net zero by 2050. We really discussed internally that commitment and that ambition and really feel that we're the company in the aluminum space that has the opportunity to get there and can lead the industry towards a significantly decarbonized world. Why do I say that? We've got the technologies on the refining side, the electric calcination, mechanical vapor recompression. We have the ELYSIS joint venture. That will be a zero-carbon process when that works. We've announced ASTRAEA. ASTRAEA uses scrap and should make high-purity aluminum. So really well positioned to meet our 2050 ambition for net zero in 2050. We then go on the S and the G side. Our industry over the last 5 years has seen a real focus around the social aspects of the industry. Our industry is really on the spear point of all ESG-type issues. So impoundments, we've invested, in our comments, and I believe that we manage our impoundments very effectively. Community relations, so we've invested in the community relations side, you can never do that well enough, but we're very focused over there. And then if we get to the G piece, governance -- the governance of our company. When we started back in 2016, we had a tremendous focus on setting the company up for strong corporate governance, separated the Chairman and the CEO. That was important to us. That model has worked great. We had -- we have a non-staggered board. We had proxy access from the very start, so the governance angle is really strong. So from my perspective, the convergence of the fact that the world is more focused on ESG issues, and we do that really well, is going to add -- it gives us an opportunity to succeed in the future.

That's great. Bill, I do want to touch on your sustainable line of products out there. They are a lot more lower carbon, then you're already a lower carbon portfolio. But maybe talk us through the 3 different products you've got there. Have you seen an increase in demand for these green or lower-carbon value-added products in the North Americas and Europe? And any sort of interest that you're seeing emerging from specific end markets, end market bases, whether that's the OEMs -- auto OEMs, packaging, other consumer industries that do seek this kind of a product?

So we are the -- we have the broadest suite of low-carbon products in the industry. Nobody can match the suite of products that we have. We've got ECOLUM, ECODURA and EcoSource. ECODURA is a scrap-based product, so we have a scrap content there. ECOLUM is the product that comes out of low-carbon electricity, so renewable electricity in the smelters. And EcoSource is our brand for our alumina that is low carbon. When a smelter is considering how they can become lower carbon, one easy solution is for them to buy our alumina as alumina is the lowest carbon emitting out of any of the major producers, so I think we're well positioned there on the products. As far as demand goes, we are seeing the demand for green aluminum grow rapidly, but it's from a very small base. There are many providers of green aluminum out there, so they're in the Western world. There are many people who can meet a green aluminum spec. We're starting to see that growth coming from -- in places, for instance, like the automotive sector. High-end automobile is very focused on the carbon footprint, so we're seeing that demand. We've seen it from the electronics industry, the Apples of the world who are looking for a low-carbon aluminum. So that's where we're starting to see the demand growth.

Great. And then as a follow-up, any kind of price premium that you're able to see from these products?

Price premiums today are small. But as you start to see the demand grow, we're trying to position the company to get a premium on those products. They are clearly a premium product. They provide benefits to our customers that they can't get through normal aluminum or normal alumina, so we believe we should be able to drive a premium for those.

And one question from the audience is just around what are you seeing in terms of demand for products that use more scrap? I know you obviously announced the ASTRAEA project at the Analyst Day. Was that part of the decision-making process to pursue a route that includes more recycled material in what you're selling?

As we look out into the future, there will be strong demand growth for both primary aluminum but also for secondary aluminum. We're not large players in the secondary aluminum process or industry at this point. We do process some secondary aluminum in some of our smelters that the cast house are configured to be able to take secondary aluminum. But the ASTRAEA technology is a complete game changer that would allow us to take very low-level scrap, very dirty scrap called Zorba and process it into high-purity aluminum. So yes, it was part of the process for us to announce that, that, as we look forward, secondary scrap will become more important. In the case of ASTRAEA, what differentiates it from just a secondary remelt is that it can use post-consumer scrap, which is a lot harder to process than post-industrial scrap. Right now, the scrap loops for post-industrial scrap out of automotive stamping plant or an engine plant is pretty well defined and pretty well positioned. But in the case of post-consumer scrap, it's an opportunity for us to be able to solve the issues there and generate a return.

Fantastic. Well, I'm not seeing any more questions from the audience, Bill. I'll turn it back to you for any closing remarks.

I think we hit on most of them, Emily. I mean, I would just remind folks to take a look at the Investor Day presentations. We're a significantly different company than we were, as you said, over the last 5 years. The balance sheet is in better position. The portfolio is in a better position. The market dynamics are very strong and -- for both the near term and our view for the long term. So the company is positioned for success as we go forward. I appreciate Goldman inviting us to the conference and giving us an opportunity to talk.

Fantastic. Well, thanks again, Bill, for joining us today. With that, this concludes our session with Alcoa. Please stand by for our next panel with Freeport at 11 a.m. Thanks, everyone, for joining.