Century Aluminum Company (CENX) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to day 2 of the Goldman Sachs Global Metals & Mining Conference. I'd like to welcome you to our next session, which is a panel focusing on decarbonizing the aluminum supply chain. Joining us today, we have Jesse Gary, President and CEO of Century Aluminum; Nick Snowdon, our base metals and bulks commodities research analyst; and Brian Singer from our sustain research team here in New York. So interest in aluminum has certainly been very high recently, notwithstanding the recent volatility in aluminum prices. But more importantly, we have seen a transition and interest in aluminum following renewed -- sorry, not renewed interest, but new interest in the green transition and how aluminum plays a role in decarbonizing the economy. But that said, aluminum has its own decarbonization journey in and of itself, so certainly a very interesting setup for investors who have been following along this path over the last 12 months. But before we get into questions, as a reminder, I'd like to let you guys know that you more than welcome to submit any questions you may have via the ask a question button on the top right-hand side of your screen. We'll have some prepared questions, and we'll take audience questions throughout the course of the session.

So with that backdrop, let's get started. Nick, I'll start with you. You've long talked about how aluminum is both a cause and cure for climate change. With the green transitional drive, an increasing demand for aluminum, yet production of the metal as a whole is very carbon intensive. Could you discuss how global climate policy today is already impacting the ali markets? And maybe touch a little bit on what has driven the recent volatility in aluminum prices? And should we continue to expect that volatility over the next 3 to 6 months?

Sure. Yes. And thanks for having me on the panel. In terms of the first question regarding the impact of climate policy on the aluminum market. Yes, I think essentially, what decarbonization policies have done is create a paradox for the aluminum market. And that is, on the one hand, aluminum is clearly a green metal. It's used in higher intensity in greening technologies than kind of previous technologies. So there's a strong demand benefit to the market. But at the same time, aluminum production is the most cold intensive metals production process. And to marry the 2 through the green transition, ultimately requires significant investment on supply side of the aluminum market in decarbonization of that production process. Now to achieve that, we think that the only kind of path is by significantly higher prices. And we think we're very much in an early innings of that story. When we look at the outlook for aluminum fundamentals with that decarbonization paradox in mind, what it means in the micro is that for the next 3 to 4 years, at least, we see very constrained supply trends, both in China and the west and a reasonably healthy demand environment that together will generate very large global deficits and a path towards scarcity risk on inventory. So ultimately, it's a market underpinned by tightening inventories and ultimately, higher prices in that context. Now that sets the broader theme. In terms of the kind of recent volatility that you spoke about, I think that's somewhat removed from the kind of medium-term story that we've just talked about. That episode, the spike in aluminum price from mid-September through to mid-October and then the sharp pullback, I think is very much focused on a kind of power scarcity concern in China that fed into a rapid move higher in coal price and in turn, aluminum price. And then when Beijing stepped in to solve this problem by significantly increasing domestic coal supply and also mandating a lower coal price, that generated a pretty sharp sell-off in the aluminum price as well. So I think it's very much a kind of power scarcity driven spike episode that shouldn't really distract from what is still an extremely compelling medium-term bullish story for aluminum. But I think the final point to make is, right now, the aluminum market has entered a slightly softer phase. We're seeing inventories in China build modestly. The arb is closed, and that means less metals going into China. So there's a bit more in western markets. I think that's a reflection of the price advantage. I think consumers in China have destocked or starting to destock because of high prices. And that is generating a negative influence on the visible market. There is also some short-term effects from the auto sector and aluminum producers. As a result, diverting production from kind of semis products focused on the auto sector back to P1020, and that's generating a bit more supply. But these are short-term effects that we think will moderate into next year, and the market will retighten. And key message is that medium-term bullish decarbonization deficit story will kind of regain dominance over the kind of price path.

Thank you, Nick, and that's a really great segue maybe into bringing Jesse into the conversation now. Jesse, there are a couple of different ways to decarbonize the aluminum smelting process. And without changing the chemistry of that smelting process, the easiest way to reduce carbon emissions in this -- in the ali supply chain is to really be using a more renewable energy power source. Can you talk through your company's portfolio, you've got about 1 million tonnes of capacity between the Nordural smelter in Iceland, and you've got 3 smelters in the U.S.? Maybe share what the energy resource breakdown is there, the emissions intensity of your portfolio relative to the global average and where the opportunity is to further reduce carbon emissions at Century?

Sure. Thanks, Emily, and thanks for having me here today. And I think you're right on. The biggest opportunity in the aluminum space is really on the energy side, and I think we'll get into that a little bit today. But just to speak with -- start with our own portfolio. So as you said, we operate 4 smelters in the U.S. and Europe with operations in Kentucky, South Carolina, Iceland and the Netherlands. We're the largest primary aluminum producer in the United States, and we've got ongoing expansion projects at Hawesville, Kentucky and Mount Holly, South Carolina smelters. Our product mix consists mainly of billet, high-purity and foundry alloys in the value-added space and then, of course, P1020 into the marketplace. We're the largest domestic supplier of billet to the U.S. market and the only volume producer of high-purity aluminum in the North American market. In Iceland, the Nordural smelter supplies P1020, foundry alloys and natural low carbon aluminum to the EU market. We also recently announced construction of a new billet cast house there that will supply low carbon billet to the EU market starting in 2024. When that's complete, that means that Nordural's product mix will be 80% value add. Overall, we're very focused on serving the short U.S. and EU markets with compact, reliable supply chains and increasing our value-added product mix, including green aluminum products. So then breaking it down further into our energy mix and kind of the topic de jour today, with respect to the greening of the aluminum space. I'll start with Grundartangi, where we really have world-class green operations. So that smelter produces aluminum with Scope 1, 2 and 3 emission levels, around 4 tonnes of CO2 per tonne of aluminum produced, which is world-class. We certified at that level for our Natur-Al product. And then outside of the Natur-Al product, all that aluminum is still very green. We just don't certify quite down to that 4 tonne of CO2 per tonne of aluminum level. The energy mix there really helps that facility be world class. So it's 2/3 geothermal, 1/3 hydropower, and we recently announced, actually yesterday, that we're looking to add wind power to that portfolio. In Kentucky, we've got a really quickly greening energy mix there. So for both our 2 Kentucky smelters, we take power from the MISO Energy Grid, which uses a mix of fossil fuels and green energies, mainly solar and wind. At any given time, that mix can change. So we see periods where we'll be close to 50% renewables in Kentucky, powering those 2 smelters. But on an annual basis, right now, it's around 25% renewable in that energy mix. Probably more importantly, we're seeing the speed of the conversion there and really it's pretty true across the U.S. right now of significant additional renewable penetration into the marketplace. So just for instance, in MISO, we've gone from 5% renewables to 25% renewables in the last 5 years alone. If you look at the ongoing generation mix that's coming online, we expect that over the next 5 years, we could get to 50-50 in terms of renewable mix in Kentucky. South Carolina is a similar story there. We're buying from the state-owned utility, Santee Cooper, but they've got a product mix, today is about 10% renewable, and they've announced plans to substitute current coal generation for renewable generation over the next 5 to 10 years. So just kind of wrapping it up, overall, our carbon footprint, we estimate is about 50% of the industry average. And going forward, we're very focused on where we can make the biggest changes in the short term. So for us, that's energy mix, first and foremost. And that's either through continued renewable penetration into the grids from which we take. But we're also looking at a variety of sort of behind-the-meter projects where we would do standalone solar or wind deals that would directly supply the smelters, and then we would balance with market powers. And then finally, the third pillar and our green transition will be to include increasing amounts of scrap into our process. So -- and with the focus, I would say, on post-consumer scrap, which the way we look at it has basically a 0 carbon content in that post-consumer scrap because it's been used. And so as we add that into our mix, we can lower our overall carbon content from the primary side. And we think by doing so, we can bring the total portfolio down very significantly from where it is today and sort of play our part in where the industry needs to go.

Got it. That's really helpful. Maybe just continue on that line of discussion on your Natur-Al product. Maybe discuss a little bit more about what differentiates the Natur-Al. And I think you've also got a Natur-Al ZERO product from the other product that is also being produced at the same smelter in Iceland. I know you mentioned there wasn't too much in the carbon footprint differential lab. But perhaps what's the difference between certifying that product versus your standard product? And perhaps how you're seeing global demand evolve for low carbon and carbon neutral ali products.

Yes, sure. That's great. So yes, as I mentioned, really, when you look at Nordural, because our energy mix is 100% renewable, all of that aluminum is really low carbon aluminum when compared to our competitors or when compared to the global industry average. But if we start to break down the carbon content across Scope 1, 2 and 3, for the Natur-Al product, we certify that all of those, Scope 1, 2 and 3 are at or below 4 tonnes of CO2 per tonne of aluminum. And sort of the differentiator with the marketplace, I would say, is when you look at a lot of our competitors' low carbon products, they are focusing on Scope 1 and 2 and not including the Scope 3 emissions. And so that we found to be a pretty key differentiator for Natur-Al as we started to take that into the marketplace because we can certify that the total carbon content of that aluminum, which is what then our customers will include in their own carbon content and carbon accounting. So just differentiating then between the 2 products. When we certify the Natur-Al product, we're sourcing, it really comes down towards the Scope 3 emissions or our raw materials getting into the bauxite and alumina. And so for the Natur-Al product, we're specifically sourcing low carbon content, bauxite and alumina, that enables us to reach that 4 tonnes CO2 per tonne of aluminum threshold. And then we offer a further product where we'll actually prepare that Natur-Al aluminum with carbon offsets to offer a Natur-Al ZERO product, where we certify to our customers that they are having fully offset aluminum coming into their product mix. So that sort of covers Grundartangi as a whole. But as I mentioned, even our non-certified, non-Natur-Al certified product coming out of Grundartangi is really world-class in terms of its CO2 level. We're just differentiating it by sort of certifying to that raw material and the Scope 1 and 2 emissions are the same across both products. And so it's very exciting for us. We launched this a couple of years ago now, and demand for this product has really expanded very quickly, specifically in Europe, which is where the Nordural aluminum all goes. We've seen significant demand expansion for this. You've seen certain announcements that we've made for some long-term contracts and some very good Tier 1 automotive suppliers. But we've seen it even more broadly over this past year. And this is the first year where we'll be selling all of that Natur-Al production at a green premium into Europe, 2022 we'll be. So we're seeing sort of significant demand expansion. And that demand expansion is coming most quickly in Europe. But largely on the basis of CBAM and the ETS schemes, but we're also starting to see it in the U.S., I'd say the U.S. maybe a couple of years behind Europe in terms of demand expansion, but it's coming quickly. We are sort of anticipating we may start to see that in 2023.

And any sort of indication as to what the size of the green premium you are seeing for these products?

Yes. We haven't put that out publicly yet. But I guess what I would say is its increasing. So we sold some of this at a green premium in 2021, and we're seeing that increase significantly, both mainly driven by demand side drive in 2022. So it's still relatively modest in the grand scheme of things, especially compared to, say, where billet premiums are this year in Europe, but it's a nice significant adder to the overall product mix. And I'd say you probably see it most significant when paired with value-added products rather than [indiscernible] specifically.

Got it. That makes sense. Nick, maybe coming back to you now. So we've talked a little bit about how we do need decarbonization. And we've talked about a couple of -- one of the decarbonization strategies there. But how should you -- how are you expecting decarbonization to change the supply landscape? How does the cost curve start to change when, historically, lower cost but higher carbon intensity Chinese capacity is required to shift off coal captive power to either the grid of hydro power?

Yes. So I think in terms of the first part of the question, regarding the supply landscape. I think the key message there is one of supply stagnation. And particularly in China, we're expecting supply growth rates over the next 3, 4 years to average 1% to 2%. And the key repercussion of that is that China has now shifted to a structural net importer of primary metal. And for the next 3 years as well as the current year, we're seeing China in a 1.5 million to 2 million tonne deficit. So that's really important for the overall market because it means China then pulls on metal in the ex-China market, timing that space and ultimately running down inventories and driving prices higher. And so I think that's the first immediate effect on the supply side. In the kind of longer-dated part, eventually, the very high aluminum prices that we expect will stimulate investment in new capacity. Some primary smelting capacity, but also secondary smelter capacity. As has already been mentioned, scrap is ultimately a lot greener source to try aluminum units. So we do think that, that will be an area of kind of overweight investment on the supply side going forward, both in China and clearly in the West, where the majority of producers are focusing on it. Now the second part of the question is around the cost of decarbonizing supply. Well, I think in China, the shift there in terms of decarbonization is predominantly right now focused on adjustments to power supply. And what we're seeing are smelters relocate from kind of cold provinces to hydro provinces, predominantly Yunnan as the center of hydro right now. In terms of what that does to the cost structure, we think, if you assume a smelter goes from being on a sort of cold captive power basis to being on grid in Yunnan, that will add just under a CNY 1,000 a tonne to their cost structure. So it's around sort of just under 10% cost impact. But it's going to involve a significant amount of CapEx to achieve that. We think over kind of $5 billion, $6 billion worth of CapEx is going to be needed to kind of decarbonize the Chinese smelting sector at a very minimum. In the West, I think the kind of cost of decarbonization will be very much felt through the smelters through carbon costs. We're already seeing that to some extent in Europe, although the kind of direct impact of carbon cost is quite limited. But we think if you were to see direct $100 carbon cost being imposed on the smelting sector, that would generate for the highest cost smelters in the ex-China market, a nearly 80% increase in cost. So if you look at the highest cost smelter today in the ex-China market, that cost would be around $2,500 to $3,000 per ton, depending on which kind of power price you assume they're exposed to in Europe. If you add on that a $100 carbon price, ultimately, that cost would move up to the kind of mid, high kind of $3,000, if not low, $4,000. So I think in terms of decarbonization costs in the West, it's that carbon price exposure that ultimately will be incredibly kind of inflationary.

Great. That makes sense. We haven't touched on this quite yet, but I mean there are a couple of inert anode technologies that are currently in R&D stage. They're not quite there at commercialization. But maybe, Nick, can you touch on how maybe policy can help to incentivize the cost of new smelting technology? I know you talked a little bit about carbon cost there, but anything else that we should be thinking about?

Yes. So I mean, I think carbon anode is an important part of the potential decarbonization technologies. It only generates around 2 tonnes of carbon during the smelting production process, which is just over 10% of total carbon emissions, on average, around 15 tonnes of carbon through the smelting process. So we shouldn't overplay what a kind of moderation in that carbon on anode emission kind of volume would mean for smelting as a whole. And also, it is likely that there will be quite significant costs attached to buying that technology into smelters. The reality is we don't know at this stage what that cost is going to be because the technology is still being developed. But in terms of forcing smelters, we're incentivizing them into adapting that technology. I think in the West, we ultimately see it as likely being a function of carbon price being imposed on smelter. So there's a clear incentive to reduce your carbon emissions to benefit from a lower cost exposure. In China, the picture is very different. Although there is an emissions trading scheme being introduced, we don't think it's going to move particularly aggressively. There instead, what the government is doing is imposing a cap on the sector. And only allowing smelters to kind of build new capacity within that cap, essentially replace old capacity to new capacity, if it is green capacity. They're moving from coal to hydro. And there's a sort of hope in a high-margin environment that smelters will invest in other decarbonization technology. So China is slightly different to the rest of the world, and particularly Europe, which is the most front footed in terms of carbon pricing.

And that's a great segue to bring Brian into the discussion here. All of this talk of decarbonization sounds like it's a lot of money. You published a report last month around investing in green CapEx, where we're going to need to see about $2.8 trillion of spend each year. Could you briefly summarize what is requiring an incremental investment to align with the 2015 net 0 target from perhaps the metals and mining perspective, what that can mean for an industry. And to Nick's point, it's a very significant investment here to decarbonize.

Yes, absolutely. Thanks, Emily. So in our green CapEx analysis, we look not only at the path towards net 0 by 2050. We also looked at what's needed for broader infrastructure and clean water goals as well. And certainly, aluminum plays an important role in a lot of that. And so when we added it all together, the average capital that's an investment that's needed annually this decade is about $6 trillion. And as you said, that is up about $2.8 trillion versus the annual average in 2016 to 2020. So that's not just the aluminum sector, that is globally to meet all of these objectives. If we were to parse that incremental $2.8 trillion per year, that would go about $1.8 trillion towards that net 0 pathway by 2050, about $0.8 trillion for incremental infrastructure and then the rest for clean water. And I think an important point to make as we think about the technologies and the projects and products that are required to make all of this happen is that there really is an all-in approach that it's not just solar and wind and electric vehicles that will get us all the way there, that we will need carbon capture and storage, that will need biofuels, that will meet energy efficiency with smarter buildings and other efficiencies. And then certainly, on the infrastructure side, we're talking more usual suspect; railroads, ports, airports, broadband, et cetera. Now frankly, if we look into the 2030s, that we would actually see that need for capital increase. But I bring up this all-in approach because it encompasses so many different sectors that need to be a part of this, and including the metals and mining sectors. So then your next logical question is, are we on track for that? That's a lot of capital. I mean, frankly, the incremental $2.8 trillion annually would represent about 2.7% of GDP over that period. So that's not insignificant. And frankly, it doesn't look to us today that like we are on track. Doesn't mean we can't get there. But if we try to add it up, we actually -- thanks to your help and other analysts, just have unveiled some forward-looking bottoms-up views on how the percentage of green CapEx versus total CapEx is going to evolve. And if that's going to grow at about a 1.5 percentage point mix shift higher per year and if we're going to see about 2.5% overall global CapEx and R&D increase, we could get to incremental green CapEx from publicly traded companies of just under $0.5 billion per year. So that's a piece of it. You get to about $0.4 billion from private equity-based on a 20% CAGR on new green capital raises. That still leaves a lot left to go. Now the good news is that there is about $1 trillion, we think, of spare capacity among publicly traded companies, based on the capacity for reinvesting more of their operating cash flow back into CapEx and R&D and because balance sheets have strengthened. If we look historically, public companies have invested historically, about 60% to 70% of cash flow back into CapEx and R&D, and it's projected by our analysts to be 50%. So if we just took that to 60% and normalized balance sheets, that could get us at $1 trillion of annual green CapEx spare capacity. And I bring this up because the metals and mining sector is actually where a good portion of that lies; oil and gas, metals and mining, semiconductors and software take up a lot of that spare capacity. And with metals and mining companies only reinvesting about 40% of cash flow back into CapEx and R&D, there's about $200 billion we see of spare capacity that is available. So that's good news if the circumstances are correct, and I'm sure we'll talk about that here. But there's a lot of capital that's required. It's not on track, but there is some hope.

That makes a lot of sense, Brian. I think certainly some of the hesitation that we get when we speak to our clients around companies deploying more capital towards green CapEx is that they may not see the returns that they were perhaps hoping. Corporate returns for natural resources sectors have not often been as good as corporate returns for the broader market. So what do you think shareholders or management teams need to see from either a returns perspective or a free cash flow perspective to really start to accelerate the spending here?

Yes. It's a great question. It's a critical takeaway, and I think something that is not well understood by the combination of stakeholders between policymakers, managements and investors that even as there may be the need for capital. And even as there may be capacity for greater green capital, to be spending greater green CapEx, that doesn't mean that every sector that has that capacity has a historical track record of above-average/acceptable corporate level returns. And there are many sectors in this overall mosaic that are going to be needed, as you said, that have below average corporate returns. I used to cover the E&P sector in the U.S. and they reinvested for a while in the shale area 100% or more of their cash flow back into CapEx and R&D with degrading corporate returns, and we and the broader investment community was pushing back on those management teams to spend less aggressively to try to improve corporate returns and balance sheets. And so I think it is logical that there may be less immediate acceptance of a major capital commitment for industries towards green CapEx for industries that have lower corporate returns. So what could change that? Higher prices/inflation would be one. Maybe you heard from Nick about the bullish outlook for aluminum, in part because of the supply side and in part because the green demand is coming. And frankly, in our report, we highlighted copper and aluminum as what we call green enablers or green enabler sectors, once where if investment doesn't happen sooner rather than later, there could be medium-term supply chain bottlenecks or materially higher prices that are going to be needed over the medium or longer term, completely unrelated to the supply chain bottlenecks we may be seeing in areas like semiconductors today. So higher prices is one way to get there. And in fact, if we look at the corporate returns for metals and mining companies that are being projected for 2022, thanks in part to your and Nick's bullish views on copper and aluminum prices, they are above average. So that is partly the exact incentive to try to convince management teams and investors to be accepting of greater commitment towards supply growth. The second potential would be innovation and lower costs, really reducing the cost and improving the competitiveness of some of the projects that Jesse mentioned earlier and the technologies -- and technology across the metals and mining space or in other sectors. So innovation would be a second way to try to get there. And then policy is -- policy is 1/3 and whether that can try to bridge that gap. So any of those 3, we think, are needed. If we try to actually put some numbers to the inflationary point, for every 100 basis point change in cash return on cash invested, the metals and mining sector to achieve that would need to see 2% to 2.5% higher pricing. And the average within the mosaic of sectors needed for green CapEx or the range would be between 1% and 4%. So metals and mining would be right in that range. So to the degree investors say or management say, "Hey, you know what, we need a 100 basis point higher corporate returns now to be able to have comfort to make these investments," that's the type of pricing increase, all else equal, that would be required.

That's really helpful, Brian. Maybe shifting gears a little bit and bringing Jesse back into the conversation. I wanted to touch a little bit on what you're seeing in the European markets. You mentioned Europe is probably a little bit more advanced in sort of the decarbonization themes than we are sitting here in the U.S. But Jesse, could you share what impact you're seeing from your Iceland facilities on the European Carbon Border Adjustment Mechanism on European ali supply demand balances?

Yes. And maybe this ties directly into what Brian was saying a little bit, which is how do we start to see some pricing response to drive the returns that are necessary for this transition. And CBAM is certainly one of these ways. So maybe just to start a little more specifically, if we start to think about -- and Nick spoke about this too, what a price for carbon is and we start to look and say how would that apply on the aluminum side, if we take the industry average and then compare that to, say, our natural products, so you're going from 16 tonnes of CO2 to 4 tonnes of CO2, and you start to apply a carbon price to that decrease. That's one way where the industry, I think, can start to estimate what a green premium really should be from a supply demand perspective. And from a carbon pricing perspective, that could then drive some of these return requirements, which are necessary to fuel the transition. So to get there, I think a mechanism like CBAM is probably necessary, right? So we need -- the EU market does have a price for carbon. And through the ETS scheme, we can see what that is. If you take that price and start to apply it more broadly, you can see that it could be significant enough to drive some of these investments that Brian was speaking about. So as a whole, I think as an industry, we should be supporting CBAM, CBAM standing for Carbon Border Adjustment Mechanism, of course. And make sure that we implement it in such a way that we avoid carbon leakage going forward. So I think this initial phase probably is going to have very little impact, right? It's mostly just a declaratory program through 2026 and focused on Scope 1 emissions. Scope 1 emissions' focus is probably not sufficient for aluminum, most of the carbon content comes from Scope 2 emissions, as we've been discussing, which is the energy side. And so we probably need to see that expand in order to avoid leakage and make sure we're really applying policy to the area where you can see the most benefit, which is the energy side. Nick had a good quote. I think on the -- just take the carbon anode side which is the main focus of our own direct emissions. There's still one emission. You're really talking maybe 2 tonnes of carbon per tonne of aluminum versus most of the balance of -- to that industry average of 16 is going to come from your Scope 2 or your energy side emissions. So I think going forward, we're big fans of CBAM. We think that it makes a lot of sense. We think it has the potential to drive some of the response that we've been discussing. But we probably need to see it rollout with a little stricter implementation and make sure that we're focusing on Scope 2 as well as Scope 1 and ultimately price scope 3 emissions.

That makes sense. And then maybe just a follow-up and sort of bringing the Century portfolio back into focus here. I think you mentioned there was a low-carbon cast house expansion project there. Any sort of color you can provide around how that's progressing and how this addresses what you've just talked about?

Yes. Absolutely. And I think, again, maybe to Brian's point, one new thing about that project is it was done with the green financing through some Icelandic banks. And so we did see a little bit lower cost of capital because it was a green project, not significantly lower. So probably not enough to drive conversion in and of itself, but we're starting to see some of this transition on the financing side to start to enable the conversion that we all see is necessary. So we're very proud of this project. It will bring 150,000 tonnes of green billets to the European marketplace and an additional 60,000 tonnes of foundry alloy to the European marketplace. So in total, Grundartangi's output will be 80% value added or 100% value added, if you consider that all of that metal really is green metal that will go into the European marketplace. And we made that decision because we are seeing the demand side pull. I mean everyone knows and has seen what European billet premiums have done this year. They're at all-time record highs, being driven from demand on both building products, but also sort of continuing strength in automotive from our perspective. We obviously see the complications in that marketplace as a whole. But to be honest, we've still seen demand on the auto side, both in the U.S. and EU markets. So when we take that, then just look at the green side, I think the section of the market that's the farthest ahead is definitely on the building and construction side, driven a lot by government policies and big government-backed construction projects, where they're making -- requiring green aluminum as part of their sourcing. But we're also seeing it start to go into our customers' automotive OEM contracts as well, where the OEMs are starting to demand at least the option to require green aluminum going into their product mix. So we're really excited. I think we'll be very well serviced -- served to service the EU market with really short supply chains from Iceland and to be able to supply all of that billet as -- and frankly, foundry alloy, which mostly goes into automotive is green aluminum. We think that's very well situated.

Great. Maybe, Brian, turning back to you now, relative to copper, aluminum is still not as widely perceived as a "green metal". Maybe from an ESG investor's perspective, what are the key differentiators between the 2? And what do you think is required to change that perception? Because at the end of the day, we still need ali in light-weighting vehicles. It's -- 75% of aluminum is still in circulation today. It's highly recyclable. How do we get that to change? How do we get producers to perhaps change the narrative and earn "ESG improve premium" over time?

Yes. Great question, and I think I would certainly agree with the premise of it, right, which is, frankly, even with many copper companies, even before we try to differentiate between copper and aluminum, there still has not been appreciation from ESG investors. If we're going to define that appreciation in terms of how ESG investor -- ESG funds are positioned relative to their benchmarks. Metals and mining overall is, call it, 50 percentage points underweight relative to benchmarks and ESG funds, and there's not always differentiation between the individual metals with perhaps the exception of lithium. And I think to your point on copper versus aluminum, that there has been a little bit more recognition for copper in its enablement of electrification than there has been for aluminum. I think there is that potential. I'll talk about that in a second here. And then also, it is the power consumption point that has been brought up here repeatedly on the call. So to try to improve that dynamic of what is needed, I think the first goes to just improving the emissions footprint. And again, this is a discussion point we've already had. But moving to places where greater renewables exist are -- that's helpful, right, particularly if there's spare renewable capacity that's on the margin. Supporting renewables development is helpful, but lowering the intensity of the process, that's likely going to get even greater credit than the ESG community. We think investors are going to look at the emissions intensity. They'll also look at the power intensity, right? So lower is better for both. But lowering the power intensity, we'll get greater credit because, in theory, it should open the door for others to consume spare renewables capacity. That doesn't exist everywhere at all times. So from that perspective, I think investors will watch both metrics and companies that can demonstrate innovation and can demonstrate that lower or the ability to lower the energy, the power intensity in addition to the emissions intensity, we do think there's some room for greater credit. So that's kind of the, what do companies or how do companies do it, side of the equation. Then there is the, what do companies do? And the other point I would make is the potential for greater appreciation for the enablement of the product. And as you said, how it gets used in some of the technologies and products that are ultimately needed to make infrastructure net 0 and clean water goals successful. ESG investors right now are moving into and will move over the next few years into a stage where we think there is going to be a much greater focus on product impact, product alignment and how companies are going to be moving on a forward-looking basis. That hasn't always been the case because ESG and ESG's data has very much been backwards looking. But as the capital builds, and as we think there's going to be greater scrutiny on where companies are moving and also among ESG investors on their relative performance, there's going to start to be, we think, a shift for investors to look earlier in the supply chain. Because today, ESG funds are extraordinarily overweight, the end of the supply chain; solar, wind and water. And they're very underweight, as I mentioned, early parts of the supply chain. There's a lot in between copper, aluminum and solar and wind. There's a lot of white space in between. So we're not necessarily saying tomorrow all the ESG investors are going to suddenly start looking at aluminum. But we do think there's going to be more work and more attention paid to how can -- what is the enablement. And for the companies that can start to both demonstrate that and also demonstrate emissions intensity improvement, we do think over time there can be greater acceptance. We've started to talk a bit more about emissions avoidance for some of the other green enablers that we've highlighted like the semiconductor sector, though I think some of the work that we've done in trying to demonstrate what type of emissions avoidance exists in the electric vehicle supply chain from data centers and from PCs and other products can apply to sectors like metals and mining, including aluminum.

Great. Well, we have come to the end of our allotted time for the session today. But Jesse, Brian, Nick, I really wanted to thank you all for your time today. It was really insightful hearing about how we can start to decarbonize the aluminum supply chain, certainly sounds like we'll see some capital being allocated towards this in future. But hopefully we'll also see the price environment support this. So I wanted to thank everyone for joining us for this panel and again, and up next, we do have a session, a commodities roundtable, investors and corporate strategies amidst metal scarcity up at 11:00 a.m. Eastern? Thanks, Deal. Thank you. Thanks.

Thanks, Emily.

Thank you.

Thanks.