Q3 2007 Century Aluminum Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Ladies and gentlemen, thank you for standing by and welcome to the Century Aluminum third quarter 2007 earnings call.

(OPERATOR INSTRUCTIONS)

I would now like to run the conference over to our host, Ms. Shelly Lair. Please go ahead.

SHELLY LAIR, VP AND TREASURER, CENTURY ALUMINUM: Thank you, Art. Good afternoon, everyone and welcome to the conference call. For those of you joining us by telephone, this presentation is being webcast on the Century Aluminum website, www.centuryaluminum.com. Please note that website participants have the ability to advance their own slides.

The following presentation, accompanying press release and comments include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements relate to future events and expectations and involve known and unknown risks and uncertainties. Century's actual results or actions may differ materially from those projected in these forward-looking statements. These forward-looking statements are based on our current expectations and we assume no obligation to update these statements. Investors are cautioned not to place undue reliance on these forward-looking statements.

For risks related to these forward-looking statements, please review Annex A and our periodic SEC filings, including the risk factors in management's discussion and analysis sections of our latest annual report and quarterly reports.

In addition, throughout this conference call, we will use non-GAAP financial measures. Please refer to the appendix, which contains the reconciliation to the most directly comparable GAAP measures. This presentation, including the appendix, is available on our website.

I'd now like to introduce Logan Kruger, Century's President and Chief Executive Officer.

LOGAN KRUGER, PRESIDENT AND CEO, CENTURY ALUMINUM: Thank you, Shelly. Welcome to the third quarter conference call. With me here today are Wayne Hale, Mike Bless and also Bob Nielson and Steve Schneider. So if we can move on to slide number four, we can start our program for the day.

We've had a successful third quarter and are well set up for our fourth quarter. Robust aluminum markets continue, the LME averaged some $2,550 per ton for the third quarter of this year. This is a decrease from quarter two. A couple of factors, seasonality, credit concerns, obviously, and market uneasiness, offset somewhat by the ongoing robust demand in the Far East, particularly China.

U.S. aluminum plants are operating well. Our production is at or above capacity at all of our facilities. We're particularly pleased about Grundartangi performing well. The expansion is on budget, on schedule to reach capacity by the year end. Some two-thirds of the phase five expansion capacity is already operating by the end of the quarter.This will give us some 10,000 to 12,000 tons from the latest expansion for this year of 2007.

Helguvik progress on the project, the environmental impact assessment, we've had a very positive impact from the National Planning Agency in Iceland. The transmission agreement has been signed. We continue to have strong community support and we'll begin preparing the site for construction early in 2008.

Project studies in Jamaica, the Republic of the Congo and China are progressing and showing some interesting developments. Early stages for these projects, but we remain positive about them. We'll obviously continue to pursue further growth opportunities, and in summary overall a good quarter. Can we go to slide five?

The aluminum market is well balanced for 2007. Forecasters are continuing to indicate that China will be a net importer of metal by 2009, and maybe sooner. Global aluminum demand was up some 9% year-to-date. Interestingly enough, 39% up in China. China's GDP growth is 11.5% year-to-date and industrial production growth is nearly 17.5% year-to-date. More interesting today, I think the news came out that for September IP growth in China was 18.9%.

India is very low per capita use of aluminum, but significant room for growth. IP growth in India is almost 11% year-to-date. Global supply increased by 12% year-to-date, 36% in China. Half of the supply comes from restocks. Capacity growth was only some 6%.

Efforts by the Chinese government to restrain aluminum production growth appeared to be having some impact. [Annual] exports are down from 57% year-to-date. You'll have noticed the latest action on the Chinese government and authority is to cancel electricity price discount for aluminum makers by the end of this year. And this can translate, in our estimate, to some $40 per ton for aluminum producers in some of the smelters.

Industry operating is at full utilization, we would assume, at 95%. And so we continue to believe that the supply side is constrained. The risk is on the down side and give one example is the recent power outages and turn-downs in South Africa.

September global production levels fell from all-time highs and we note that perhaps the rates of output growth seems to be slowing somewhat. We move on to slide six.

If we look at the intensity of aluminum use, the per capita usage remains low in the BRIC countries. Significant increase in China's usage since 1990, but this is still one-third of what is used per capita in the USA today. If we assume the midpoint between the current Chinese usage and where the U.S. is, you would need some 10 million tons of aluminum per year in extra production. There remains significant room for growth in aluminum usage in Brazil, Russia and most notably India.

We move on to slide seven, looking at the forward curves. There's been significant upward shift and flattening of the forward curve. Forward pricing is indicative of stronger markets over the longer term. If you take today's …