Good afternoon. And welcome to Alcoa Corporation Fourth Quarter 2020 Earnings Presentation and Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to James Dwyer, Vice President of Investor Relations. Please go ahead.

Thank you, and good day, everyone. I am joined today by Roy Harvey, Alcoa Corporation President and Chief Executive Officer; and William Oplinger, Executive Vice President and Chief Financial Officer. We will take your questions after comments by Roy and Bill. As a reminder, today’s discussion will contain forward-looking statements relating to future events and expectations that are subject to various assumptions and caveats. Factors that may cause the company’s actual results to differ materially from these statements are included in today’s presentation and in our SEC filings. In addition, we have included some non-GAAP financial measures in this presentation. Reconciliations to the most directly comparable GAAP financial measures can be found in the appendix to today’s presentation. Any reference in our discussion today to EBITDA means adjusted EBITDA. Finally as previously announced, the earnings release and slide presentation are available on our website. With that here is Roy.

Thank you, Jim, and thanks to everyone for joining this call today. Obviously, 2020 was a historic year, with the world united in fighting through the challenges associated with the global pandemic. Throughout this turbulent time however, we stayed true to our Alcoa values and accomplished much in an unprecedented year. We focused on our people, making sure we took every possible steps to protect our employees and contractors, and to support the communities where we operate. Do the team work across Alcoa. We not only kept our operations running efficiently. We improved our processes and made our company even stronger. We will discuss the specific financial results shortly. But it all culminated with a solid fourth quarter. We had a higher sequential quarterly adjusted EBITDA and we also recognized clearly improvement in revenue. Both prices and demand improved in the fourth quarter, including for value-add aluminum products. And for the full year, we made significant progress in improving our cost structure with our multiyear strategy and we will highlight many of those achievements during this call today. First, however, I would like to address safety. Despite so many accomplishments in 2020 and as reported last April, we sadly did not achieve our most important objectives. A contracted worker died on February 10th after sustaining on the job injuries at our Poços de Caldas facility in Brazil. This was an unacceptable tragedy and we worked to make sure it does not recur. This tragic accident demonstrates that we must be ever vigilant with our safety practices and must remain focused on each and every task at hand. Safety is embedded in the three Alcoa core values you see on the left hand of the slide and those three simple values continue to guide us. In fact, our response to the…

Thanks, Roy. The 2020 fourth quarter saw revenues exceed third quarter levels on strong aluminum prices. Revenues were up $27 million compared to the prior quarter and lagged to the fourth quarter of 2019 by $44 million on lower aluminum prices. Fourth quarter earnings improved versus both the third quarter and year ago quarter, either including or excluding special items. Special items in the fourth quarter of $53 million, primarily related to the U.S. pension lump sum settlements. The net loss attributable to Alcoa Corporation improved $45 million to $4 million, up $0.24 per share and was $1.61 per share better than the prior year. Adjusted net income of $49 million or $0.26 per share was $1.43 per share better than the prior quarter and $0.57 per share higher than the prior year fourth quarter. Also on an adjusted basis compared to the previous quarter, EBITDA excluding special items improved $77 million to $361 million and increased $15 million compared to the fourth quarter of 2019. For the full year, revenues declined $1.1 billion to $9.3 billion on lower alumina and aluminum prices, while the net loss attributable to Alcoa improved $955 million to $170 million, primarily due to lower restructuring charges. Adjusted net loss for full year 2020 was $215 million, down $31 million from 2019. Let’s look closer at factors driving adjusted EBITDA in the fourth quarter. Adjusted EBITDA excluding special items increased $77 million in the fourth quarter, or $39 million higher earnings from the segments and $40 million from favorable intersegment eliminations. Overall, favorable market price impacts totaled $92 million where higher metal and alumina prices were partially offset by a weaker U.S. dollar. All other factors combined were unfavorable $15 million. Energy costs were higher in smelters in Norway and Spain and at Brazil refineries…

Thanks, Bill. Let me turn to our market. In the fourth quarter, we saw strong improvement in prices for both alumina and aluminum. Each rebounding due to stronger demand and finishing near our 2020 peak that were well above the lows in April. A broad recovery in the markets through COVID-19 impacts particularly in China, supported a resurgence in the fourth quarter an aluminum demand, with the price rally reinforced by a weakening U.S. dollar as prices ended 2020 higher than a year earlier. In December of 2020, less than 5% of global smelting and refining capacity was cash negative. The recovery in global aluminum demand has been driven by a few notable items. First, the reestablishment of more normal operating conditions due to reductions in COVID-19 infections in certain jurisdictions, particularly in China, next, the ability of global manufacturers to mitigate the risks from the pandemic and continue operation, also monetary and fiscal stimulus programs have accelerated stronger demand in aluminum ‘s end use markets and that effect is expected to continue. Now looking ahead to our outlook for global aluminum consumption in 2021, in China, where 2020 consumption exceeded 2019 levels, we expect consumption to grow again this year by about 5% year-on-year. In a world ex-China where consumption contracted in 2020, we expect 2021 consumption to grow by about 10% year-on-year. This will be only the second time we have seen double-digit growth in the past 20 years. Globally, 2021 consumption is expected to grow by about 7%, the highest global growth rate since 2014. The speed of recovery from COVID-19 and the impact of additional stimulus measures will be key drivers in achieving this growth rate. At the same time, 2021 smelting supply growth led by China is projected to be lower than demand growth. As…

[Operator Instructions] Our first question today will come from David Gagliano with BMO Capital Markets. Please go ahead.

Hi. Thanks for taking my questions. They are really more along the lines of some clarification questions around some of the numbers in the presentation, the slide deck, that kind of thing. On -- in terms of the additional business consideration, can you speak a little more and explain a little more about what’s going on within the bauxite segment and the alumina segment with regards to the lower internal alumina bauxite pricing, $45 million lower? And then also related to that the $25 million lower earnings from the bauxite mines, is that a reasonable run rate moving forward for that piece as well?

Hi, Dave. It’s Bill. So let me take that one. As far the bauxite pricing, the intercompany bauxite pricing goes, we are essentially just reflecting the changes that have occurred in the marketplace where bauxite prices have become lower and we are reflecting that change between the two segments, it is really a left pocket, right pocket thing. And so overall on a per ton basis, bauxite prices between the segments will be down about $4 a ton for the annual basis and that results in the first quarter versus the fourth quarter about $45 million, but that just gets picked up in the alumina segment. When you look at the additional $25 million down in the first quarter, the fourth quarter had some one-timers that occurred on true-up of pricing on annual pricing and that’s not going to recur. So that leaves some higher costs and some lower equity earnings from the joint venture mines filling the additional, let’s say, $15 million of lower earnings. Remains to be seen whether that is a new run rate, clearly the $45 million is a new run rate that will apply for the entirety of the year unless we see some change in bauxite prices, but we typically set bauxite prices and hold them for the year. So that will be a shift between the two segments.

Okay. So the true-up that occurred in the fourth quarter, the one-timer was obviously an adjusted EBITDA. Is that the total -- is that -- does that account for all the $25 million?

No. It’s $10 million of the $25 million.

$10 million of the $25 million, okay.

So in the fourth quarter, we had true-up on a couple of different areas on pricing, one in Western Australia, one in CBG. That resulted in about $10 million of earnings in the fourth quarter, which won’t recur in the first quarter. So that leaves you out of that $25 million lower, that leaves you about $15 million of higher cost, some lower volumes in the first quarter.

Okay. And then just the other clarification I had was during your remarks, I thought I heard you mentioned a $12 million -- I thought you said $12 million tariff benefit that flowed through in the fourth quarter or did I miss understand that and if so was that related to?

No. You didn’t miss understand. That’s a fourth quarter versus third quarter variance.

Okay.

So in the third quarter, we had roughly $7 million of expense in the fourth quarter because we reversed part of the third quarter we had a $4 million positive. So that rounds to a $12 million variance between third quarter and fourth quarter.

Okay. Understood. Last question for me, the $375 million of sustaining CapEx for 2021, is that a more reasonable run rate moving forward versus the $318 million that we saw in 2020?

It isn’t a near-term. There’s two things that are driving that. First of all, I should say, in the $318 million in 2020, given the market environment. We were -- we are driving real cash sustainability, delays and deferrals in 2020 as much as possible, just given the situation that we are in and the second quarter and the third quarter with the overall pandemic and market environment. As we are rolling into 2021, I think, the $375 million for the near years is a more reasonable number. There’s a couple of things that are going on in there. We still have continued spending on the mine moves that we saw some high mine move spending in 2020. We will continue to have that in 2021. And we are continuing to spend money, and I would say, invest in the residues storage area around the system. We are going to spend a little bit more money in 2021 in the residue storage area. So that’s what’s driving the increase from ‘21 over ‘20. And I think for the near years’ that’s a reasonable amount of capital spend. It will all be based on what the portfolio changes get made of in the next few years.

Okay. That’s helpful. Thank you.

Thanks, Dave.

And our next question will come from Timna Tanners with Bank of America. Please go ahead.

Yeah. Hey. Good afternoon. Just two questions. One is a broader question about the aluminum market and another one is just about your capital structure. So, I guess, to start with, if I recall 2020 was a year where aluminum didn’t really stop producing despite the dip in demand that you identified. So into 2021, if we think about the market, are there lots of sources of additional supply or do we expect that this demand will be met with kind of the same base of supply? And could you comment on both aluminum and alumina on that one? And then I will ask the other question. Thanks.

Sure. Timna, I will take that one. This is Roy. So I think 2020 was certainly a rather remarkable year in a lot of ways. And I think it’s -- in -- to start off, in China, you saw a very significant drop in demand in the first quarter and then you saw a pretty significant recovery across the year to a point where you actually grew 2019 to 2020. So from a demand perspective you actually saw some progress in China. Going into 2021, we continue to believe that demand is going to be increasing. We think it’s going to about 5% as I mentioned during the presentation. So demand is a very good story there. You are still seeing some supply growth inside of China and so that’s -- and particularly headed in the direction of the Yunnan Province where they can get hydropower. It is more constrained than we have seen before. However, you are continuing to see some supply come out. Outside of China and really looking towards the rest of the world and again on aluminum -- starting on aluminum. Usually you didn’t see as bigger impact in Q1 although there was certainly a lot of uncertainties been going into Q2 through Q4. You saw some buildup of inventories and so those continue to exist. And you really didn’t see a significant curtailments, Intalco is one of the few places that we chose to curtail and that’s really about all you saw across the market. So you generated the inventories. You certainly didn’t see any supply growth perhaps I will come down a little bit. Going into 2021, because you have had such -- you have had a year where your demand has dropped from 2019 to 2020, you will actually see a pretty significant…

Okay. Great. So summarizing quickly recovering market year-over-year with limited ex China supply response if I understood that was from Abu Dhabi alumina. So that’s a helpful overview. I want to just if I could just go through slide nine real quick and it’s really helpful these sources and uses. But if we didn’t have this the debt raise in July and keeping in mind change working capital and pension being a little higher, you would have been kind of balanced sources and uses. And of course, there’s this big amount that you are raising through the Warrick sale and a top of the debt issuance. And I know we have talked about this before and you are fully aware of this, but what’s the -- I think what’s the holdup been you have taken some more aggressive actions to addressing the pension low interest rates keep that kind of expensive, and as you know, not a lot of benefit to keeping the cash. So just wanted any more color that you can provide on that please?

Thanks. And I will take that one. You saw and just to make sure that it’s clear we did make a pension contribution in -- at the end of 2020, so we contributed $250 million. That allowed us to keep our pension and OPEB total liability of relatively flat in a significantly declining discount rate environment. So we continue to take action even at 2020 in a year that was a pandemic year. We had thought we would defer that payment out of 2020. But when we saw that the cash that we had on the balance sheet was pretty robust and the outlook is okay, we thought we would make that contribution. As far as cap -- overall capital allocation goes. I will point you in really two directions. First of all, we do have a net debt target and we still have that net debt target. And that net debt target is $2 billion to $2.5 billion and we ended the year I think around $3.5 billion on proportional net debt. So we still need to do further deleveraging either through the pension or through payback or buyback of the bonds to get to that debt target. We think that we could get there simply by making mandatory contributions over the next three years, but that is the one target that we have as far as the capital structure goes. And then lastly, the point I’d make is we, on purpose put the slide in there that refreshes people about our capital allocation model and our capital allocation model is we want to maintain $1 billion of cash on the balance sheet. We weren’t always able to do that during 2019 and 2020, but with the debt issuance that we that we did earlier in this year, we have greater than $1 billion in cash on the balance sheet. We want to sustain the operations. We are spending $375 million and $50 million on sustaining and return-seeking capital projects. Beyond that, we will balance those four items and one of those item is obviously deleveraging with the debt target. So more to come. I think, we acknowledge the fact that we are sitting on at the end of the year a significant amount of cash. Hopefully that the work transaction completely gets done at the end of the first quarter and we will have more cash. So more to come over the next six months or so.

Okay. That’s it. Thanks, Bill.

And our next question will come from Lucas Pipes with B. Riley Securities. Please go ahead.

Hey. Good afternoon, everybody. So you have really accomplished a lot on the portfolio optimization side over the past years and congratulations on all of your success there. And two questions on that, kind of what are the priorities from here? And then two, a question that we get fairly frequently from investors, how is this going to impact your cost position going forward? And when I go back to prior quarters, you commented how this would move you lower on the cost curve including aluminum where you are not -- you haven’t been at target range. But how should we try to capture this in our model? What are some of the moving pieces going forward? Thank you very much.

Yeah. Lucas, thanks. Thanks for the question and let me talk a little bit about portfolio and then I can have Bill fill in a little bit on the cost curve side as well at the end. So we had -- we really broke it down into two very specific programs, it was 4 million metric tons in refining. And as you remember, we did a permanent closure of Point Comfort, which was 2.3 million metric tons. So on the way there. On the smelting side, we had a program of 1.5 million metric ton. Really the first action was the approximately 280,000 ton smelter in Intalco or 280,000 tons of operating capacity. And then we also are starting to take action in San Ciprián. Although, that curtailment itself has been put on hold because of a recent legal judgment and we are now in negotiations with the Works Council because of an ongoing strike. And so I think those things are pretty clear. We will continue to keep everybody informed about what happens in San Ciprián. But we have a tentative agreement to restart our ability to sell in San Ciprián here shortly. But of course, we have to wait for that to actually be ratified. Looking forward, Lucas, I think, I would just remind you that, that each of these reviews has a number of different potential outcomes. First and foremost, hopefully, that we can find a solution so that they can become more competitive, and of course, that also connects with the power source. And so as you imagine, we are trying to solve not only for best financial outcomes but also for low carbon because of the emerging ESG expectations and our drive to also be the lowest, lowest, lowest producer of -- lowest carbon producer…

Thank you very much.

Roy, I think, you summarized it well. So, Lucas, just to be clear, bauxite maintained our first quartile cost position, alumina maintained our first quartile cost position, maintained our first best CO2 emitter position and actually get better and then, on the aluminum side, we bounce between the top of the second, the bottom of the third quartile’s cost curve and we are targeting for the top of the first quartile, so right around that 25th percentile. And at the same time, we will have the lowest carbon emissions portfolio out there. So both on costs and on carbon we are targeting some of the physicians in the world.

That’s helpful. Thank you for that detail. That gives me things to think about as well. So appreciate that. But quick follow-up question, while on the earlier question on China, you mentioned the strength. Could you elaborate a little bit as to what end markets appear to be driving the demand recovery in China in particularly? Thank you.

Sure. And it’s oddly enough, it’s pretty broad based and so it’s hard to pick one single piece of the Chinese recovery that is outstanding. Construction is certainly, because it’s such a large proportion of the aluminum consumption is growing, we think, around 4% for 2020. The other piece that really was very much infrastructure driven was machinery and a lot of that going into infrastructure builds and that’s about 15% of the total Chinese aluminum demand and that’s growing just a little bit shy of 5%. We think about 4.7% in 2020. And then I would also highlight the electrical systems and particularly ultra-high voltage. We think that’s growing about 6% in 2020 and that’s about 13% of the total market. Looking towards 2021, it’s sort of the same story where it’s -- you have got a lot of strength going across a number of different areas, continue to see similar construction growth. Packaging doing very well as well, almost 6% growth we are expecting in 2021. Machinery continues strong and again, very much connected to infrastructure growth. And then transportation and particularly automotive passenger vehicles and with the shift to new energy vehicles continuing at work, really had a decent year in 2020, but roaring back and strengthening up even to that 9% for 2021. So again it’s -- when you have had what was a challenging, it’s a really strong recovery.

That’s a very helpful detail. I appreciate it very much and continue your best of luck. Thank you.

Thanks, Lucas.

Your next question comes from Curt Woodworth with Credit Suisse. Please go ahead.

Yeah. Hey. Good evening, Roy and Will. So I have got a…

Hi, Curt.

Hey. So a similar question to Timna just on capital structure, when you look at the balance sheet today of $1.6 billion cash and then pro forma Warrick assuming that goes through you are close to Q2. And then you still have additional non-core assets sales you are looking at and the business is generating a pretty good free cash at spot pricing. So it’s not in foreseeable that a cash balance is going to continue to grow in the next year. And you have kind of talked about on the pension side, just the mandatory contributions, I guess, where you need to go for the leverage targets. I am just curious at that point would you evaluate a more material buyback? I know you have $150 million left or taking the dividend up or is it the type of thing where depending on how successful the pilot program at ELYSIS goes that theoretically to make more of the footprint carbon free would require more capital. I am just kind of curious to think about what you are kind of thinking beyond the short line? That’s my first question.

Yeah. So, again, four potential uses of excess free cash flow and if I could just give you some color on each one of them and I think you touched on a little bit of this. In the near-term, the midsized growth projects as always referenced our refining projects both in Australia and in Brazil. We put those projects on hold in 2020 due to the crisis and have yet taken them off hold. So should give you an indication of the near-term spending around the midsized growth projects. If we then look at return to shareholders, we do still have $150 million of an authorization of share buyback. So that gives us the opportunity there. We do not have a dividend at this point. So if we saw ourselves in a position, Curt, where we are generating consistent free cash flow through the cycles, that would certainly be something that we would analyze and consider. The repositioning of the portfolio, depending on what happens with some of these key assets, and Roy, specifically talked about San Ciprián. He talked about Portland. Depending on what happens there, that will cost us some money and we have not given transparency around how much that will cost just because we don’t yet know what the outcome is on those particular plants. And then when it comes to the deleveraging, we are committed to the $2.5 billion. And as you and I have discussed in the past, and I think, Timna alluded to this, the pension is an opportunity for us to deleverage further. And the pension is a large underfunded pension for the size of our company and that’s why over the course of the last four years, we have consistently done everything we possibly can to try to address that pension and OPEB liability. So, as I said to Timna, we will have more clarity during the course of the year and we will be balancing those four items.

Okay. That makes sense. And then, on the pension the -- I think the total pension OPEB funding of $320 million for this year. But then you also say that that does not include $197 million related to what was deferred to January 4th. So, I guess, the question is what is the right number for this year…

Yeah.

…and…

Let me clarify that. There’s lots and lots of numbers on pension and it’s important to understand what the boundaries are on pension. We began this year with close to $700 million of prefunding balance and we used part of that prefunding balance for the 2020’s deferral. And you may say, how do you get to $700 million of prefunding balance, the funding that we made at the end of December added to our prefunding balance. And then early January came and we had to use part of that prefunding balance to cover those deferrals. So, as we look forward, the range of outcomes for the company in 2020 is, if we use no prefunding balance, we will contribute $320 million. If we use all of our -- not all, but if we use all applicable prefunding balance, then we could be contributing as low as about $150 million of cash in 2020. So that’s the range of outcomes. If we use prefunding balance, it’s $150 million. That’s both pension and OPEB. If we do use no prefunding balance its $320 million both pensions and OPEB for 2020.

Okay. Perfect. Thank you very much.

Thanks, Curt.

And our next question comes from Alex Hacking with Citi. Please go ahead.

Thanks, Roy and Bill. And congrats on all the sustainability efforts that you are making. Just following up on the assets, not sure how much color you can give here. But I guess what’s the timeline for the legal process at San Ciprián? This is something that could drag on a while like in terms of years or are we thinking more in terms of months? And then at Portland, you talk about the power contract there, obviously prices is one aspect, you also alluded to the instability of the grid. And I guess, like what do you -- specifically, what are you looking for there in terms of ensuring that you will get the kind of stability of supply that you will need going forward? Thanks.

Sure. Alex, let me hit on both of those. So from a San Ciprián perspective, there’s really a couple of different routes. So the timing is going to depend on where we find ourselves and how those couple routes move forward. So the legal process and we have filed an appeal to the negative judgment that we received, that could last for a while, it takes time. And so no question that that is something that just requires patience. However, at the same time, we are also in discussions with the Works Council in order to end the strike to try and see once again if there is the potential for the state-owned company to take ownership, if Spain truly wants to continue to produce aluminum. And so that one could move more quickly. It’s not instant. It takes time in order to try and understand and determine what is an acceptable deal, but it’s something that we obviously are considering committing to as we move forward with these discussions with the Works Council. So, it will certainly take some time and it depends on which route we go on. From a Portland perspective, and really that’s moving towards the middle of this year when the current deal with the government ends. Flexibility, really what I am trying to refer to there is that, we found ourselves in. We have a power price issue, which is structural for the State of Victoria. But we’ve also had significant issues where the power is simply not been delivered to the plant. And as you can imagine, you only can spend a couple two hours, three hours before our plant gets into serious trouble. So, the flexibility we need, number one is to make sure that we have a consistent power supply. And then, number two, that our contracts are sufficiently flexible and give us extra clauses, that means that we are not forced to rebuild in order to restart and that we have the right path forward to -- the right path forward so that we can not only have a good price, but also have the flexibility in case something were to go wrong because of the instability of that particular grid.

Okay. Thanks. So, I mean, simplistically are you looking for prioritization on power when they run into issues with the grid?

I’d look at it more as, what are the clauses in case there is another power disruption, whether it’s a take or pay or whether you structure it in some other way. How do you recognize the instability of the grid? And then on the other side also as is, what are the benefits that you can accrue from things like interruptibility, where you have a shorter-term interruption as well. So it gets into a little bit of the arcane contractual language and trying to build that. Not so much prioritization because if the power is flowing, typically there’s enough and we are right on the right direct path.

Okay. I got it. And then just like it’s one final one, a quick one, you mentioned that value-added products, you would increase about 5% year-over-year. I guess my question is like, how does that compare to 2019 just sort of takes us back to where you were?

Yeah. Maybe Bill has a more quantifiable answer, but the issue that you have is that you’ve got some pretty significant portfolio changes. And so, Intalco was very heavily weighted over towards value-add production. And San Ciprián is also heavily weighted over towards value-add production as well. So, as you look into 2020 and currently with San Ciprián not producing nor selling products. And then with Intalco no longer in the portfolio, it’s that you are changing both the numerator and the denominator. And so, the 5% really represents what’s happening across the portfolio and so it’s probably under representing the fact that the markets are improving. I don’t know Bill if you have something that would be a bit more quantifiable to be able to answer that.

No. I don’t Roy. I think you hit on all the key points. It really depends on the some of the asset shifts that we faced and the fact that Intalco was curtailed with a lot of value-add products. So no comparison to ‘19 that I have.

Perfect. Thanks for the color. Have a good evening.

Thanks, Alex.

Thank you%

And our next question comes from Chris Terry with Deutsche Bank. Please go ahead.

Hi, Roy and Bill. Hope you are doing well. I will try to be quick, just two quick ones. With the prefunding balances to help understanding that, why wouldn’t you use that? I guess to be direct. And then the second question, you talked around the energy costs in the alumina division. I just wondered if you could talk about cost taken and then also carbon for the for the smelting? Thanks. Just what you are saying for ‘21 on the cost outlook?

As far as the prefunding balance goes, Chris, we -- having the prefunding balance gives us flexibility to be able to defer payments in difficult years and so a year like last year where we are sitting in April and metal prices had plummeted, alumina prices had plummeted. It gives us the ability to manage through some of those cycles. So it will depend on how strong cash flow is during the course of the year to whether we maintain that prefunding balance or not. Your next question should probably be will when will you use that prefunding balance and we will use the prefunding balance as we get closer to a fully funded pension. So we will use it. It’s just a matter of whether we use part of it. This year we actually refreshed that prefunding balance. So, as of today, we are sitting with about $500 million of free funding balance, gives us a lot of flexibility to manage cash flows over the next couple of years now with the with the U.S. pension system.

Thanks.

What was your -- I am sorry, what was your second…

Thanks.

…what’s your second question?

Just some comments on the outlook for costs. You mentioned the energy costs specifically for 1Q ‘21, just on cost and carbon and the trends in those on those costs?

Okay. Yeah. I can definitely address that. We -- let me address carbon first. On the carbon side, we are seeing some higher calcined coke prices and green coke prices. And so we are -- we saw that in the fourth quarter. In relation to where they were a couple of years ago, it’s certainly not big. But we did some see some increase in calcined coke and green coke prices. We are projecting those to continue into the early part of 2021. You have probably heard me talk about coal tar pitch and the stubbornness of high prices on coal tar pitch. We have finally started to see coal tar pitch in the fourth quarter took a fairly decent decline from the prior quarters, but may trend up a little bit again in the first half of next year. And then, lastly, caustic prices have come down sharply over the course of the last six quarters or eight quarters and we believe that at least in the near term, they will stay at those lower levels. So not a lot of upward pressure from caustic prices in the first half of next year -- I should say this year, I keep saying next year. My mind is still thinking about the fourth quarter, so in reference to the first half of 2021.

Thanks. Thank you. That’s helpful.

Thanks, Chris.

Thanks, Chris.

And our next question comes from Emily Chieng with Goldman Sachs. Please go ahead.

Hi. Thanks for taking the call today. I wanted to come back to slide 12 where you outlined some of your cash actions here. Maybe this is me nit-picking a little bit, but I think the target that you had for lower production costs in 2020 was $100 million there. But I think the achieved number was $73 million. Can you sort of talk through maybe what the variance was between the target and what was achieved and is there a path to seeing some of that being pulled through into 2021?

I will take a first crack of that. First of all, it was an aggressive target. And we try to set aggressive targets. And if you look at each one of those targets we either exceeded or came off closely, Emily, to each one of those targets and in aggregate we delivered over $900 million of cash improvements. So for you to pick out the one where we didn’t achieve it by what $27 million when in fact we over achieved on the working capital side by tens of millions if not over $100 million is an interesting question. This is the first year that we have been able to turn the tide on some of the cost increases and that we have seen the last couple of years. We have a new operating model in place that really flattens the organization and allows us to manage across the organization much better. And while we didn’t hit the target, I can tell you I am really, really pleased with the overall results of the operations and the stability that we saw and the fact that we drove lower cost even though we didn’t hit the overall target. And then when you look at the working capital side, tremendous outperformance by our commercial team, which is now managing working capital from end-to-end. So that’s my view. Roy, do you have any comments?

Yeah. Let me sort of quick technical comment then talk a little bit more about where we are going from here. Technically one of the challenges we face is that we had really preplanned under significant, significant change. And first of all in telco you can imagine we have big intention to see in telcos cost drop significantly but then reverse that and decided that we would hedge towards the curtailment and that really comes through in the advantages and portfolio review that will really pick up in 2021. San Ciprián also was a very special case because of the decision that we have made to curtail that plant. The ongoing legal process and so that really is a place where it’s then sort of a mix bag and so it’s hard to compare one year to the next year when you have got so much happening since San Ciprián. And the third work, and as you can imagine work was also complicated because of all the hold the need to start that sales process reach, what I think is an excellent conclusion in a very fair price. And then also prepare to may actually make that separation. So those three things are sort of technically speaking they are sort of strange things in the number itself. On the other side and really looking forward and I think Bill hit this and hit it correctly. I think we have put a lot of effort this year into building stability. I think our new operating model is very clear about who owns the responsibility for driving productivity. Our plants are -- all of our plant managers, our department managers and our entire operating teams really have their eyes focused on driving productivity forward. And so, I know I’d say it’s always a challenge. It’s always a fight to make sure that you are doing that. But I am -- I would echo Bill’s words that we are seeing real improvements and we are really seeing good, good smart, thoughtful and measured ways to try and drive more productivity without losing stability, without making changes that really are not -- don’t support continuing production in going forward. One of the advantages also of working our way through the portfolio review is that it really drives us to a portfolio of plants that are low on the cost curve, whether that’s in bauxite, alumina or aluminum, and that we can truly invest in and in move through that cycle without having to take evasive and sort of difficult questions because they are on the bubble and therefore need to drive either decide between curtailment or operating.

And our next question will come from Carlos De Alba with Morgan Stanley. Please go ahead.

Thank you very much, Roy and Bill. Just on the growth projects in alumina, can you elaborate a little bit as to what are you -- how are you looking at this? What are the milestones or things that you need to do? What is the process that you are following to the side as to when do you go ahead or not? And would it -- would those -- would you pull the trigger only after you complete the portfolio restructuring in the segment or it could be a simultaneous situation where you would -- you continue to work on the restructuring but you go ahead with the project?

Yeah. Carlos, let me take a first swing at that and Bill can chime in as well. So I will answer your second question first. There’s no need to finish the restructuring or finish the portfolio review before we decide to move forward on those projects or not. When they are really two separate flow paths and I think we have the actions in hand and we have the cash that would be necessary in order to do both of those things at the same time, and of course, that’s dependent upon on market. And that really gets me to the answer for your first question, which is, we look at those projects really in two separate directions, what does it cost in order to bring that new capacity online, and what is the risk associated of actually hitting that target and not impacting what are some pretty fantastic plants that are currently operating. So we want to make sure that we don’t create negative impacts on the broader production in order to try and capture a little bit more. So it’s really making sure that they are competitive, that they are technically capable of doing that and that we are driving the cost per ton of those brownfield expansions or really the creep or debottlenecking projects drive them forward as lost cost as we can. The other side of it, of course, is market and so we are constantly looking forward how the market looks that impacts the cash that we have available of course. But also impacts whether we can get a return on putting that excess capital in, in order to do those debottlenecking projects. And so that’s sort of the nuts and bolts of looking at the market not just for this year but really out the next five years, 10 years or even further and understanding -- and in the case of Western Australia, understanding our bauxite reserves and how we are going to use them and then also evaluating all the different opportunities that we have. But in the end, and then circle back to your second question yet again, there’s not a constraint outside of our belief that we can drive a real return for our shareholders by doing those projects given the market that we see going forward. I don’t know, Bill, if you would want to add to that and anything.

Yeah. No. No further comments, Roy. You covered it well.

And then just, Bill, this is probably relatively small, but on page 13 of the deck, the transformation the EBITDA increased $60 million to $65 million negative in the outlook. Maybe you mentioned this, but if you did, I missed that, what is the driver of that?

Yeah. I actually didn’t mention it, Carlos, so it’s good that you asked it. We were really in -- again, in the second quarter and third quarter of 2020, we were in cash conservation mode given where alumina and aluminum prices were. So we were deferring delaying as much as we could on the transformation side, and I think, that’s, to some extent, just to reflect -- that is being reflected in that outlook for 2021 about a $20 million increase in cost on projects that we didn’t do in 2020.

All right. Excellent. Thank you very much. Good luck to you.

Thanks, Carlos.

Thanks, Carlos.

This concludes our question-and-answer session. I’d like to turn the conference over to you Roy Harvey for any closing remarks.

Thank you, Cole. I appreciate the help on today’s call. And for everybody, I’d like to thank you for joining us as well. I am very proud of what our employees have accomplished in 2020. It simply has been an extraordinary amount of work and what are really unprecedented and a bit uncertain times. To put it simply, we are trying to do what we said that we would do and that is really working towards a stronger Alcoa and really moving forward with the strategy that we have presented over these last quarters. Here at Alcoa, we are consistently driving for improvement. We are focused on making progress and looking towards the future. So I look forward to updating you again next quarter and until then I hope that you stay safe, healthy and have a good evening. Thank you.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.