Lawson Winder: Sure. Thanks, operator. And good evening, gentlemen. Michael, you mentioned some mechanical reliability issues that are kind of dogging the ramp up. But you mentioned it certainly wasn’t related to design or material quality. And you elaborated a little on what you thought was driving it. Could you maybe provide just a little more detail and discussion on what you think is driving that?
Michael Rosenthal: Sure. Thanks. I guess I think some of it relates to initial startup and commissioning and some operational challenges during commissioning where we had unusual equipment failures. An example of which would be in one of our filtration circuits where we had an unusual number of pump failures. And then, in terms of how that impacts the operation, in order to continue to operate, we were forced to use sort of temporary measures that were inefficient from a process yield, operating and maintenance cost, labor productivity perspective. And so, as we are able to bring on kind of the appropriate equipment, the appropriate permanent equipment that then work quite well, we could see a dramatic impact on the operability yield, reduction in loss, and then much lower labor cost and much lower amount of labor allocation to that area and rework.
So, we’ve got a number of issues like that. And that sort of underlies the confidence in how the trajectory will improve as the supply chain delivers.
Lawson Winder: And then, would it be fair to say that you’ve kind of identified the majority of these issues? Are they recurring and less easy to identify? Are there some that you’re still trying to figure out?
Michael Rosenthal: I would say optimization is a permanent, continuous process. So, we’ll always have these kind of things. Certainly, we’ve identified, all the ones that we see in front of us now. As I’ve said in the past, we’re able to run a lot of the circuits at pretty significant throughput rates. It’s kind of pulling it together and sustaining that and having them all run together at the same time. So, we could see how the bottlenecks will progress as we ramp. And we’re obviously addressing those in advance of being there. But it’s really not so much throughput as uptime and reliability.
Lawson Winder: Okay, great. And then, just one follow-up, if I could, on the plant shutdown. You mentioned that in April, it was a little — there was one in April. Just any color on future shutdowns for 2024 would be really helpful. Thanks. And that’s it for me.
Michael Rosenthal: So, each year, we schedule two longer maintenance outages, one in the spring and one in the fall. So, we continue to target that. Given we have the Upstream and midstream assets now versus in the past just Upstream, there’s a little bit of a lag. We first focus on the Upstream assets. And then, some of the midstream assets follow. And then, the Upstream refills the midstream. We would expect that pattern to continue. Because the midstream is younger, the duration of the downtime in those areas is shorter than in Upstream. But because of the lag and feed and de-inventory and re-inventory, there may be — the actual outage drags on a little bit longer.
Martin Sheehan: Thanks. Next question.
Operator: Our next question comes from the line of Bill Peterson with JPMorgan. Your line is now open.
Bill Peterson: Yes. Hi. Good afternoon, and thanks for taking the questions. I wanted to expand on earlier question around the demand environment, I guess, in the context of, what you’re calling, I guess, some kind of imminent violent improvement in fundamentals. If we think about this year’s demand environment, EVs is down, but in the U.S., replaced by hybrid electric. You have wind, then you have a lot of the standard, HVAC, consumer electronics. Can you walk through the different end markets and what you’re seeing and what you’re expecting this year in terms of a demand environment? What’s stronger than expected, weaker than expected and maybe how quantify how you’re seeing demand growth as this is part of the supply demand equation?
Ryan Corbett: Hey Bill, it’s Ryan. I’ll start. I think the reality here and sort of what Jim was talking about earlier, we’re not – I don’t think we are necessarily predicting this in 2024, right. That’s almost the opposite of what we were saying. We’re thinking about this from a broader cycle perspective the cure for high prices is high prices and cure for low prices is low prices etcetera. And so I think that was more the point. When you do start to get more granular on 2024, however to your point I think 2023 was well adjusted here for wind. 2023 had lower growth in EVs. I think a lot of people say no growth, but growth was very robust. It wasn’t as robust as expected. And maybe you also add some of the cycles I talked about on the electronic side.
Couple that with – the Chinese economy and the fact that the property market there drives a tremendous amount of from an appliance and HVAC perspective and you can kind of see why things went how they went. If we could accurately from a timing perspective predict exactly where prices would go, we’d probably focus on that. So…when you think about what are the drivers in 2024 we sort of just see for example a big push-on on the Chinese economy side so the typical stimulus where they push for trade-ins all sorts of things and there’s a big bushnel [ph] on sort of let’s call it a [Indiscernible]. A version of that, that also not only applies to trying to stoke EV demand, but also HVAC, appliances, etcetera. And then, you’re seeing a turn in some of the other electronics.
And so, again, we can’t predict the exact quantum or timing, but it does feel like the things that drove sort of negative revisions last year, hopefully, are maybe turning.
Jim Litinsky: And just adding on to that, that’s great. But, Bill, in really simple terms, and we’ve talked about this before, but I think it’s definitely worth repeating because it’s kind of a simple framework to think about this. Roughly 75% of demand are sort of your – think of them as your legacy historical use cases, GDP or plus or minus oriented electronics, HVAC, etcetera. But then, when you go in, the other 25% are sort of the electrification use cases. And those are, short-term Wall Street Armageddon, in a sense. Those are growing very quickly. And so, what you have is a base effect, right? You have 75% that can take a macro hit, particularly given that it is mainly centered around China, where if that’s a 5% or 10% hit, that can really trump 20%, 30%, 40% growth of these bigger use cases.
But there’s a compounding effect there, right? Is that as that 25% is growing at 30% a year, you look out a few years out and it becomes so much more material relative to overall demand that the sort of the short-term cyclical macro items have much less of an impact. And then the reality of the electrification, which has never happened before in our supply chain, really starts to impact demand. And by the fact that these projects are so long-term, that’s where you sort of get violent pricing effects when sort of those realizations hit people in real time. Commodities are a spot market. They’re not really a long-term pricing market. So, even though you can see this coming in the short-term, if there’s a supply demand imbalance, the pricing adjusts.
And so, and then lastly, and again, this is longer term, but when we think about all these electrified use cases, particularly, I’m a big believer that the, for all a lot of the hype around AI, aside from, chips and data center built out, one of the real world use cases we’re really going to see a lot quicker than people think is going to be around robotics. And, there’s much, much smarter people than me saying this and making investments and showing you real products. And so, I think in the next few years, we’re going to see humanoid-like robotic products. You can certainly do plenty of your own research around that. But just as an example, and again, I think it’s so important, and you’ve heard other people talk about this, an EV is a robot on wheels.
A robot is obviously a robot with legs. And an EV will have, one to four motors, whereas a robot will have dozens of actuators, right? Those are the, those are the things that are, think of them as joints in the human body that will move. And so, if you are somebody who does believe, and again, you’ll start to see this building out. It’s not, it’s not a 2024 event. But if we think about the sort of global units of vehicles as being one and a half billion and, maybe 90 million or 100 million a year of new production, and then we’re talking about billions of robots that will have double or triple the magnetic content of an EV, it doesn’t actually take that full bill out. It starts to get sort of really ridiculous in the potential demand. And so, I think that that is something that could create another step function change expectation vertical in our space.
And, look for the statements that Xi [ph] in China has made around building out this industry in 2025. And so, this is stuff that actually was kind of a couple years ago, pie in the sky kind of stuff. And now it’s stuff that, you’ll start to see it in the next couple years actually become a real material demand vertical. And so, we’re really optimistic about it. That means nothing though for 2024. But it does mean a lot for the value that we’re creating here and how we think about the business over the next three to five years.
Bill Peterson: That’s well understood between the legacy versus growth drivers. So, just thinking about capital allocation, I guess, in the context of your bullish outlook looking two to three, four or five years out, can we think about buybacks being actionable given where you think your share price is today? How should we think about the use of cash from here or for the debt pay down? Well, you’d rather kind of keep driving out or for other things, M&A or otherwise?
Jim Litinsky: Bill, we just bought back 7.3% of the company last month. I think after the bell, Apple announced $110 billion buyback and there’s lots of excitement on the news how huge that is. That’s 4% of their company. So, look at all the press tonight and in the morning about the scale of that buyback. We did nearly double that last quarter. For a number of quarters, when prices were much higher, people asked us and we said repeatedly, we’ll act when we can act in a substantial way with material impact and we’re not going to telegraph these kinds of things. That remains the case. Certainly, we think that there’s a lot of value here and we’ve sort of made that clear. But I think we’ve also sort of voted with our purse, so to speak.
Martin Sheehan: Next question. Thank you. And this will be the last one, I think.
Operator: Yes, we have time for one last question and that question is going to be from the line of Benjamin Kallo with Baird. Your line is now open.
Benjamin Kallo: Hi, guys. I’ll make it quick. You’re very passionate about demand. I’m a believer in that too. I just want to understand about the other part of the investment case and all you’re working for. If you see any signs of the bifurcation of pricing, the distinction between the American versus China for customers or because of the current environment just right now, in the near term, no one really cares. It might not be a fair question with GM, all done, but just wondering how those conversations have changed. It’s like, you said commodity. Do you think it’s not no longer a commodity at some point because you’re made in America? You get a premium for that.
Jim Litinsky: Sure. So, Ben, I think I heard most of it. It sounded like you’re at a car wash or something. I hope you’re somewhere for fun. But I think actually, and so I hinted at this a little bit in the comments, and I think, certainly as we look at our market today, there’s no question that it is, effectively pricing is just effectively controlled in China, right? They’re the vast majority of production and downstream usage. And with the vast majority of their industry operating at a loss, I think it’s fair to say that one could conclude that, there are other than free market things going on there and that there may be, sort of, strategic things happening to the pricing in our industry. But if we look around the world, and we’ve been talking about this for a few years, but I think this year in particular, it has exploded.
There was actually an article on Bloomberg today about Geely is going to be introducing a product this summer. I guess that was announced at the Beijing Auto Show. There were, 100 plus new models there of exciting products, that Chinese industry, Chinese OEMs have created at very low cost, but there’s a, you know, a Geely car that’s going to be a very much equivalent of a Model Y that’s going to be coming to market substantially cheaper, thousands of dollars cheaper. And given sort of the Volvo aspect of it will not be subject to tariff. And I think what you’re going to find, and then there were also other stories of BYD building a plant in Mexico and certainly excess capacity in China that will now make its way around the world. I think the big picture thing here that is so important is that when we thought about EV penetration globally, it used to be a situation where EVs were much more expensive than ice.
