Century Aluminum NASDAQ: CENX used a fireside chat at the Wells Fargo Industrials and Materials Conference to frame its investment case around tight aluminum markets, U.S. and European production exposure, and a planned new smelter in Oklahoma.
Timna Tanners, Building Materials and Metals and Mining Analyst at Wells Fargo, opened the discussion by asking what makes Century’s position unique in the current environment. Jesse, speaking for Century Aluminum, said the company benefits from producing in what he described as “the two shortest markets for aluminum in the world”: the United States and Europe.
He said Century is the largest producer of aluminum in the United States and one of the largest in Europe, positioning it to benefit from regional premiums and trade protections. In the United States, he pointed to the Midwest premium and a 50% tariff on primary aluminum. In Europe, he cited the European duty-paid premium and a 6% tariff on primary aluminum entering the region.
Jesse also said Century has reduced cost volatility through its Jamalco asset, which gives the company internal bauxite and alumina production. Tanners noted that Century had historically been viewed as a higher-cost and more volatile publicly traded aluminum producer, but said the Jamalco acquisition and hedging activity had reduced volatility around two key inputs: alumina and energy.
Century Sees Aluminum Emerging From a Long Bear Market
Jesse characterized the aluminum industry as coming out of a 15-year bear market, driven largely by China’s expansion from about 5% of global production in 2000 to roughly 65% today. He said Chinese overproduction and subsidies pressured global prices for years, but added that China imposed a production cap of 45 million tons about five to six years ago, near where production stands today.
As a result, he said global aluminum inventories have fallen sharply, breaching six weeks of global inventory for the first time since the global financial crisis. He also said the market is seeing what he described as the largest supply deficit in aluminum market history following disruption in the Middle East.
Asked by Tanners how an aluminum shortage could play out, Jesse said he expects a supply response from the West. He highlighted Century’s planned Oklahoma project, which he said would be the first new aluminum smelter in the United States in more than 50 years and would double the size of the U.S. industry with about 750,000 tons of capacity.
Oklahoma Smelter Project Moves Forward
Century’s proposed Oklahoma smelter is structured as a joint venture, with Century holding 40% and Emirates Global Aluminium holding 60%, according to Tanners. Jesse said the state of Oklahoma has been “incredibly welcoming,” citing support from Governor Kevin Stitt, Representative Kevin Hern and Senator Markwayne Mullin. He said the company remains bullish on Oklahoma and does not currently view local political issues as a major impediment.
Jesse said the U.S. government has also been supportive of building domestic aluminum capacity. He said Century has a $500 million grant from the Department of Energy that will go toward the project’s capital cost. He added that the company has been working with government agencies on financing programs that could provide low-cost financing and potentially underwrite most or all of the project’s financing package.
On power, Jesse said Century is negotiating with Public Service Company of Oklahoma, owned by AEP, for a 1.2-gigawatt power agreement. He said both sides are eager to move the project forward, though work remains before an agreement is completed.
Asked why an aluminum smelter might win local support over a data center competing for power, Jesse said a 1.2-gigawatt data center might employ about 100 people, while Century’s smelter would employ about 1,000 workers with an average wage and benefits package of $125,000 per year. He also said the smelter would attract downstream industry and create billions of dollars in annual economic impact.
Capital Allocation, Tariffs and Shareholder Returns
Jesse said Century is generating significant EBITDA and cash flow in the current environment, with more cash flow expected as expansion projects at Mount Holly and Grundartangi are completed. He said free cash flow has initially been directed toward those expansion projects, which are bringing on more than a quarter-million tons of production.
He said Century will continue to look first for organic growth opportunities and will also review M&A opportunities, while maintaining discipline on return requirements. If excess cash builds and the company does not have uses for it, Jesse said Century would consider returning capital to shareholders.
On tariffs, Jesse said Section 232 tariffs have been in place since 2018 and remained in place under the Biden administration. He said both political parties recognize the importance of reindustrialization and high-paying industrial jobs. He also argued that tariff exemptions made the program less effective by encouraging imports through loopholes.
Operational Updates and Hawesville Sale
Century also provided updates on several company-specific items. Jesse said the restart at the Grundartangi smelter in Iceland remains on schedule, with the vast majority of tonnage expected online by the end of July. He said business interruption insurance recoveries are lagging cash spending by about a quarter, which should support cash flow conversion over the next few quarters.
At Mount Holly, Jesse said the ramp-up is also on schedule and should reach full capacity by the end of the month.
Jesse also reviewed Century’s sale of the Hawesville site to TeraWulf. He said Century received $200 million in cash upfront and retained a 6.8% interest in the completed data center, without needing to contribute additional capital. Century also negotiated a put option on the one-year anniversary of energization, which TeraWulf has said it hopes to reach in the second half of 2027.
In response to an audience question about the Oklahoma project’s economics, Jesse said Century has not yet issued a capital expenditure number and is in the final engineering phase with Bechtel. Using a $6 billion figure cited by Tanners from a Bloomberg report as an illustrative example, he said the $500 million grant and potential government financing could leave Century with an estimated $600 million equity contribution over time, based on its 40% share.
Jesse said most of Century’s equity spending would likely occur in 2028 and 2029, following permitting and groundwork in 2027. He said Century’s current EBITDA generation makes the company confident it can finance its share of the investment.
About Century Aluminum NASDAQ: CENX
Century Aluminum Company is a primary aluminum producer that develops and operates smelters designed to supply low-carbon, high-purity aluminum products to a range of industrial and commercial markets. Established in 1995, the company has grown to become a significant North American aluminum producer with an expanding international footprint. Century Aluminum is headquartered in the United States and is focused on energy-efficient operations and cost management.
The company's core operations include three primary aluminum smelting facilities located in Hawesville, Kentucky; Mount Holly, South Carolina; and Grundartangi, Iceland.
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