Executive Summary / Key Takeaways

• Century Aluminum is capitalizing on a transformative U.S. policy environment, including Section 232 tariffs and Section 45X tax credits, to drive significant growth in domestic aluminum production and enhance profitability.
• The company's strategic vertical integration through its Jamalco alumina joint venture and a disciplined focus on operational efficiency are strengthening its supply chain and cost structure.
• Recent Q2 2025 results show solid adjusted EBITDA of $74 million, with Q3 guidance projecting $115-$125 million, and Q4 potentially reaching $140-$150 million, primarily fueled by rising Midwest premiums.
• Key growth initiatives include the $50 million Mt. Holly restart, adding 50,000 metric tonnes of capacity by Q2 2026, and the development of a new $500 million DOE-funded U.S. smelter, poised to double existing domestic capacity.
• Investors should closely monitor the realization of the $195 million 45X tax credit receivable, the outcome of the Hawesville strategic review, and the sustained strength of market premiums amidst a global supply deficit.

The Dawn of American Aluminum Resurgence

Century Aluminum Company (CENX) stands at the forefront of a revitalized American aluminum industry, strategically positioned to capitalize on a confluence of supportive U.S. trade policies and robust global demand. As a primary producer of standard-grade and value-added aluminum products in the United States and Iceland, complemented by its bauxite mining and alumina refining operations in Jamaica and carbon anode production in the Netherlands, Century has meticulously shaped its business model for resilience and growth. The global aluminum market is currently experiencing a structural deficit, with demand outpacing supply and inventories at multi-year lows, creating a compelling backdrop for producers.

The company's strategic vision centers on leveraging its position as the largest domestic producer of primary aluminum in the United States. This focus is not merely about volume; it is about securing critical supply chains, enhancing operational efficiency, and delivering high-quality products essential for national security and diverse industrial applications. Century's approach to technological differentiation, while not rooted in novel material science, lies in its commitment to modern, efficient plant design and continuous operational optimization. This includes strategic investments in infrastructure, such as the Grundartangi billet casthouse and the planned new U.S. smelter, which will be "amongst the most modern and efficient smelters in the world." These investments are designed to yield tangible benefits like improved cost-effectiveness, enhanced product quality, and increased capacity for value-added products, thereby strengthening its competitive moat.

A Foundation Forged in Policy and Integration

Century Aluminum, founded in 1995, has evolved through strategic acquisitions and operational adjustments. A pivotal moment in its history was the May 2023 acquisition of a 55% interest in Jamalco, a bauxite mining and alumina refinery in Jamaica. This vertical integration was a game-changer, securing a long-term, captive supply of alumina for Century's smelters and insulating the company from the volatility of spot alumina prices. Jamalco is strategically located in the Atlantic region, benefiting from an expanding Atlantic premium for alumina and its self-sufficiency in bauxite through long-term mining licenses. The company aims to return Jamalco to its nameplate capacity of 1.4 million tonnes and achieve a second-quartile cost curve position, supported by a new steam power generation turbine expected to be operational in Q1 2026, which will lower costs and enable self-sufficiency in power.

The U.S. policy environment has been a powerful catalyst for Century's recent trajectory. President Trump's Section 232 tariffs on imported primary aluminum, initially implemented in 2018, were significantly strengthened in February and May 2025, raising the tariff rate from 10% to 25% and then to 50%, respectively. These actions, aimed at protecting U.S. national security and incentivizing domestic production, have led to a substantial increase in the Midwest Premium (MWP), which surged from approximately $0.20 per pound in Q4 2024 to a spot price of $0.72 per pound (or $1,600 per tonne) by Q2 2025. This policy shift has demonstrably driven "strong domestic demand" and increased customer orders, validating the effectiveness of the Section 232 program.

Further bolstering Century's domestic competitiveness is the Inflation Reduction Act's (IRA) Section 45X production tax credit. Final regulations, published in October 2024, clarified that direct and indirect materials, including carbon, pitch, and other operating supplies, are eligible for a 10% production tax credit. This significantly enhances the economic viability of Century's U.S. operations, with an expected benefit of $79 million for FY 2023 and $73 million for FY 2024. These credits, which do not phase out over time for critical minerals, are a crucial component of Century's long-term earnings power and strategic advantage.

Operational Excellence and Strategic Expansion

Century's operational performance in Q2 2025 demonstrated resilience and strategic execution. The Sebree plant continued its "excellent quarter" streak, delivering strong operating results and completing a planned major maintenance program in its carbon plant on schedule. In Iceland, the Grundartangi smelter returned to full production in Q2 2025 following the end of power curtailments and is actively ramping up its billet casthouse production, optimizing performance in its first full year of operations. A long-term power agreement with ON Power, extending until 2032, further secures Grundartangi's energy supply.

Looking ahead, Century is embarking on significant expansion initiatives. The company announced a decision to restart the last 50,000 metric tonnes of capacity at its Mt. Holly, SC smelter, bringing the plant to full production of over 220,000 metric tonnes per year. This $50 million investment, expected to create over 100 new jobs, will increase total U.S. primary aluminum production by nearly 10%, with first hot metal anticipated in Q1 2026 and a full run rate by the end of Q2 2026. The alumina for this incremental production will be sourced from Century's existing supply book for 2026.

Beyond Mt. Holly, Century is pursuing a monumental new U.S. smelter project, supported by up to $500 million in IRA funding from the Department of Energy. This project aims to build the "first new U.S. primary aluminum smelter in 45-50 years" in the Ohio/Mississippi River Basins, with the potential to double the size of the existing U.S. industry. While major capital spending is not expected until the second half of 2026, following the finalization of power arrangements and site selection, this initiative underscores Century's long-term commitment to U.S. manufacturing and national security. Concurrently, the company is conducting a strategic review of its Hawesville facility, exploring potential redevelopment opportunities, including for AI data centers, while evaluating its value under a restart scenario. Final negotiations for Hawesville are expected to conclude by the end of Q3 2025.

Financial Strength and Future Trajectory

Century Aluminum reported Q2 2025 adjusted EBITDA of $74 million. Total net sales for the quarter reached $628.10 million, marking a 12% increase year-over-year from Q2 2024. For the first six months of 2025, net sales were $1,262.00 million, up 20.2% from the prior year. While the company reported a net loss of $5 million for Q2 2025, its adjusted net income stood at $30 million, or $0.30 per share, reflecting underlying operational strength.

The company's liquidity position remains robust, with $362.5 million as of June 30, 2025, comprising $40.7 million in cash and $321.8 million in unused revolving credit facility availability. Net debt was relatively flat at $446 million. A significant financial maneuver in July 2025 saw Century successfully refinance its $250 million senior secured 7.5% notes with new $400 million senior secured 6.875% notes due 2032. This transaction simplifies the debt structure, lowers interest costs, and extends maturities, aligning with the company's unchanged priority to reduce net debt to a $300 million target.

Cash flow is set to benefit from the realization of Section 45X tax credits. As of June 30, 2025, Century had a receivable of $195 million for FY 2023, 2024, and H1 2025 U.S. production, with the FY 2023 portion expected "imminently." Looking ahead, management has guided Q3 2025 adjusted EBITDA to a range of $115 million to $125 million. This outlook anticipates a $50 million increase from Q2, driven by the lagged impact of the Section 232 tariff increases on Midwest premiums. Furthermore, management projects Q4 2025 EBITDA could reach $140 million to $150 million, based on current spot LME prices exceeding $2,600 per tonne and Midwest premium at approximately $1,600 per tonne. Total capital spending for FY 2025 is estimated at $70 million to $80 million, including $40 million for Jamalco, with the Mt. Holly restart project expected to nearly pay back its $50 million investment by the end of 2026 at spot pricing.

Navigating the Currents: Risks and Competitive Dynamics

Century Aluminum operates in a dynamic and competitive global market. As the largest domestic producer of primary aluminum in the United States, Century holds "privileged positions in very under-supplied U.S. and EU markets." This focused operational execution and regional reliability differentiate it from larger, more diversified competitors like Alcoa Corporation (AA) and Rio Tinto plc (RIO), which, while benefiting from greater scale and broader portfolios, may lack Century's agility in specific regional markets. Century's Gross Profit Margin (10.07%) and Operating Profit Margin (7.40%) are competitive, notably higher than Kaiser Aluminum's (KALU) GPM of 11% and OPM of 3%, and comparable to Alcoa's GPM of 16% and OPM of 7%. Rio Tinto, a diversified mining giant, exhibits significantly higher margins (GPM 56%, OPM 29%), reflecting its different business model. Century's Debt/Equity ratio of 0.66 is moderate, positioning it favorably against Kaiser Aluminum (1.63) and comparable to Alcoa (0.55), though higher than Rio Tinto (0.25).

Century's competitive advantages, or moats, include its established production facilities, which offer operational stability and efficient resource utilization, leading to potentially superior margins. Its cost leadership in certain regions, bolstered by efficient energy contracts and vertical integration through Jamalco, provides a distinct edge. However, vulnerabilities persist, primarily from exposure to commodity price fluctuations, although this is mitigated by LME-linked contracts and the 45X credits. The company also faces potential technological gaps in advanced sustainable production compared to peers like Norsk Hydro ASA (NHY), which emphasizes green aluminum.

Key risks include geopolitical disruptions, such as recent bauxite supply issues in Guinea, which highlight the sensitivity of raw material markets. Energy price volatility, particularly in Europe due to reduced Russian gas supply, could impact operations at Vlissingen and Grundartangi. Regulatory shifts, such as the "One Big Beautiful Bill Act" removing the critical minerals exemption for Section 45X phase-out (starting in 2031), and the pause in IRA funding disbursements, introduce policy uncertainty. Operational challenges, including the Mt. Holly instability in Q4 2024 and a Grundartangi transformer failure in Q2 2025, underscore the inherent complexities of heavy industrial operations. The company also faces legal and contingent liabilities, and tragically, a recent safety incident at Mt. Holly serves as a stark reminder of the paramount importance of operational safety.

Conclusion

Century Aluminum is undergoing a profound transformation, evolving into a more stable and strategically vital player in the global aluminum market. Driven by a supportive U.S. policy landscape that champions domestic production and incentivizes investment, the company is poised for substantial growth. Its vertical integration through Jamalco, coupled with a relentless focus on operational efficiency and strategic capital deployment, underpins a compelling investment thesis.

The commitment to expanding U.S. capacity through the Mt. Holly restart and the ambitious new smelter project, alongside a strengthened balance sheet and robust earnings guidance, paints a picture of a company capitalizing on its unique market position. While risks inherent to the commodity sector and regulatory environment remain, Century's proactive strategies and technological focus on modern, efficient production position it as a critical supplier for national security and a compelling opportunity for investors seeking exposure to a revitalized domestic aluminum industry.