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Century Aluminum Just Spiked 24%...Here's How It Could Double Next

Century Aluminum Just Spiked 24%...Here's How It Could Double Next
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  • Century Aluminum Co (NASDAQ: CENX) shares jumped 24 percent on August 27, after having declined steadily through the year.
  • Deutsche Bank’s Jorge Beristain, maintained a Buy rating on the company, while reducing the price target from $19 to $10.
  • Reduced overhead costs are expected to ease the cash strain on U.S. smelters and result in improved profitability once aluminum prices recover, Beristain said.

Analyst Jorge Beristain said that Century Aluminum’s profitability is expected to be hit by the recently announced closure of the Hawesville aluminum smelter by October and a reduced possibility of a V-shaped aluminum price recovery.

“While US Midwest aluminum premia have remained relatively stable at ~8c/lb, global LME prices have fallen 11% since July 1 and are now 11c/lb lower-than-DBe for 2H15 ($0.80/lb),” Beristain wrote.

Grundartangi remains the company’s only profitable smelter at current prices with the two U.S. smelters essentially offering optionality for the time when aluminum prices recover.

Since Century Aluminum’s high cost U.S. operations are essentially being funded by Grundartangi, any shutdowns in the US will mean that the company’s overall smelter portfolio will become cash flow positive again, the Deutsche Bank report explained.

“We laud management’s willingness to idle (Hawesville) and close (Ravenswood) operations that are losing cash as it implies reducing Balance Sheet risk vs. maintaining cash draining operations,” Beristain added.

Latest Ratings for CENX

May 2018JP MorganDowngradesOverweightNeutral
Apr 2018Deutsche BankMaintainsHoldHold
Mar 2018JP MorganMaintainsOverweightOverweight

View More Analyst Ratings for CENX
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