CENTURY ALUMINUM Q2 FY26 earnings call CENX

Century Aluminum successfully completed two major capital projects ahead of schedule, bringing all assets to full capacity for the first time in over a decade. The Mt. Holly expansion, involving 90 pots, was finished in late June, adding nearly 10% to U.S. primary aluminum production. Concurrently, the Grundartangi Line 2 restart was completed by the end of July, six months early, restoring the plant to near full production. These achievements were executed safely and involved welcoming hundreds of new employees.

The company is operating in a strong market, with LME prices at approximately $3,250 per tonne, U.S. Midwest premium at $1.11 per pound, and European duty-paid premium at $500 per tonne. Demand is robust, driven by power and data infrastructure, commercial aerospace, defense, and reshoring efforts. Management expects a global aluminum deficit of around 1 million tonnes in 2026, persisting into 2027, leading to historically low inventory levels and a tight market.

Progress continues on the new Oklahoma smelter project, a joint venture with Emirates Global Aluminum, with detailed engineering underway and negotiations for the final energy contract and financing advancing. The company anticipates FID and groundbreaking by the end of 2026, with first hot metal by the end of 2029. A new executive order from President Trump provides a significant incentive, allowing approved companies like Century to import primary aluminum at a reduced 25% tariff rate, with Century's share for the Oklahoma project estimated at 300,000 metric tons per year starting in 2027.

Century's balance sheet has significantly strengthened, with a cash balance of $388 million at the end of Q2 FY26 and net debt reduced to $98 million. As of July-end, cash on hand exceeded total debt. The company also received $94 million in 45X tax credits and $19 million in insurance recoveries post-quarter. This robust financial position, combined with potential monetization of its 6.8% stake in the Hawesville data center (valued at $19 billion over 20 years), provides ample capacity to fund the Oklahoma project and pursue other strategic priorities, including capital returns.

At Jamalco, the new TG4 power generation turbine came online in early August, enabling self-generated energy and eliminating expensive grid purchases, expected to yield a $20 per ton benefit. However, the refinery faces a modest headwind from lower quality bauxite, which is expected to take a couple more quarters to resolve. Sebree continued its strong performance, consistently delivering top-tier operating and financial results, setting a high standard for the portfolio.