Century Aluminum’s capex
The aluminum industry is capital intensive in nature. The capex that’s done to maintain the existing plant and equipment is referred as “maintenance capex.” The capex that’s done in new projects is referred as “growth capex.”
Growth capex is associated with business opportunities. Companies do growth capex when they see opportunities for their business. Aluminum majors—like Rio Tinto (RIO) and BHP Billiton (BHP)—curtailed aluminum production capacity over last few years.
Century Aluminum had a capex of $56 million in 2014. It has a capex budget of ~$80 million for this year. The above chart shows the breakup of the capex. As you can see, its maintenance capex is expected to be $20–$25 million. The maintenance capex is expected to be higher in 2015. It’s expected to be higher because Century Aluminum has full ownership of the Mt. Holly smelter. It acquired Alcoa’s (AA) stake in the smelter last year.
Along with maintenance capex, Century Aluminum has a significant growth capex budget for this year. It plans to spend $10 million on the expansion project at Grundartangi. It’s also expected to spend $15 million to restart the second anode project at Vlissingen.
Along with these projects, Century Aluminum also plans to invest $35–$40 million on projects with high returns in the US. It plans to invest in an anode rodding shop at Hawesville. This project will help increase the plant’s energy efficiency.
While Century Aluminum’s capex budget is set to rise in 2015, its working capital requirements might come down. We’ll discuss this in the next part of this series.