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Century Aluminum Posted a Loss despite Trump’s Tariffs

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Century Aluminum

On February 21, Century Aluminum (CENX) released its fourth-quarter earnings after the markets closed. The company posted an adjusted net loss of $40.7 million in the fourth quarter. In fiscal 2018, the company posted an adjusted net loss of $13.0 million. US aluminum producers (SPY) including Alcoa (AA) and Century Aluminum are enjoying higher physical delivery premiums in US markets. The higher premiums are due to the Section 232 tariffs.

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Lower aluminum prices

Higher delivery premiums have been more than offset by lower aluminum prices. To make things worse for Century Aluminum, alumina prices rose last year following supply disruptions at Norsk Hydro’s Alunorte refinery. The sanctions on RUSAL, which have been withdrawn, also fueled the rally in alumina prices. Since Century Aluminum buys alumina from third parties, its earnings took a hit in the fourth quarter. Century Aluminum expects higher alumina costs in the first quarter.

Century Aluminum’s fourth-quarter shipments rose 9% sequentially due to the restart of its Hawesville and Sebree plants. Century Aluminum announced the restart of its Hawesville plant after President Trump announced a 10% tariff on US aluminum imports last year.

2019 outlook

While 2018 was a terrible year for Century Aluminum, 2019 might be better. The company expects to generate positive EBITDA in the second quarter even if aluminum prices stay at the same level. In the second half of the year, Century Aluminum is expected to benefit from lower alumina costs and higher shipments.

Relatively higher aluminum prices in the United States have a negative impact on downstream users (GE) like Ford (F) and General Motors (GM).

Chinese aluminum exports rose to a record last year and have continued to rise this year. Read No Respite for Alcoa, China Exported Record Aluminum for a detailed analysis of China’s January aluminum imports.

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