CENX - Century Aluminum: Looming Capex Requirements And Weak Fundamentals
2024-06-10 16:20:50 ET
Summary
- Century Aluminum's stock price has increased by 89% YoY, most likely due to a spike in LME aluminum prices.
- In my view, the underlying company fundamentals are poor and do not justify a sustained outperformance compared to its peers at the moment.
- A simple model suggests a ~26% downside to the stock's fair-value. However, the strong correlation with spot aluminum markets suggests a short position could be a speculative bet.
Introduction & Investment Thesis
Century Aluminum ( CENX ) is an aluminum smelter with operations in the United States and in Iceland. It is owned 46% by Glencore ( GLNCY ) and marketed 64% of its production to Glencore in 2023. CENX’s business model is to buy raw materials, to smelt aluminum, and to then market it downstream to end users.
Century Aluminum share price soared 89% from $8.39 at the beginning of December 2023 to $15.82 on June 7 th , 2024. This price appreciation is likely to be driven by a corresponding spike in LME aluminum prices....
Century Aluminum: Looming Capex Requirements And Weak Fundamentals