Century Aluminum Q1 2025: Key Contradictions in Costs, Demand Outlook, and Cash Flow Strategies

Alumina costs and market conditions, manufacturing tax credit receivable, demand outlook and market deficit, demand outlook, and cost reduction initiatives and impact on cash flow are the key contradictions discussed in Century Aluminum's latest 2025Q1 earnings call.



Strong Financial Performance and Market Conditions:
- Century Aluminum Company generated $78 million of adjusted EBITDA in Q1 2025, leading to a reduction in net debt of $55 million and an increase in liquidity by $94 million.
- Financial performance was supported by rising LME and Midwest premiums offsetting higher energy prices, with realized LME prices averaging $2,553.
- The strong result was attributed to operational discipline, working capital optimization, and favorable market conditions.

Operational Efficiency and Capital Expenditures:
- The company's assets, particularly in Iceland and the U.S., delivered strong operational results, with Iceland's Grundartangi smelter returning to full production in March.
- Century's capital improvement program at Jamalco is aimed at returning the refinery to nameplate capacity, with a new turbine generator planned for completion by year-end.
- These initiatives are expected to lower costs and improve operational efficiencies, contributing to future financial performance.

Tariff Impact and Supply Chain Resilience:
- The implementation of Section 232 tariffs on aluminum resulted in a doubling of the Midwest premium from $0.20 to nearly $0.40 per pound.
- Century is enhancing its supply chain security in response to reciprocal tariffs, with no expected material cost increases.
- The tariffs and supply chain measures are part of efforts to support U.S. national security and manufacturing reshoring.

Debt Reduction and Cash Flow Management:
- Century's cash balance stood at $45 million, with net debt declining to $442 million, a reduction of $55 million from the previous quarter.
- Cash inflows were strategically deployed to repay $45 million of short-term debt and fund $16 million of CapEx, with a focus on debt reduction.
- The company's financial management is focused on deleveraging while maintaining capital discipline and investing in key projects.

Global Market Dynamics and Demand Growth:
- Century anticipates a global market deficit of approximately 400,000 tons in 2025, driven by China's production cap and low inventories.
- Demand growth, particularly for domestically produced billets, has increased following the effectiveness of revised Section 232 tariffs.
- The company's outlook is supported by these market dynamics, indicating potential for higher aluminum prices and continued strong demand.