Century Aluminum's Q2 EBITDA Outlook: Navigating Tariffs and Costs in a Tight Aluminum Market

Century Aluminum’s Q2 2025 EBITDA guidance of $80 million to $90 million underscores the company’s precarious balancing act between rising premiums, cost pressures, and strategic investments. As one of the largest U.S. aluminum producers, Century is uniquely positioned to capitalize on Section 232 tariffs while navigating headwinds tied to raw material inflation and operational hurdles. Let’s dissect the drivers of this guidance and what it means for investors.

The Midwest Premium Surge: A Double-Edged Sword

The single largest tailwind for Century’s Q2 EBITDA comes from the U.S. Midwest premium, which jumped to $866 per ton—up $265/ton from Q1. This surge stems directly from Section 232 tariffs, which shield domestic producers from low-cost imports. However, this benefit is tempered by the lagged impact of falling LME aluminum prices, which averaged $2,513/ton in Q2 versus $2,553/ton in Q1. The $10 million headwind from lower LME prices illustrates the tension between global pricing and regional tariffs.

Energy Costs: A Silver Lining After the Polar Vortex

The post-polar vortex drop in U.S. energy prices—specifically a 15% decline in Midwest Indiana Hub natural gas—delivered a $10 million tailwind. This is a critical reprieve for Century, as energy represents a significant portion of its smelting costs. Meanwhile, falling global oil prices also reduced heavy fuel oil expenses at the Jamalco refinery in Jamaica, further easing pressure on margins.

Raw Material Pressures and One-Time Costs: Near-Term Challenges

Not all trends are favorable. Rising costs for coke, pitch, and caustic soda—critical inputs for aluminum production—introduced a $5–10 million headwind. Compounding this, a scheduled maintenance outage at the Sebree smelter’s Green Mill carbon plant and summer labor adjustments added a $10–15 million one-time hit. While these costs are non-recurring, they highlight the fragility of supply chains in an inflationary environment.

Tax Credits and Liquidity: A Cushion Against Volatility

A key offset to these pressures is the $60 million in U.S. production tax credits (45X) expected in Q2. These credits, part of a $70–80 million annual benefit, provide a critical cash infusion. Combined with $339 million in liquidity and reduced net debt ($442 million), Century is better positioned to weather macroeconomic storms.

Risks on the Horizon

The company isn’t without vulnerabilities. Rising alumina prices—a key input—could squeeze margins further, while global aluminum supply constraints might disrupt production. The CFO also flagged potential delays in receiving the remaining $20–30 million in tax credits, which could push into late 2025 or 2026.

The Bull Case: Positioning for a Global Aluminum Deficit

CEO Jesse Geary’s confidence in a $0.45–0.50 Midwest premium by mid-2025 aligns with a projected 400,000-tonne global aluminum deficit in 2025. With the Hawesville smelter expansion on track to double U.S. production, Century is betting on sustained demand from industries like automotive and renewables. The Jamalco steam turbine project, funded by $16 million in Q1 capex, also aims to reduce energy costs long-term.

Market Reaction: Discounting Near-Term Pain for Long-Term Gain

The stock’s 5.18% post-earnings dip reflects investor focus on Q1’s EPS miss. However, the Q2 outlook—coupled with reduced debt and strong liquidity—suggests the company is stabilizing. At $15 per share, Century trades at a 30% discount to its 52-week high, offering potential upside if EBITDA targets are met.

Conclusion: A Buy for Aluminum Bulls

Century Aluminum’s Q2 EBITDA guidance is a mixed bag: it reflects both the benefits of tariffs and the challenges of an inflationary market. The $80–90 million range is achievable given tailwinds from Midwest premiums and energy cost declines, while tax credits and deleveraging add resilience. Risks are present, but the company’s focus on operational discipline and capital projects positions it to outperform in a tightening aluminum market.

Investors bullish on U.S. industrial policy and global aluminum demand should view dips as buying opportunities. With a projected $70–80 million annual tax credit tailwind, $339 million in liquidity, and a strategic roadmap to capitalize on a supply deficit, Century Aluminum is a play on both near-term resilience and long-term structural growth. The question remains: Can it convert this transitional quarter into sustained profitability? The data suggests it can—if tariffs hold and costs stabilize.

Data as of Q2 2025 guidance. Market conditions and risks are subject to change.