Century Aluminum Company (NASDAQ: CENX)

Century Aluminum Company (CENX) produces primary aluminum through its subsidiaries in the United States and Iceland. The Company’s products include molten aluminum, standard-grade ingot, extrusion billet and other value-added products. Founded in 1981, the Company is headquartered in Monterey, California.

Source: Reuters.com, SEC Filings.

Financial Summary

Source: Reuters.com, SEC Filings.

Analyst Consensus

The mean of seven analysts polled by Thomson Reuters rate shares of CENX a “Hold.”

Analyst Recommendations and Revisions

Source: Reuters.com, SEC Filings.

Investment Highlights

Aluminum producers are expected to continue in defensive modes as expectations of higher smelter demand in 2010 will not outstrip supply, but instead will more likely to fall below both capacity and double-than-normal inventory supplies presently glutting the market. Additionally, new capacities and restarts will act as a cap on prices, at best, but will more likely depress prices from current levels. Ralston Johnson of Wood Mackenzie Consultants said he anticipates between 1.0 and 1.5 million tonnes surplus in 2010, according to Reuters.

Commodities analysts believe that producers will slow output if supplies remain high, which will put additional pressure on marginal producers to close or further curtail production, while other analysts expect supply and demand to match in 2010. Overall, at best, demand will burn off substantial inventories and keep capacity at present levels.

Industry overcapacity may turn out to be a problem for the foreseeable future. China’s plants open and close much faster than producers of the West, giving Chinese-based plants a large advantage over Western producers both in the speed to delivery and the final costs to the customer, which is more likely to be a customer from China or another nearby Asian country. According to independent consultant James King, new refinery capacity will be coming on-line in the next few years in Brazil, China, Australia and India, which could increase capacity by approximately 16 million tonnes per year. Much of the capacity closed during the financial crisis may remain closed, especially in the United States, Canada and Western Europe.

Most Recent Quarterly Results

The Company posted $228.7 million in sales for the third quarter, compared with $552.2 million for the same period last year. Shipments of aluminum dropped to 146,245 tonnes, compared with 203,618 tonnes for the third quarter of 2008.

The Company reported net income of $40.1 million, or 45 cents per common share, for the third quarter of 2009. Net income was heavily impacted by the Company’s Hawesville, Kentucky, smelter of $55.6 million relating to the termination of an existing contract and the placement of a new contract at its Hawesville, Kentucky smelter.

The Company reported that its Grundartangi smelter shipped approximately 275,000 metric tonnes, at an average annual rate, for the quarter; its Nordural smelter operated at ‘modest activity levels’; it divested its 50% stake in the Gramercy refinery and in the St. Ann, Jamaica bauxite mine; it retired $128 million of 1.75% convertible senior notes and converted the note to 11.4 million of common shares; and reported $196.3 million in cash at the close of the quarter ended September 30, 2009.

Technical Analysis

CENX trades above its 13-day moving average. This bullish sign is significant because the 13-day moving average is turning upwardly as well.

The MACD for CENX currently indicates a bullish signal. The MACD is above the signal line, a 9-day moving average of the MACD. The MACD is about to move above the critical level of 0, which implies the past price action has been positive. Overall, the chart is short-term bullish.

Comparative Analysis

Source: Thomson Financial

Insider Trading Activity

Source: Yahoo Finance

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