Action | 07 Jan 2026 10:23:57 ET │ 15 pages Aluminum Corporation of China (2600.HK) Benefit from Hiking Aluminum Price, Maintain as Top Pick CITI'S TAKE We update our Chalco model to factor in updated aluminum and alumina price forecast. We revise our 2025E/26E/27E net profit forecast by +2%/+4%/+7% to Rmb14.0/19.1/21.9bn and revise TP for H-share to HK$15.94 (from HK$12.41). We expect Chalco to benefit from higher for longer aluminum price and aluminum margin. Maintain as Top Pick. We will host a 2026 busi ...

Core Insights - Century Aluminum Company reported a net income of $14.9 million for Q3 2025, a significant increase of $19.5 million from the previous quarter, primarily driven by favorable realized Midwest Premiums [4][8] - Adjusted net income attributable to Century stockholders reached $57.9 million, up $27.5 million sequentially, reflecting improved operational performance despite challenges [4][8] - The company expects fourth quarter Adjusted EBITDA to range between $170 to $180 million, driven by higher realized LME and Midwest regional premiums [6] Financial Performance - Net sales for Q3 2025 were $632.2 million, a slight increase of $4.1 million from Q2 2025, mainly due to an increase in realized Midwest premium [3][8] - Aluminum shipments decreased to 162,442 tonnes in Q3 2025 from 175,741 tonnes in Q2 2025 [1][8] - Adjusted EBITDA attributable to Century stockholders was $101.1 million, an increase of $26.8 million from the prior quarter, primarily due to favorable realized Midwest Premium [5][27] Operational Highlights - The realized Midwest Premium increased to $1,425 per metric tonne in Q3 2025, up $575 per metric tonne from the prior quarter [8] - The company finalized a power agreement for the Mt. Holly facility through 2031, which is crucial for the restart of idled capacity [8] - Century Aluminum received a $75 million refund under the 2024 45X program in October 2025 [8] Liquidity and Financial Position - As of September 30, 2025, Century's liquidity position was $488.2 million, consisting of $151.4 million in cash and cash equivalents and $336.8 million in borrowing availability [5][8] - The company reported a gross profit of $77.3 million for Q3 2025, compared to $36.2 million in Q2 2025 [15][27] Future Outlook - The company anticipates an increase in U.S. billet premiums by $110 per metric tonne for FY26 volumes [8] - Century's management is focused on improving operational efficiency and managing costs to enhance profitability in the upcoming quarters [4][6]

Core Insights - Century Aluminum Company (CENX) reported a loss of 5 cents per share for Q2 2025, missing the Zacks Consensus Estimate of 34 cents and showing a decline from a loss of 3 cents in the prior year quarter and earnings of 29 cents in the previous quarter [1][7] Revenue and Shipments - The company achieved net sales of $628.1 million, reflecting a 12% year-over-year increase, but fell short of the Zacks Consensus Estimate of $650.7 million. Sequentially, sales decreased by 0.9% due to lower third-party alumina sales, although this was partially offset by favorable regional premium prices, volumes, and mix. Primary aluminum shipments totaled 175,741 tons, up approximately 4.7% year over year [2][7] Financials - At the end of Q2 2025, CENX had cash and cash equivalents of $40.7 million, a decrease of 9.4% from the previous quarter. The net cash provided by operating activities for the six months ending June 30, 2025, was $80.2 million [3] Q3 Outlook - The company anticipates adjusted EBITDA for Q3 2025 to be between $115 million and $125 million, driven by increased realization of Midwest regional premium [4][7] Stock Performance - CENX shares have increased by 74.6% over the past year, significantly outperforming the industry growth of 31.9% [5]

Company Overview - Century Aluminum Company (NASDAQ:CENX) plans to restart over 50,000MT of idled production at its Mt. Holly, SC smelter with an investment of approximately $50 million [1] - The company is the largest producer of primary aluminum in the United States and operates production facilities in Iceland, the Netherlands, and Jamaica [5] Production and Economic Impact - The restart will create over 100 new jobs and boost U.S. domestic aluminum production by almost 10 percent [1] - The Mt. Holly smelter, when operating at full capacity, has an economic impact of over $890 million annually in South Carolina, with an average wage of $100,000 for jobs directly supported by Century Aluminum [3] Government and Regulatory Support - The restart is facilitated by President Trump's application of Section 232 tariffs, which recently increased tariffs on aluminum imports to 50% [2] - The South Carolina Public Service Authority (Santee Cooper) has cooperated with Century Aluminum to extend the current power supply contract through 2031, which is essential for the restart [4]

Core Viewpoint - China Hongqiao Group Limited (CHGL) is initiated with an OUTPERFORM rating and a target price of HK$23.62, implying an 8.0x 2025 estimated P/E ratio [1] Investment Positives - CHGL is a leader in the aluminum industry with an integrated presence across the green aluminum value chain, focusing on high-quality green development [2] - The company has established a green ecosystem through optimizing energy structure, advancing green energy projects, and developing a circular industry to meet China's carbon neutrality goals [2] Raw Material Self-Sufficiency - CHGL has a high self-sufficiency ratio in raw materials, with a bauxite production base in Guinea (60 million tons annually) and alumina production capacity of 17.5 million tons in Shandong, China, and 2 million tons in Indonesia [3] Energy Optimization and Production Capacity - The company is relocating aluminum production capacity to Yunnan province, aiming to increase its exposure to green power-based aluminum to 46% [4] Downstream Expansion - CHGL is expanding into lightweight automotive materials to further develop a green and recycling industry [5] Market Opportunities - The aluminum sector is expected to present investment opportunities due to a supply shortage, with proactive fiscal and monetary policies likely to improve macro expectations and boost aluminum prices [6] Competitive Advantages - CHGL has four key competitive advantages: substantial upside potential in profit and valuation, high self-sufficiency in raw materials, a high dividend payout ratio (62%) and yield (8.9% in 2024), and a focus on building a green aluminum value chain [7] Differentiation from Market - Unlike the market's focus on earnings driven by price hikes, CHGL's high self-sufficiency and transformation towards a green value chain may enhance product competitiveness and valuation premium [8] Financial Projections - Expected EPS for 2025 and 2026 are Rmb2.63 and Rmb2.70, indicating a CAGR of 6%, with the stock trading at 6.8x 2025e and 6.5x 2026e P/E [8]

Financial Data and Key Metrics Changes - Century Aluminum generated $78 million of adjusted EBITDA in Q1 2025, a modest decrease from Q4 2024 primarily due to polar vortex-related weather conditions impacting energy prices and one-time alumina costs [20][24] - Net sales for the quarter were $634 million, reflecting a $3 million increase due to higher metal volume and all-in metal pricing, partially offset by lower third-party alumina sales [22] - Net income was reported at $30 million or $0.29 per share, with adjusted net income at $37 million or $0.36 per share [22] - Liquidity increased to $339 million, up nearly $100 million quarter over quarter, and net debt declined by $55 million to $442 million [24] Business Line Data and Key Metrics Changes - First quarter shipments rose slightly to nearly 169,000 tonnes, an increase of 1% sequentially, with all smelters operating at targeted utilization levels [21] - Jamalco produced its highest quarterly volume in Q1 since acquisition in 2023, while Grundartangi returned to full production levels in March [21][14] - Billet orders from Grundartangi were lower than anticipated in Q1 due to demand weakness in the European market, but a small uptick was noted as Q2 began [15] Market Data and Key Metrics Changes - Realized LME prices averaged $2,553 per ton in Q1, up $91 per ton from the prior quarter, while the Midwest premium averaged $6.00 per ton, up $165 per ton [25] - Global market is expected to face a deficit of approximately 400,000 tonnes in 2025 as China reaches its production cap, with global inventories at new lows of only 46 days [11] - U.S. shipments increased by 6.7% year over year in March as downstream customers shifted supply chains back to the U.S. [12] Company Strategy and Development Direction - The company is focused on achieving lower production costs through capital improvement programs, particularly at the Jamalco facility, which aims to return to nameplate capacity of close to 1,400,000 tonnes [17][21] - The new smelter project is expected to double the size of the existing U.S. aluminum industry, creating over 1,000 full-time jobs and 5,500 construction jobs [38] - Management emphasized the importance of the Section 232 tariffs in stabilizing the U.S. aluminum market and supporting domestic production [35][36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for aluminum, particularly in the U.S., despite some weakness in Europe [62] - The company expects Q2 adjusted EBITDA in the range of $80 million to $90 million, with anticipated benefits from lagged pricing and reduced energy costs [30] - Management remains cautious about market volatility but believes that aluminum prices will continue to rise in the near to medium future [66] Other Important Information - The company is on track to complete a major capital improvement project at Jamalco by year-end, which will enhance self-sufficiency in power generation [17] - A one-time increase in maintenance spending of about $10 million is expected in Q2 due to planned maintenance at the Sebree facility [18] Q&A Session Summary Question: Confirmation on one-time OpEx cost in Q2 - Management confirmed that the incremental OpEx cost of $10 million to $15 million in Q2 is a one-time expense [40] Question: Clarification on alumina costs - Management explained that higher alumina costs were also one-time due to timing of vessel sales, with no expected benefits in Q2 [42] Question: Update on Jamalco operations and cost improvements - Management indicated that Jamalco is operating well and is expected to improve further with the introduction of a new steam generation turbine [54] Question: Expectations on aluminum market and inventory replenishment - Management projected that global inventories will continue to decrease, supporting higher aluminum prices in the future [66] Question: Key milestones for the new aluminum smelter project - Management highlighted that finalizing power arrangements and site selection are the next key milestones before significant capital expenditure begins [76]

Financial Data and Key Metrics Changes - Century Aluminum generated $78 million of adjusted EBITDA in Q1 2025, a modest decrease from Q4 2024 primarily due to polar vortex-related weather conditions impacting energy prices and one-time alumina costs [21][22] - Net sales for the quarter were $634 million, reflecting a $3 million increase due to higher metal volume and all-in metal pricing, partially offset by lower third-party alumina sales [23] - Net income was reported at $30 million or $0.29 per share, with adjusted net income at $37 million or $0.36 per share [23][24] - Liquidity increased to $339 million, up nearly $100 million quarter over quarter, and net debt declined by $55 million to $442 million [25] Business Line Data and Key Metrics Changes - First quarter shipments rose slightly to nearly 169,000 tonnes, an increase of 1% sequentially, with all smelters operating at targeted utilization levels by quarter end [22] - Jamalco produced its highest quarterly volume in Q1 since acquisition in 2023, while Grundartangi returned to full production levels in March [22][14] - Billet orders from Grundartangi were lower than anticipated in Q1 due to demand weakness in the European market, but a small uptick was noted entering Q2 [16] Market Data and Key Metrics Changes - Realized LME prices averaged $2,553 per ton in Q1, up $91 per ton from the prior quarter, while the Midwest premium averaged $6.00 per ton, up $165 per ton [26] - Global market is expected to face a deficit of approximately 400,000 tonnes in 2025 as China reaches its production cap [10] - U.S. energy prices have eased since the polar vortex conditions in Q1, with Midwest Indiana hub prices down approximately 15% compared to the last quarter [31] Company Strategy and Development Direction - The company is focused on achieving lower production costs through capital improvement programs, particularly at the Jamalco facility [22][18] - Century Aluminum is committed to building a new smelter project, which will be the first new smelter built in the U.S. in fifty years, aiming to double the size of the existing U.S. industry [37] - The company is actively working to secure supply chains in response to recent tariff implementations, aiming to mitigate cost increases [36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for aluminum, particularly in the U.S., as customers are nearshoring their supply chains [61] - The company anticipates continued support for higher aluminum prices due to low global inventories and ongoing demand growth [11] - Management remains cautious about market volatility but expects a small deficit in the aluminum market this year, with prices likely to rise in the near to medium future [62][65] Other Important Information - The company plans to complete a major capital improvement program at Jamalco by year-end, which will enhance power generation and lower production costs [18] - A one-time increase in maintenance spending of about $10 million is expected in Q2 due to planned outages at the Sebree facility [20] Q&A Session Summary Question: Confirmation on the one-time OpEx cost of $10 million to $15 million in Q2 - Management confirmed that this cost is indeed one-time and should reverse in Q3 [40][41] Question: Clarification on alumina costs being one-time - Management explained that the higher alumina costs were related to timing of vessel sales, with a high-priced vessel sold in Q1 and lower prices expected in Q2 [42] Question: Update on manufacturing credit receivable - Management expects to receive about $60 million of the FY '23 amount in Q2, with the remaining $20 million expected later this year or early next year [44][45] Question: Confirmation on debt reduction as a priority for excess cash - Management confirmed that reducing debt remains the top use of excess cash while continuing existing CapEx programs [50] Question: Update on operations at Jamalco - Management reported that Jamalco is operating well, with plans to introduce a steam generation turbine by year-end to reduce third-party power purchases [53] Question: Expectations on aluminum market and inventory replenishment - Management indicated that they do not foresee a replenishment of inventories and expect aluminum prices to continue rising [65] Question: Key milestones for the new aluminum smelter project - Management highlighted that finalizing power arrangements and site selection are the next key milestones, with significant CapEx expected in 2026 [74]

Core Insights - Century Aluminum Company reported a net income attributable to stockholders of $29.7 million for Q1 2025, a decrease of $15.5 million from Q4 2024, primarily due to higher input costs and losses on derivative instruments [4][8] - Adjusted net income for the same period was $36.6 million, down $6.9 million sequentially, influenced by exceptional items including emergency energy charges and unrealized losses on derivatives [4][8] - The company expects Q2 2025 Adjusted EBITDA to range between $80 to $90 million, driven by increased regional premiums and lower energy costs [6] Financial Performance - Net sales for Q1 2025 were $633.9 million, an increase of $3.0 million from Q4 2024, attributed to higher LME aluminum prices and favorable volume and mix [3][8] - Aluminum shipments increased by 1% sequentially to 168,672 tonnes [8] - Adjusted EBITDA for Q1 2025 was $78.0 million, a decrease of $2.9 million from the previous quarter, mainly due to higher energy prices and raw material costs [5][8] Operational Highlights - The Midwest premium realized was $602, reflecting a 38% increase from the prior quarter [8] - The company recorded a positive impact of $16.2 million from the increase in Section 232 aluminum tariffs to 25% [8] - Century Aluminum's liquidity position as of March 31, 2025, was $339.1 million, consisting of cash and cash equivalents of $44.9 million and $294.2 million in borrowing availability [5][8] Strategic Developments - A new five-year labor contract was approved for the Grundartangi smelter [8] - The power purchase agreement with ON Power, the largest power provider in Iceland, was extended through Q1 2032 [8]