Why Century Aluminum Stock Popped Today

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What happened

Shares of Chicago-based aluminum producer Century Aluminum (NASDAQ:CENX) shot up 14.4% in 12:50 p.m. EDT trading today. There appear to be two reasons for this.

So what

Reason #1: Ever Given.

As you’ve probably heard by now, over in Egypt, a containership by the name of “Ever Given” is taking a toll on the global supply chain right now. The heavily laden transport vessel somehow got itself stuck crosswise in the middle of the Suez Canal, and traffic is backing up before and aft — at the cost of some $400 million an hour, according to shipping data company Lloyd’s List.  

Reason #2: South Carolina.

Now, it’s not known precisely how much of the supplies getting interrupted by the Suez debacle comprise aluminum shipments, but I’m guessing the number is more than zero. In the meantime, that makes local producers of the metal, such as Century, invaluable to U.S. manufacturers — and Century Aluminum is about to make itself even more indispensable than it already is.

In an optical illusion, a containership looks like it's in a desert, but it's actually transiting the Suez Canal.

Image source: Getty Images.

Now what

The reason: Yesterday, Century Aluminum announced that its South Carolinian subsidiary has secured a three-year power contract from the South Carolina Public Service Authority that will permit its Mt. Holly aluminum smelter, beginning on April 1, to start increasing its aluminum output by as much as 50%.  

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As the company advised yesterday, this development will help it to grow its second-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) by “approximately $45 million” sequentially, even as its power costs fall. In total, the company anticipates a sequential increase in adjusted EBITDA of $70 million.

Given what’s going on in the Suez right now, this news couldn’t have come at a better time.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.



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