Century sees supply headwinds continuing to reduce global aluminum inventories: CEO

As supply-side headwinds are expected to continue to reduce global aluminum inventories in the near term, regional premiums and London Metal Exchange prices for the material should respond quickly once demand conditions improve, Century Aluminum CEO Jesse Gary said during the first quarter conference call.

Global aluminum supply and demand was roughly balanced entering Q2 with additional smelter curtailments in Europe and Yunnan offsetting restarts elsewhere in China, Gary said during the call late-May 8.

A total 1.2 million mt of smelting capacity in Europe, representing 50% of total EU capacity, has been curtailed since the energy crisis in the region began, Gary noted. With EU energy prices expected to increase further, there is risk for an additional 250,000 mt to 5000,000 mt of European curtailment over the next 12 months, he said.

"We do not anticipate any significant restarts during this time period as forward energy prices above $150/MWh remain well above levels needed for economic restarts," Gary said.

In China, continued low reservoir levels in Yunnan drove an additional 600,000 mt of curtailments in the province in Q1, partially offsetting restarts in Sichuan and other provinces, he said.

"These supply-side headwinds continue to reduce global inventories, which are now below 50 days of global consumption," Gary said. "With inventories at these historically low levels, LME prices and regional premiums that should respond swiftly once demand conditions improve."

In Europe, the Platts daily European duty-paid aluminum premium range in-warehouse Rotterdam was assessed at a midpoint of $324/mt on May 5, up from a low of $245/mt in late-2022, but down from $615/mt for the same date in May 2022, according to S&P Global Commodity Insights data.

Auto expected to drive demand in US, Europe

Despite the recent weakness, Gary said the company continues to anticipate long-term aluminum billet and slab demand in both the US and Europe, driven by global trends toward sustainability, light-weighting, and electrification.

"Automotive demand will benefit from all three trends as aluminum content per vehicle has steadily increased in order to meet the industry and regulator's requirements for fuel efficiency, lower emissions, and increased production of electric vehicles," Gary said.

When asked about the potential for restarting the company's Hawesville, Kentucky, smelter, Gary said while conditions have improved, Century is continuing to wait to see the volatility reduce in both power and aluminum prices in order to justify the cost of a restart.

In its earnings release, Century noted Kentucky power prices have fallen about 50% compared with fourth quarter levels.

"We need everything to align, it's something that we'd really like to do, but we just need to wait for the right market conditions in order to move that forward," he said.

The company halted production at the 250,000 mt/year Kentucky smelter in June 2022, citing high global energy prices. At the time it said it expected operations to remain offline for a period of nine to 12 months "until energy prices return to more normalized levels."

The Platts US aluminum Transaction premium was assessed at 25.1 cents/lb plus LME cash, delivered Midwest on May 5, while up from a low of 19.6 cents in late 2022, the assessment is down from 38.9 cents/lb on May 5, 2022, according to S&P Global data.

Q1 results

Century shipped a total 181,165 mt of primary aluminum in Q1, down from 211,411 mt in the year-ago quarter. US Q1 shipments were reported at 102,430 mt, down from 134,953 mt in Q1 2022, while shipments in Iceland stood at 78,735 mt, up from 76,458 in the same period a year ago.

Overall, the company reported a net loss of $38.6 million on sales of $552.4 million, down from net income of $17.7 million on sales of $753.6 million in Q1 2022. Sequentially, the company's loss narrowed from a net loss of $113.5 million in Q4 2022.