CENX — Q2 2026 Financial Report Analysis

Century Aluminum turned a $4.6 million loss in the second quarter of 2025 into a $249.3 million profit in the second quarter of 2026, even though it shipped a quarter less metal. Tariffs explain most of the swing. The 50% U.S. tariff on imported primary aluminum (under Section 232 of U.S. trade law) has pushed up the Midwest premium. That premium is the extra amount U.S. buyers pay on top of the global London Metal Exchange (LME) price, and Century's U.S. smelters collect it. Net sales rose 19.7% to $752.1 million. Operating margin, the share of revenue left after running the business and before interest and tax, went from 2.9% to 28.1%. Volume moved the other way: a transformer failure at the Grundartangi smelter in Iceland cut shipments from there by more than half.

At a glance

• $6,021 per tonne realized in the U.S., up from $3,432 a year ago. U.S. aluminum sales of $572.3 million over 95,057 tonnes. Volume barely changed (94,519 tonnes a year ago), so price did the work.
• Iceland shipments fell 56%, from 81,222 to 35,575 tonnes. One of Grundartangi's two potlines (the long rows of cells where aluminum is made) was idle from October 2025 until the second half of April 2026. Total shipments fell 25.7% to 130,632 tonnes.
• Adjusted EBITDA attributable to Century was $326.9 million. That is the company's measure of earnings before interest, tax, depreciation and one-off items. Management's Q3 guidance is $325–345 million, so it expects the higher run-rate to hold.

The numbers

*Our calculation: segment aluminum sales divided by tonnes shipped, from the company's shipments table. "n/m" = not meaningful, because a percentage change from a loss can't be read sensibly.

The prior-year figures are labelled "As Restated". Earlier in 2026 Century changed how it consolidates its 55%-owned Jamalco alumina refinery in Jamaica: it now includes all of Jamalco in its accounts, where it used to include only its share of certain Jamalco assets. Restated revenue and costs therefore differ from what was originally reported. Net income attributable to Century did not change.

Why price beat volume

The 10-Q gives a clear explanation. Over the first half, gross profit rose $255.8 million versus a year earlier, "primarily due to favorable metal price realization of $457.4 million." Four things worked against that:

The price numbers in the filing show the size of the tariff effect. In the first half of 2026 the LME price averaged $3,386 a tonne, up 33% from $2,538. The Midwest premium averaged $2,406 a tonne, up from $855, or 2.8 times. In Q2 alone the LME averaged $3,576 and the Midwest premium $2,518. Together that is about $6,094 a tonne, close to the $6,021 Century realized in the U.S. The premium now adds about 70% on top of the LME price. The filing says the premium "continued to increase due to the additional increase in Section 232 tariff rate... from 25% to 50% effective June 4, 2025."

Iceland is priced differently. Metal sold into Europe earns the European Duty Paid premium, which averaged $581 a tonne in Q2, so Grundartangi's realized price ($3,407) was far below the U.S. figure. U.S. tonnes now earn roughly $2,600 more each than Icelandic ones. That is why 73% of Q2 shipments but 83% of primary aluminum sales came from the U.S. plants.

Compared with Q1 2026, sales rose $102.9 million: $80.5 million from higher prices and premiums, and $34.4 million from more volume as Mt. Holly's last 90 pots and Grundartangi's second potline restarted. Gross profit also gained $34.3 million from power, which the filing attributes to "improved weather conditions in the United States." Q1 had included $13.3 million of emergency energy charges at Mt. Holly.

Power: three plants, three kinds of contract

Electricity is the biggest controllable cost in smelting. Power, alumina, carbon, labor and other controllable costs together make up more than 82% of Century's cost of goods sold. The three plants buy power on very different terms:

• Sebree (Kentucky) buys at MISO market prices, the wholesale price on the regional U.S. grid, so a cold snap or heat wave raises its costs directly. Century has fixed part of this with swaps covering 852,960 MWh through December 2027.
• Mt. Holly (South Carolina) gets all of its power from Santee Cooper at cost-of-service rates (rates set to cover the utility's costs, not market prices) through December 2031. That is a stable base for the newly restarted capacity.
• Grundartangi (Iceland) buys about 545 MW of hydro and geothermal power. Most of it is priced off the LME, so power costs rise when aluminum prices rise. This acts as a partial built-in hedge: the plant gets less benefit from a rally but is cushioned in a slump. The filing says Century has negotiated extensions running to 2031–2037.

What the headline numbers hide

• Insurance money is propping up the Iceland figures. Q2 includes a $40.1 million "gain on insurance proceeds" for the Grundartangi failure. That is business-interruption cover for profit the plant would have earned. Century excludes it from adjusted earnings and adds back $61.3 million (after tax) of outage costs. On the company's own after-tax figures, the outage still cost about $29 million net of insurance in Q2. As the potline returns, both the costs and the insurance gains should fade.
• GAAP and adjusted earnings are close this quarter, but only because large items cancel out. Adjusted net income was $257.3 million against $249.3 million GAAP. The bridge includes +$61.3M Iceland outage, –$38.9M unrealized hedge gains, –$32.1M insurance gain, +$10.7M Mt. Holly expansion costs, +$4.3M inventory write-down and +$2.5M share-based pay. In Q1 the gap was far wider: GAAP $337.5M against adjusted $170.7M, because of the $287.9 million gain on selling the Hawesville site.
• Hedges limit how much of the tariff premium Century keeps. At June 30 Century had sold forward 109,300 tonnes of Midwest premium through December 2028 and 58,600 tonnes of LME aluminum through December 2027. Those tonnes are locked at fixed prices. If the premium keeps rising, Century does not benefit on them. If tariffs are cut and the premium falls, these hedges soften the hit. Hedge liabilities on the balance sheet were $83.3 million.
• Tax credits help margins. The Section 45X manufacturing tax credit (10% of eligible production costs, from the Inflation Reduction Act) cut Q2 cost of goods sold by $26.3 million, up from $21.9 million. That is about 12% of the quarter's gross profit. The $94.3 million refund for 2025 arrived in July. Margins therefore depend on two policies: the tariff and the credit.
• The tax rate was very low. Income tax was $12.1 million on $256.9 million of pre-tax income, about 4.7%. The filing attributes the change only to "jurisdictional mix of earnings," so readers should not assume the rate stays this low.
• Cash lags profit, for known reasons. First-half operating cash flow was $236.0 million against $570.8 million of net income. Most of the gap is the non-cash Hawesville gain ($287.9 million). Leaving that out, net income was about $283 million, so cash conversion was roughly 83%. The rest went into working capital: inventories (–$68.4M) and receivables (–$40.9M) rose with higher prices, and $52.6M of 45X credits were earned but not yet received in cash. Capital spending was $134.4 million. Cash rose to $343.4 million from $134.2 million at year-end, and by the end of July cash exceeded total debt (long-term debt $480.0 million at June 30).
• Accounting controls are a weakness. The Jamalco restatement came after SEC staff disagreed with the company's view that the error was immaterial. Century said it expected to report a material weakness in internal control over financial reporting, meaning a significant gap in the checks on its accounting. Reported net income attributable to Century did not change, but this is a governance issue.
• Guidance was met. In May, management guided Q2 adjusted EBITDA to $315–335 million. The result was $322.8 million total, or $326.9 million attributable to Century, inside the range.

Takeaway: Century is now mainly a bet on U.S. tariff policy. With U.S. tonnes earning about $6,000 against about $3,400 in Iceland, the 50% Section 232 tariff and the Midwest premium it supports account for most of this quarter's profit. Restored volume and lower costs did not drive the result.

Other moving parts

• Hawesville sold. On February 2, 2026 Century sold its idle Hawesville, Kentucky smelter to an affiliate of Terawulf for $200 million in cash plus a 6.8% stake in the data center being built on the site. The stake comes with a put option, the right to sell it back, and was valued at $97.0 million. Terawulf has since announced a 20-year lease for about 401 MW of computing load there, to be delivered in phases from late 2027.
• New smelter. In January Century signed a joint development agreement with Emirates Global Aluminium for a 750,000-tonne smelter in Inola, Oklahoma, with Century owning 40%. Construction is targeted to start by end-2026. That depends on a long-term power contract with Public Service Company of Oklahoma and a final joint-venture agreement, and up to $500 million of Department of Energy funding is attached.
• 2026 capex is guided at $180–190 million. That includes $70–80 million of Grundartangi repairs Century expects insurers to reimburse, about $50 million for the Mt. Holly restart and $20–25 million at Jamalco.

Outlook

Management guides Q3 adjusted EBITDA attributable to Century at $325–345 million. The $335 million midpoint is only about 2–3% above Q2's $326.9 million, even though Q3 should be the first quarter with Mt. Holly's full restart and close to two working Grundartangi potlines. The release says Line 2 is "near full production". The 10-Q expects near-full output "by the end of the third quarter". With more volume and only flat guidance, management appears not to assume further gains in the LME price or the Midwest premium, and the price hedges cap part of any rally.

The biggest risk is policy. Earnings at this level depend on the 50% tariff holding. A cut, or broad exemptions, would compress the Midwest premium quickly. The forward-sold premium tonnes would soften the hit, but only partly. A July 20, 2026 executive order lets companies investing in new U.S. primary aluminum capacity import a matching amount at a reduced tariff. The filing says the order's effect depends on rulemaking still to come. Things to watch in Q3: whether Iceland shipments get back toward the ~80,000 tonnes a quarter of last year, how fast the insurance gains wind down, and whether the Oklahoma power contract gets signed.