New Section 232 tariff: Leverage to pay for power

Capral may not have announced it yet – but I’m betting they’ll be hanging their name on this Tennessee project before long.

The Association of American Railroads (AAR) publishes monthly freight indices and carload volumes which are a good barometer of economic activity. Canadian carriers CN and CP participate in this reporting, so aluminum imports from Canada are embedded in these numbers.

Century benefits from tariffs it backs, but volume growth hangs on Mt. Holly Century Aluminum’s Q1 2025 earnings show a company benefiting from aluminum’s pricing boom and Section 232 tariffs, while grappling with flat shipment volumes and lingering capacity constraints – especially at Mt. Holly. While strong Midwest premiums and LME prices point to near-term margin strength, Century’s full-year targes hinge on unlocking more tonnage. High prices, low throughput Century Aluminum reported Q1 2025 shipment volumes of 168,672 metric tons (t), down 3% from 174,627t the year prior. Deliveries from its’ Mt. Holly, South Carolina and Sebree, Kentucky facilities dropped similarly to 94,601t in the latest quarter. Despite the drop in shipments, Century pegged their US capacity utilization at 87.5% across two smelters – 75% at Mt. Holly and 100% at Sebree – equating to roughly 98,125t per quarter at current output. These figures are unchanged from from the prior year, predating the additional Section 232 tariffs that tacked an additional 25% on primary aluminum imports back in March. Can Mt. Holly shoulder the load? Century maintained full-year guidance of 700,000t, which would require a 5% increase over the Q1 run rate across the remaining three quarters. That equates to an additional 25,312t – nearly all of which must come from Mt. Holly. To hit that target, Mt. Holly would need to increase utilization to 86%, an 11-basis-point jump. However, it’s unclear whether Mt. Holly has achieved that level of output recently. Company presentations going back to 2018 don’t show it exceeding 75%, and power constraints have long plagued the site. While Century purchased the facility in 2014, its production has remained below nameplate capacity. Billet and slab output for 2025 remains unchanged – a combined 295,000t slated from both US facilities. Priced to impress Century anticipates the London Metal Exchange (LME) aluminum price to average $2,351/t in Q2 2025, based on a blend of 50% cash settlement and 50% of the three-month forward contract settlement. For that average to hold, the next 61 trading sessions would need to average around $2,560.13/t. That price point would imply an average cash settlement price of $2,531.14/t in Q2 and a 3M settlement average of $2,589.14/t over the same period, if the ~1.3¢/lb cash-to-3M spread throughout April and into May were to hold. For those keeping score at home. In other words, in terms of Midwest transaction price, Century’s guidance implies daily cash settlement trading to be around 8¢/lb higher than the $1.06-1.07/lb settlement on May 8th before adding in the delivery premium. Tangentially, Century also indicate expectations of a 39.28¢/lb average for the Midwest premium in the next quarter, fairly flat from recent levels. The company executives did note on the call that they expect the Midwest premium to reach 45-50¢/lb by the end of the year though, due to inventory reductions potentially boosting premiums. Tariffs boost margins, not metal Century enters Q2 riding strong pricing momentum and a tariff environment that works in its favor. With Section 232 duties now discouraging imports and tightening North American supply, the company is well-positioned to capitalized on elevated premiums. But the full benefits hinges on Mt. Holly. Unless the South Carolina smelter can meaningfully boost utilization, Century’s shipment guidance may be at odds with its physical output ceiling – leaving its growth story more about margins than metal.