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Century Aluminum Hurt by High Raw Material Cost, Pricing Woes

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We issued an updated research report on Century Aluminum Company (CENX - Free Report) on Jan 9.

According to the company, market fundamentals and demand across key markets in the United States and Europe remain favorable.  Commodity prices have increased of late, including alumina, aluminum, pitch and petroleum coke. Century Aluminum expects to witness the impact of each of these prices in fourth-quarter 2017. Over the mid-to-longer term, the direction of the metal prices is expected to depend upon China’s commitment to eliminate illegally subsidized overproduction and implement long-term discipline.

High levels of production from China is still hurting the aluminum industry. Chinese production rose 13% year over year during the first nine months of 2017. Significant capacity additions from China will outpace consumption and worsen the country’s already oversupplied position. Global aluminum market witnessed modest surplus of roughly 50,000 tons.

The company also faces a difficult pricing environment and is seeing high costs for power and certain key raw materials. For the fourth quarter, the company expects EBITDA impact of increase of raw material costs to be roughy $20 million, owing to higher alumina costs and other carbon related key raw materials cost.

However, shares of Century Aluminum have outperformed the industry it belongs to for the last six months. The company’s shares have rallied around 18.5% over this period, compared with roughly 9% gain recorded by its industry.

Zacks Rank & Stocks to Consider

Century Aluminum currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the basic materials space are Kronos Worldwide Inc. (KRO - Free Report) , Koppers Holding Inc. (KOP - Free Report) and Huntsman Corporation (HUN - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Kronos Worldwide has expected long-term earnings growth of 5%. Its shares have skyrocketed 105.5% over a year.

Koppers has expected long-term earnings growth of 18%. Shares of the company have rallied 23.6% over a year.

Huntsman has expected long-term earnings growth of 8%. Its shares have soared 72.6% over a year.

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