CENTURY ALUMINUM CO (CENX) stock intrinsic value fair value estimate & owner earnings analysis

Century Aluminum runs three primary aluminum smelters: Grundartangi in Iceland (its largest and most modern, running on hydro and geothermal power), and Sebree in Kentucky and Mt. Holly in South Carolina in the U.S. A fourth smelter, Hawesville, Kentucky, had been shut down since 2022 and was sold in early 2026 for $200 million cash plus a small stake in a data-center project on the site — a clean exit from a plant that had stopped contributing to results years earlier. The economics of this business are set by three things: the price of aluminum (and the U.S. import tariff, currently a 50% duty under Section 232, which has meaningfully lifted the domestic premium since mid-2025), the cost of the enormous amount of electricity smelting requires, and a federal production credit (Section 45X) that has been paying U.S. smelters since 2023 and is currently legislated through 2032. All three have been unusually favorable over the last two years, and 2024-2025 were the best two years the company has had in a decade. They were not always this good. Looking back over the last ten years — a period covering a full price cycle, from the 2015-16 aluminum price collapse through the 2018 tariff spike, the 2020 pandemic trough, the 2021-22 European energy crisis (which hit Grundartangi's power costs directly and produced large swings in hedging positions), a soft 2023, and the recent recovery — the business's cash-based owner earnings were negative in six of those ten years. The three worst years (2016, 2019, and 2021) each show owner earnings of roughly negative $0.80 to $1.10 per share. That history is real and matters: it is a direct look at what this business does in a bad stretch, and it is the foundation of our downside case. At the same time, two of the things dragging that ten-year record down were specific and dated, not just bad luck: the now-divested Hawesville plant was a costly, high-power-cost smelter that lost money for years before being idled, and the 45X credit did not exist before 2023. Both of those are gone from the picture now. So rather than mechanically averaging the whole ten-year, four-smelter history, we set our starting point for the next decade from the three-smelter, post-credit business as it has actually performed since 2022 — roughly break-even to modestly negative in the weak year (2022-23) and strongly positive in the strong years (2024-25) — while carrying the full ten-year record's downside squarely into our bear case, because there is no evidence the underlying cyclicality has gone away. Our base case assumes aluminum prices and the tariff-supported premium ease somewhat from today's elevated levels but remain firm, the 45X credit runs its legislated course, and Century's newly announced joint-development agreement with Emirates Global Aluminium for a new U.S. smelter — which would be the first new primary aluminum smelter built in the U.S. since 1980 — proceeds only gradually and contributes modestly by the back half of the decade (it has not yet reached a final investment decision). On these assumptions we estimate the shares are worth around $7. Our bear case assumes a repeat of the kind of stretch the company has already lived through twice in the past decade: aluminum prices give back their recent gains as global supply catches up, the Section 232 tariff support is weakened or removed, Grundartangi's power costs step up at a future contract renewal, another operational disruption hits one of the three smelters (Grundartangi's larger potline was in fact knocked out by an electrical failure in October 2025 and is not expected back until around April 2026), and the new smelter project is abandoned after Century has already spent money developing it. In that world we estimate the equity is worth only a few tens of cents per share — not because the company goes bankrupt, but because at trough conditions there is very little left over for shareholders after the plants' ongoing costs. Our bull case assumes today's favorable tariff and credit environment persists or strengthens, aluminum's low-carbon premium (Grundartangi runs on renewable power) becomes more valuable as buyers pay up for lower-carbon metal, and the new EGA smelter joint venture is funded largely by the partner and reaches meaningful production within the decade. On those assumptions the shares could be worth over $20. A few accounting and judgment notes: we build owner earnings from operating cash flow, which already adds back all non-cash items — including a large, unrelated $246 million non-cash accounting gain in 2024 and swings of over $100 million a year in unrealized hedging gains and losses — so none of that distorts the figure. Because this is a very capital-intensive business whose revenue swings mostly track metal prices rather than production volume, we used depreciation as our estimate of the ongoing capital spending needed just to keep the plants running, rather than a formula tied to revenue growth, which would be unreliable here. We valued the business assuming the smelters keep operating indefinitely at whatever level each scenario assumes, since sustaining investment is already charged against earnings; this indefinite-continuation assumption accounts for roughly 60% of the value in both our base and bull cases, which is worth knowing since it rests on the judgment that this cyclical business keeps running rather than winding down. Century also has a minority partner in a Jamaican alumina joint venture that has been absorbing some losses in recent years; we did not attempt to split that out of the company-wide cash flow figure, which is a minor conservative simplification. Century carries meaningful debt (it refinanced with a new $400 million bond issue in 2025); we did not deduct debt from the value because owner earnings are already calculated after interest payments, but the leverage is one of the reasons our bear case is as low as it is.