By: Philip MacKellar
Published: June 4, 2025
What companies could benefit from U.S. aluminum tariffs on Canada?
A relatively new subscriber sent me this question about a month ago. U.S. President Donald Trump has delayed or even halted some of the tariffs he has introduced in his global trade war, and a federal trade court recently struck down others. However, the 25-per-cent tariffs on Canadian aluminum products have stuck and are actually set to increase to 50 per cent.
Ironically, tariffs on inputs such as aluminum are arguably some of the most counterproductive levies. As former U.S. Treasury secretary Larry Summers said in a recent Bloomberg interview, tariffs on inputs are especially bad because downstream industries often employ many times more people than industries producing commodities like aluminum. In addition to hurting these employees in downstream industries, it also makes downstream companies less competitive and forces them to increase prices on a multitude of end products from cars to pop cans.
Macroeconomicconcerns aside, I was able to answer this subscriber’s question. Years ago, I owned Century Aluminum Co. a producer with smelters located in the United States and Iceland. The company is based in Chicago, has been incorporated since 1981, and is 42.9-per-cent owned by mining giant Glencore. The organization’s primary aluminum facilities are in Hawesville, Ky., and Sebree, Ky.; Mt. Holly, S.C.; and Grundartangi, Iceland. Additionally, they have a carbon anode facility in Vlissingen, Netherlands, and a bauxite mining and alumina refinery in Jamaica.
This enterprise stands apart from many of its peers, including Alcoa and Rio Tinto’s Alcan, because it does not have any assets in Canada. This explains why Century Aluminum has applauded the Trump administration’s tariffs, while Alcoa CEO William Oplinger has argued firmly against them and the executive team at Rio Tinto has cast doubt over their effectiveness.
In my response to the subscriber, I explained how I used to own Century, and why. Though I was never able to perfectly time the top or bottom, between 2012 and 2024 I traded it a number of times. I took my first positions in 2012 and 2013 when the shares were around US$8, then sold most of the position at US$25.07 in 2014 before upping the stake again in 2015 at US$3.51. The position was then trimmed in 2018 at around US$22.38, and I exited the name entirely in 2022 at US$18.39.
Between 2012 and 2022, Century Aluminum was an excellent investment because it had three unique features: a high beta, periods of clear over or undervaluation, and a strong balance sheet. The high beta – a measure of volatility – meant the ticker could go on crazy rallies but also endure terrible downturns.
Fortunately, the balance sheet strength, which was made up of low leverage and a stable share count, provided investors with a degree of safety during those tough times because they could rest knowing that solvency and dilution risks were low.
This meant investors with the gumption to pick up shares when they were cheap and hold their nose if they fell significantly, did well. The old “buy-low, sell-high” strategy works well for many stocks, but it goes into overdrive when it is applied to high-beta stocks that have good financials.
The subscriber then e-mailed me back and asked if Century Aluminum was a worthy investment today. My answer was that it depends on your risk appetite.
Today, Century can still go on wild rides, as it has a beta well over two. This said, it is not in a period where it is clearly overvalued or undervalued and – perhaps most important of all – the financials are not what they were.
Compared with when I first purchased the stock in 2012, the cash has declined 75.5 per cent and total debt has ballooned 83.1 per cent. The divergence has driven net debt to US$437.7-million from US$87.9-million. Though annual sales have grown 63 per cent over that time frame, shipments have only increased to 677,967 tonnes from 602,142 tonnes annually. This means the balance sheet bloat has outpaced the growth of its business.
Century’s shifting balance sheet composition does not suggest it is in imminent danger, especially as tariffs will help their business. The organization also benefits from an implicit backstop by Glencore, which presumably could swoop in and rescue the firm if it was in trouble (on its terms, of course).
However, the changing financial condition does mean a core pillar of the former investment thesis is gone. Those interested in owning Century Aluminum today can no longer do so while knowing the financials are rock-solid. Instead, they must accept the risks are higher than they were a decade ago.
To make a long story short, over the past decade Century Aluminum has morphed from a rather low-risk and high-reward opportunity into a high-risk and high-reward prospect. Potential buyers would do well to keep that in mind.
Philip MacKellar is the general manager at Contra the Heard Investment Newsletter.