Geopolitical tensions could create new opportunities for this U.S. producer
A new round of sanctions against Russian metal supplies is reverberating through global markets on Monday. Shares of Century Aluminum (CENX 7.71%), the largest U.S. aluminum supplier, traded up 10% as of midday as investors try to determine the ramifications of the latest geopolitical maneuvers.
A political squeeze on Russian metals
On Friday, the United States and the United Kingdom opened a new front in the economic battle against Russia when they announced new curbs on aluminum, nickel, and copper originating from that nation. The moves do not prevent Russia from selling metals to buyers outside of the U.S. and U.K., but they do limit Russia’s access to the London Metals Exchange.
That exchange’s prominent role as a broker for the global metals industry should at least temporarily boost prices on the metals.
Century Aluminum is a major U.S. aluminum producer, with operations in Kentucky, South Carolina, and Iceland, and should be in a good position to pick up whatever slack is created. The company should also benefit from higher metals prices caused by the sanctions.
Is Century Aluminum stock a buy?
This stock was already up 40% for the year even before the sanctions announcement thanks to investor excitement about a major new smelter project that would double the size of the U.S. aluminum industry. There is massive long-term demand for lightweight metals, and Century Aluminum looks to be able to capture a significant piece of that demand regardless of geopolitical drama.
That said, with the stock’s latest jumps, a lot of that potential appears to be priced into the shares. Given the cyclical nature of the commodity and the tendency for Century Aluminum shares to trade along with the price of aluminum, investors would be wise to resist buying in today and instead wait for potential dips ahead.
Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
