Aluminum prices have risen nearly 50 percent in the past year, hitting multi-year highs amid pressure from the Iran war, domestic prices, and more. The closure of the Strait of Hormuz has had a particularly strong impact, given its important role in the transfer of aluminum from the Middle East to other parts of the world.
The high cost of aluminum is weighing on companies that rely on the metal across a variety of industries, including auto companies such as Ford Motor Co. NYSE: F and beverage firms such as Keurig Dr Pepper NASDAQ: KDP. All of these businesses must prepare mitigation strategies if material costs remain high to protect their margins.
On the other hand, domestic aluminum firms such as Kaiser Aluminum Corp. NASDAQ: KALU and Century Aluminum Co. NASDAQ: CENX may be better placed, especially because of the costs of Section 232.
Kaiser Aluminum May Benefit from Cost and Aerospace Business, But Valuation Is Risky
Kaiser Aluminum is a manufacturer of semi-finished aluminum products for a variety of different markets, including aerospace, automotive, electronics, and more. The company's Q1 2026 earnings were very strong: growth of more than 42% year-on-year (YOY) in revenue and earnings per share (EPS) exceeding $1.78, as well as record EBITDA and strong guidance for the full year.
Kaiser Aluminum Today
From 02:33 PM East
- 52 week interval
- $70.39
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$185.20
- Dividend Yield
- 1.66%
- The P/E ratio
- 20.16
- Target Value
- $159.50
The company sees demand strengthening while at the same time improving operations through improved facility operations. This allowed the company to increase margins by 850 basis points YOY. Additionally, free cash flow for the first quarter reached $69 million, and the company ended the quarter with approximately $596 million in cash, providing more flexibility going forward.
With Section 232 tariffs including a 50% tariff on most imports of aluminum and aluminum-based products, domestic firms like Kaiser would benefit. However, as a specialized aluminum products firm, Kaiser may not be highly dependent on raw aluminum prices. Where Kaiser stands out, however, is in its core aerospace and defense businesses. Demand here is likely to remain strong, and multi-year contracts should provide a reasonable buffer of stability—even if the auto sector faces potential headwinds from rising demand and continued tax volatility.
For investors, Kaiser can be a solid industrial company with potential tax-related potential and lower risk than a pure commodity producer. Analysts are less optimistic, with the share driving KALU shares a Buy. However, given that KALU shares are up more than 50% year-to-date (YTD), valuation may be a concern. Indeed, Wall Street expects more than 10% on the downside.
A Century's Exposure to Costs Makes It a Big Beneficiary
While Kaiser focuses on aluminum products, Century is primarily an aluminum smelter with operations in the United States and Europe. This means that the company is highly exposed to the price of aluminum, and prices may give CENX shares a big boost as a result.
Century Aluminum Today
Century Aluminum
From 02:33 PM East
- 52 week interval
- $15.13
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$68.69
- The P/E ratio
- 20.16
- Target Value
- $80.00
Century is well positioned because it not only benefits from high aluminum prices due to costs, but also from the fact that it does not need to pay taxes on most of its production, due to its domestic concentration.
The company is planning a new smelter in Oklahoma that could help increase its domestic production capacity. The enthusiasm surrounding Century's prospects in the current tax situation has resulted in a unanimous buy rating from all five analysts who rate CENX shares, and a consensus price of $80. This price not only represents a 20% premium to recent levels but also doubles the level at which CENX stock traded at the start of 2026.
Still, investors should keep in mind that Century's reliance on tariff-related pricing is significant. If prices change and premiums go down, the company can see a big hit to its profits and multiples of value. In addition, building a new smelter will cost billions of dollars, and the capital-intensive nature of the project means Century is exposed to financing, execution and construction risks.
For investors willing to capitalize on the tax-related impact on aluminum prices, there are also opportunities to gain exposure to the commodity itself. An exchange-traded fund like the Invesco DB Base Metals Fund NYSEARCA: DBB holds an aluminum futures portfolio to directly track commodity prices. This method takes some company-specific variables out of the equation, allowing for a more direct way to determine aluminum price exposure. However, DBB is exposed to a variety of metals, so it does not specify aluminum.
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