UPDATE: JPMorgan Upgrades Century Aluminum

In a report published Tuesday, JPMorgan analyst Brian Ossenbeck upgraded Century Aluminum (NASDAQ: CENX) to Overweight from Underweight, raising its price target to $13.00 from $6.00.

According to the report, the changes are to reflect the impact of tightening aluminum markets and rising Midwest premiums on the company's earnings. Given the pace and amount at which premiums increased recently it is clearly difficult to forecast how long they will remain near current levels which we believe provide a significant amount of earnings support to CENX's primary aluminum smelting operations.

“While China should see a 1.5mm tonne surplus this year, the rest of the world should actually have a 1.1mm tonne deficit in 2014,” the report noted. “We believe it is important to split Chinese supply from the rest of the world as we think it is unlikely that China will export a significant amount of primary metal given its 15% export tax and the central government's redoubled focus on increasing pollution controls and reducing excess industrial capacity. Additionally, the recent ban by Indonesia of bauxite exports could push Chinese primary aluminum costs (and thus prices) higher as China sourced roughly 70% of its bauxite imports from Indonesia during 2008-2011. China began building inventory and diversifying away from Indonesia since 2012 when the country's export ban and tax increase was originally slated for implementation. Current estimates place Chinese bauxite inventories at roughly one year of demand.”

CENX closed Friday at $11.12.