Century Aluminium
This is a US company that produces primary aluminium. It has plants in both the US and Iceland (Finance.yahoo.com). The industry is one of the cyclical industries implying that the stock prices and return are highly correlated to the state of the economy.
Key factors
Interest rates: Interest rates affect the stock and the general economy. Interest rates have a great impact on investment decisions as well as the cost of borrowing. When the interest rate is high, the cost of borrowing increases thus affecting the aggregate demand. Investors in bonds and stocks also require a higher return on investment.
Inflation: Inflation affects the earnings of the company as well as the industry. Companies lose earnings during inflation due to the decline in the real incomes of consumers. It also affects the competitiveness of the company’s products in the international market.
Fiscal and monetary policy: the government affects the company’s operations through the fiscal and monetary policies. Favorable taxation and other macroeconomic policies are critical to the success of the company. Expansionary monetary policies also increase money supply thereby encouraging investments.
Business cycles: The Company’s earnings are high during the peak period. Earnings fall rapidly when the economy goes into depression since the company operates in a cyclical industry.
Exchange Rate: The Company sells products to markets beyond the United States. Exchange rates affect the amount of receivables and payables as well as its competitiveness in the international market. When the US dollar appreciates, the company’s aluminium becomes less competitive to products of foreign companies in the global market. US multinational corporations made losses in 2015 when the dollar appreciated against world’s major currencies. The company uses options contracts to hedge foreign exchange among other risks.
Works cited
"CENX Profile | Century Aluminum Company Stock - Yahoo! Finance". Finance.yahoo.com.
N.p., 2016. Web. 5 June 2016.
