Alcoa, a titan in the aluminium industry, triumphantly retains performance despite multiple ups and downs in 2024

Pittsburgh-based Alcoa Corporation is a global leader in the bauxite, alumina, and aluminium industry. With a market capitalisation of US$7.807 billion and an enterprise value of US$8.057 billion, the company's operations span the entire aluminium value chain, making it a significant player in the global market.

Global footprint

Alcoa's operations extend across nine countries, primarily in Australia, Brazil, Canada, Iceland, Norway, Spain, and the United States, wherein the enterprise directly and indirectly owns 27 operating locations and employs over 13,000 people.

Operations are divided into two reportable upstream segments — alumina and aluminium. The alumina segment encompasses global bauxite mines and alumina refineries, aligning the global brand as one of the world's largest bauxite miners. The aluminium segment includes smelting, casting, and a majority of the company's energy assets.

Key strategic milestones in 2024

A key strategic achievement for the American industrial corporation in 2024 was the successful acquisition of Alumina Limited on August 1. This acquisition solidified Alcoa's position as a leading pure-play upstream aluminium company. The binding Scheme Implementation Deed with Alumina Limited was signed on March 11, 2024.

In the first quarter of 2024, Alcoa resumed approximately 6 per cent of potlines at its smelter, complying with the February 2023 updated viability agreement. However, due to inadequate long-term viability and unlikely near-term government support, Alcoa initiated a process to potentially sell the complex.

The company also restarted one potline at Warrick Operations, which had been shut off in July 2022. Additionally, Alcoa advanced mine approvals for the following two Western Australian mine regions, seeking to commence mining in these regions by 2027.

To sustain the continued operation of the San Ciprián complex, Alcoa is progressing towards a strategic cooperation agreement with IGNIS Equity Holdings. Under this agreement, Alcoa would bear majority ownership and operational control, with IGNIS EQT holding a 25 per cent stake.

Financial initiatives in 2024

In January 2024, Alcoa launched a productivity and competitiveness program targeting a 5 per cent reduction in operating costs. This program aims to improve overall competitiveness and profitability.

To fund decarbonisation and water management projects, Alcoa closed an offering of US$750 million in senior notes in March 2024. This issuance prioritised climate change mitigation expenditures and aligned with the company's Green Finance Framework.

Output for the first three quarters of FY25

For the first quarter, alumina production decreased 4 per cent sequentially to 2.67 million tonnes on lower production from the Australian refineries. Alcoa produced 542,000 tonnes of aluminium, which is consistent with the previous year's fourth quarter's strong output. Adjusted EBITDA excluding special items was US$132 million, a sequential increase of US$43 million primarily due to lower energy and raw material costs, partially offset by lower average realised third-party price for aluminium and higher production costs.

For the second quarter, alumina production decreased 5 per cent successively to 2.53 million tonnes primarily due to the full curtailment of the Kwinana refinery completed in June 2024. Alcoa produced 543,000 tonnes in the aluminium segment, demonstrating a seventh consecutive quarter of increased aluminium production. Adjusted EBITDA excluding special items was US$325 million, a sequential increase of US$193 million primarily due to higher average realised third-party prices for alumina and aluminium and lower production and raw material costs, partially offset by higher energy costs.

During Q3, alumina production decreased 4 per cent consecutively to 2.44 million tonnes primarily due to a similar reason for the full curtailment of the Kwinana refinery, which was completed in June 2024. In the aluminium segment, production increased 3 per cent sequentially to 559,000 tonnes primarily due to continued progress on the 'Alumar' smelter restart. In the third quarter of 2024, Alcoa reported an adjusted EBITDA of US$455 million, aligning with pre-announced ranges and slightly surpassing consensus estimates. This performance reflects the company's resilience in a dynamic market environment.

"During the third quarter, we maintained our pace of delivering on strategic actions. We gained flexibility after closing the Alumina Limited acquisition and announced the sale of our interest in the Ma'aden joint ventures," said Alcoa President and CEO William F. Oplinger. "Positive markets and our focus on continuous improvement led to stronger results for the third quarter while we continue to execute initiatives to further enhance our operations," he said.

Outlook for the fourth quarter of FY25

Alcoa expects 2024 alumina segment production to remain unchanged, ranging between 9.8 and 10.0 million tonnes. The company is increasing its projection for shipments to range between 12.9 and 13.1 million tonnes, an increase of 0.2 million tonnes from the prior forecast, primarily due to increased trading volumes, with increased shipments due to higher trading volumes. Aluminium segment production and shipments are also projected to remain stable.

The difference between production and shipments reflects trading volumes and externally sourced alumina to meet customer contracts due to the curtailment of the Kwinana refinery.

The global business giant expects 2024 total aluminium segment production and shipments to remain unchanged from the prior projection, ranging between 2.2 and 2.3 million tonnes and between 2.5 and 2.6 million tonnes, respectively. Within the fourth quarter of 2024, the alumina segment adjusted EBITDA, and the corporation expects sequential favourable impacts of US$30 million due to higher shipments and lower production costs. For the fourth quarter of 2024, the company expects the Aluminium Segment's performance to be flat, maintaining a strong performance from the third quarter of 2024.

The company expects other expenses for the fourth quarter of 2024 to increase by approximately US$20 million sequentially on Ma'aden equity losses and equity contributions to ELYSISTM (a carbon-free aluminium smelting technology). Based on current alumina and aluminium market conditions, Alcoa expects fourth-quarter operational tax expense to approximate US$120 million to US$130 million, which may vary with market conditions and jurisdictional profitability.

Conclusion

Alcoa's strategic initiatives, global operations, and financial performance position it as a significant player in the aluminium industry. The company's unwavering commitment to operational efficiency, cost reduction, and sustainability initiatives not only navigates the evolving market dynamics but also inspires a greener future. As Alcoa continues to adapt to changing market conditions and technological advancements, it remains committed to delivering value to its shareholders and contributing to a sustainable future.

N.B. - All images are sourced from https://www.alcoa.com/