Alcoa presented at Morgan Stanley’s 13th Annual Laguna Conference, with EVP & CFO Molly Beerman highlighting financials, strategic initiatives, and market trends. Alumina prices remain stable at USD 360–370/t, aluminium demand is strong in Europe and steady in North America, and Q3 shipments are slightly lower but full-year guidance is unchanged. Alcoa is advancing smelter restarts, Western Australia mine projects, and maintaining a strong balance sheet, positioning the company to navigate market and regulatory challenges globally.
Update focus: Alumina market
Alumina prices eased from late-2024 highs due to supply issues, with China cutting 7–10 million tonnes of annual capacity in Q2, keeping prices steady at USD 360–370 per tonne. The market is expected to remain in surplus through late 2025 and into 2026, as new capacity from Indonesia and China comes online. However, delays in Indonesian smelting projects may add to the moderate surplus. Sequentially, lower alumina shipments are projected to reduce revenue by around USD 70 million.
As per the data by Focus Economics, alumina prices in July jumped to USD 366 per tonne, an increase of 1.0 per cent compared to June. By the end of July, prices had climbed even higher to USD 377 per tonne, reflecting a 5.0 per cent increase since June 30. This upward movement is mainly due to a 3 per cent drop in global alumina production in June, hitting its lowest point since February, along with some renewed concerns about supply.
Update focus: Aluminium
Alcoa's aluminium outlook remains strong despite Trump tariff uncertainty, with steady North American demand from packaging and electrical sectors. Aluminium rods are fully sold, and slab orders remain robust. However, North American foundries face weak performance as rising imports of finished wheels, exempt from Section 232 tariffs, continue to pressure billet demand, a trend mirrored in Europe. In contrast, European demand for slab and rod products is robust, with sales consistently outpacing production.
In the short to medium term, the global aluminium market is anticipated to remain relatively stable. China is expected to continue actively procuring aluminium from international sources, whereas North America and Europe are likely to experience ongoing supply deficits. As per our report, it is forecasted that the global aluminium market, by the end of 2025, will grow by 7.3 per cent.
Demand for both primary and secondary aluminium is forecasted to increase, thereby creating the necessity for new production capacity. Notably, ongoing projects in Indonesia are expected to increase the capacity and be grasped by the global market.
Unlock more forecasts here: Global Upstream Aluminium Industry Outlook 2025
Alcoa delivered stable operations this quarter, with only minor short-term adjustments. Q3 aluminium shipments are expected to be lower by about 15,000 tonnes due to timing factors, but the full-year outlook remains unchanged.
Conversations between Canada and the US
Alcoa is in ongoing talks with US and Canadian officials on smelting capacity, imports, and energy issues. Recent meetings between US Commerce Secretary Lutnick and Canada's Trade Minister were constructive, with follow-up work assigned to their teams. Alcoa remains cautiously optimistic about tariff relief ahead of the USMCA renegotiation in mid-2026. The company continues to push for an exemption, highlighting the strain of over USD 800 million in tariff payments and arguing that a rate similar to Canada's would significantly improve its financial position.
Take on the Premium
The global brand reported US smelting capacity of about 290,000 tonnes, supported by strong Midwest premiums, while Canadian operations produce around 960,000 tonnes, with 70 per cent shipped to the US and subject to tariffs. Despite margin pressure in Canada, Midwest premiums have offset much of the impact, keeping US shipments more attractive. The company continues netback checks on spot volumes to optimise margins, but sees the US as the natural destination due to logistics and supply chain benefits. Market demand remains intact, though uncertainty persists.
Focus: San Ciprián
The San Ciprián smelter restart, delayed by a power outage, is now expected to reach full capacity by mid-2026, later than the original October 2025 target, putting pressure on cash flow. Discussions with the Spanish government focus on grid resilience, outage causes, and industrial power costs, though broader energy issues remain unresolved. Workforce relations support the restart, while around USD 60 million in restricted cash for capital expenditures remains unavailable.
Efforts at San Ciprián aim to restore smelter profitability and generate cash to offset refinery losses. The refinery, previously profitable, is now operating at a loss, though EBITDA impacts are limited. A USD 100 million capital project for 2025–2026 is expanding residue storage and preparing for eventual closure, targeting a neutral cash position for Spain operations, with broader strategic options to be evaluated beyond 2027.
Also read: Alcoa resumes San Ciprián smelter restart, facing economic loss first
Mine approvals in Western Australia
Mine approvals in Western Australia are progressing, with the public comment period for North Myara and Holyoake closing in August, generating a record 59,000 submissions, including 5,000 unique inputs. The EPA is reviewing feedback, after which Alcoa will respond. An EPA recommendation is expected by Q2 2026, followed by an appeals process and ministerial decision several months later.
The timeline has shifted from the original Q1 2026 target, delaying the transition to new grades until late 2027, with full integration by 2029. Once operational, the new mine is expected to add 1 million metric tonnes of alumina annually and reduce costs by USD 15–20 per tonne via higher ore grades, lower caustic soda use, and improved energy efficiency.
In Western Australia, refinery output is constrained, with lower-grade ore reducing production by about 1 million tonnes at Pinjarra and Wagerup. At San Ciprián, bauxite is sourced from Guinea, maintaining a steady supply, with expansion potential linked to residue storage projects and favourable market conditions.
Opportunities with Ma'aden share acquisition
Alcoa is focusing on balance sheet strength, targeting net debt of USD 1 to 1.5 billion versus USD 1.7 billion at Q2 close, with gross debt at USD 2.7 billion and adjusted debt at USD 3.2 billion. Extra cash is held amid tariff uncertainty, while debt repayment options are being evaluated.
The company retains the flexibility to monetise Ma'aden shares, though early options are complex; proceeds will support shareholder returns, growth, or portfolio initiatives. Dividends remain sustainable across market cycles, and USD 500 million is available under the share buyback authorisation, to be used when excess cash allows rather than based on share price.
Also read: Alcoa's Q2 2025 results: What does the other half of FY’25 hold?
Responses
