Alcoa at Bank of America Conference: Strategic Moves Amid Global Challenges

On Wednesday, 14 May 2025, Alcoa (NYSE:AA) presented at the Bank of America Global Metals, Mining and Steel Conference 2025. The company outlined strategic initiatives to enhance its competitiveness amidst geopolitical challenges and market dynamics. Alcoa’s efforts to secure tariff relief and increase domestic production were highlighted, alongside operational updates from its global assets.

Key Takeaways

• Alcoa is pursuing tariff relief that could save the company $400 million annually.
• The company is focused on deleveraging, aiming to reduce adjusted net debt to between $1 billion and $1.5 billion.
• Alcoa plans to increase alumina production by 1 million metric tons annually through higher-grade bauxite in Australia.
• The San Ciprian smelter in Spain is recovering from a power outage, with renewable energy solutions in the pipeline.
• Alcoa is exploring new uses for closed sites, including data centers and Bitcoin mining.

Financial Results

• Tariffs: Alcoa is working towards securing tariff relief, which could benefit the company by $400 million annually. The London Metal Exchange (LME) price has dropped by over $200 since the tariffs were announced.
• Debt: At the end of Q1 2025, Alcoa’s adjusted net debt was $2.1 billion. The company aims to reduce this to between $1 billion and $1.5 billion.
• Ma’aden Transaction: The transaction with Ma’aden is valued at $1.3 billion, with Alcoa set to receive $150 million in cash.

Operational Updates

• Bauxite: Supply from Guinea to China increased by 35% year-over-year in Q1 2025.
• Australia: Alcoa is on track to receive approvals for higher-grade bauxite in early 2026, aiming to boost alumina production by 1 million metric tons per year and improve costs by $15 to $20 per ton.
• Spain: The San Ciprian smelter suffered a power outage, affecting 26 out of 40 pots. The refinery is nearly recovered but faces minor quality issues. Alcoa awaits assurances from the Spanish government and grid operator before resuming full operations.
• Elysis Technology: Alcoa contributes approximately $50 million annually to the Elysis partnership.

Future Outlook

• Tariffs: Alcoa continues to engage with policymakers to advocate for tariff relief.
• Debt Management: The company plans to continue deleveraging and may consider shareholder returns and growth opportunities once its debt target is achieved.
• China: Alcoa expects China to maintain its 45 million-ton cap on smelting capacity, which could lead to expansion opportunities outside China.
• Spain: Renewable power agreements with Ignis are expected to commence in 2028.

Q&A Highlights

• Hyperscalers and Data Centers: Alcoa is considering repurposing closed sites with existing energy infrastructure for data centers and has a lease agreement with a Bitcoin miner at Messina East.

Readers are encouraged to refer to the full transcript for a more detailed account of Alcoa’s strategic plans and financial performance.

Full transcript - Bank of America Global Metals, Mining and Steel Conference 2025:

Lawson, Interviewer: Welcome, everybody. I’m excited to have with me here today from Alcoa, Molly Berman, who’s been the CFO CFO now for well over a year. And I think it’s always interesting to have somebody that’s newer to a company because we tend to get a bit of a different perspective on the company. Your boss and colleague had been with the company for thirty plus years, and so there’s a different way of thinking about the business. And with that as context, would you mind kicking us off with a brief overview of Alcoa and thinking about the objectives for 2025, the state of the business, and some of the key catalysts upcoming?

Molly Berman, CFO, Alcoa: Glenn, too. Thanks, Lawson. So first of all, many of you may have expected Bill Oplinger to be here today, our CEO. Bill was invited to join the US Saudi Investment Summit, which President Trump is attending with his US administration in Saudi Arabia this week. So Bill is there increasing the understanding of aluminum as a critical mineral, very important for us.

He’s also using absolutely every opportunity that we get to be in front of the US administration right now. So separate from the investment summit, we have been aggressively working with the administration on tariff relief for Alcoa that has a value of about 400,000,000 for our business annually. Alcoa is a pure play aluminum company. We’re integrated and organized in two business segments, Illumina and Aluminum. We operate 26 locations across nine countries on six continents, and we employ 13,900 employees.

In alumina, we have five bauxite mines and five alumina refineries. In aluminum, we operate our 11 smelters on 87% renewable energy, and our carbon intensity is one third of the industry average. We have logistical advantages with our smelters and that they’re located in our customers’ primary markets in North America and Europe. We had a strong first quarter. We generated cash from operations well in excess of our historical first quarter when we typically consume cash.

We had strong operations in terms of production levels as well as safety, and we will continue that trajectory in 2025. We also recently announced a new adjusted net debt target of $1 to $1,500,000,000 We closed the first quarter at $2,100,000,000 so we have a bit more delevering work to do and we’ll stay focused on that during 2025. We’ll also, during the second quarter of twenty five, continue our dialogue with the US administration on tariff relief as well as working with global policymakers and the aluminum associations both in The US and Canada to advocate. The US administration, we really appreciate their support of the aluminum industry in trying to increase domestic production. However, that will take time.

And until then, we’ll focus on tariff relief and operating safely and stably as well as increasing our competitiveness. So with that, we’re ready for questions.

Lawson, Interviewer: Well, I think that’s a great place to start off from the tariffs. To date, maybe you could give us a little bit of additional color on your your view of those tariffs. And then can you share with us some progress you may or may not have made with your engagement with both The US and Canadian administration?

Molly Berman, CFO, Alcoa: So first, I wanna say this week, welcomed the news coming out of The UK. That was actually last week making progress on their trade agreement, and then China, of course, this week. That’s really changed the sentiment, decreased some of the fears about demand destruction and trade tensions going forward. That gives us hope for where we’d like to get with the tariffs for aluminum, which we still have some work to do. So since the tariffs have been announced, the LME has dropped over $200 and the Midwest premium has not risen sufficiently to cover that.

So now the net price, particularly for US producers, hurts us, and it’s actually working against the point of the tariffs, which are to incent investment in The US business. So we haven’t seen that price uplift that we had hoped for. Our engagement with the U. S. Administration has been across multidimensions.

At first, the conversations were about education. The U. S. Is importing over 4,000,000 metric tons of aluminum a year. About two thirds of that is coming from Canada.

We only have 600,000 metric tons of curtailed capacity, So The U. S. Right now has no ability to meet the current import need. We would need four to five new smelters. So think about that in terms of the investment that would be required.

It would take five to seven years to build those smelters. You’re looking for a payback period, probably over fifteen years on that. And then think about the power that’s needed, about 12 terawatt hours of power needed for each smelter. So these are points that initially the US administration was not fully aware of. So as we’re talking to them about the Canadian exemption really stressing the importance of enabling that flow to continue without tariffs like it did under the two thirty two secondtion before this latest tariff.

Lawson, Interviewer: Fantastic. On your Q1 call, you guided to a rough impact of 400,000,000 to $425,000,000 Now that was in the context of what you’ve just highlighted in terms of pricing. One key factor there, which you touched on, is the Midwest premium. What do you see as the elements keeping the Midwest premium from appreciating, and what do you think would be the next steps to get that Midwest premium up to an acceptable level?

Molly Berman, CFO, Alcoa: So we see two things. So first, it’s the negative market uncertainty and sentiment that’s holding it back. Second, before the tariffs were enacted, saw a significant amount of metal move into the country right before. We estimate that could be somewhere between 800,000 tons and a million tons. So it will take some time for that aluminum to be consumed and allow the uptick in pricing.

As we look at our contracts and how we’re able to shift flows, our annual contracts for The U. S. Customers are being met by Canadian metal, so that flow will continue into The U. S. However, we do have a certain amount of spot volumes, and there we are aggressively.

Our commercial team is calculating the net backs to see where the proper region and we have sent a small amount of Canadian volume already into Europe because the netbacks were favoring. We were getting a better margin to send it into Europe. Now, not huge amounts of supply, but that’s what you could expect to see over time if the Midwest does not respond and really incent metal to flow into The US from other regions.

Lawson, Interviewer: Okay. Makes a lot of sense. Now pivoting to another geopolitical situation, we have the Russia Ukraine war. The initial impacts were spoken about at length on the Alcoa conference calls and in venues like this. Now with the potential for a peace agreement in Russia Ukraine, do you see any potential impact on the global market again or a reverse of some of the flows that we’ve seen since 2022?

Molly Berman, CFO, Alcoa: So Russia has been under both formal and informal sanctions because we see customers self sanctioning away from Russian metal. But despite that, Russia’s continued to produce, and they’ve simply changed their trade flows. So rather than feeding metal into Europe or North America, it has gone to China. So the overall global picture of supply and demand has not changed materially. If you look at those sanctions being released, we would see an alumina.

If Russia were competing for alumina tons, it actually could raise the price of the FOB Australia, and we could see an uptick in the alumina price there that would be favorable for us. On the converse, we would expect that the Chinese domestic alumina price would drop. If you look across the next set of regional premiums that might be affected by that, the Rotterdam premium could go down even further if you have excess Russian tons coming into Europe, but you could see SIF Japan increase when the Russian tons leave Asia. We don’t believe we’d see much impact at all on The US Midwest because Russia has not been supplying material quantities to The US since probably 2018. And I missed LME.

We really don’t see LME responding too dramatically, again, because the global supply and demand won’t have changed. It’s just a shifting East West.

Lawson, Interviewer: Okay. I’d like to pivot to the bauxite markets. What are you hearing from your third party customers about the availability of bauxite globally, particularly higher quality bauxite? And when you think about the ramp up of new supply in alumina in China, India, Indonesia? How do you think that impacts the bauxite, and is there sufficient bauxite availability to satisfy those ramp ups?

Molly Berman, CFO, Alcoa: So the tightness in the bauxite market has eased. Our customers are reporting they’re having no problems getting orders. A lot of that is coming from the players in Guinea, as well as we’re seeing spot bids from Australia and Brazil as well. So despite the export bans on GAC bauxite, China is still increasing its supply from Guinea. If we looked at the first quarter of twenty twenty five, you’re seeing about a 35% year over year increase of bauxite flowing from Guinea into China.

For China’s expansion projects, that bauxite is primarily coming from the the high cost refineries that are coming offline, and they’re also using stockpiled bauxite as well. For Indonesia and India, we expect that they will be using domestic integrated supply for their expansions.

Lawson, Interviewer: Okay, fantastic. And then just pivoting from there to the alumina markets naturally. So prices obviously have corrected extremely material since last year’s enormous historical run up. From here, with that new capacity ramping up that we’ve just spoken about, do you see sufficient demand to help support that new supply? And how do you think about the risk of alumina pricing potentially falling further still?

Molly Berman, CFO, Alcoa: As we look at the current market right around $3.50, we see price support at that level primarily because China is acting economically minded and taking supply off. So even though they ramped up and for a period during the first quarter, they had both the inland refineries and the coastal refineries running. We saw about a million tons come off in the first quarter. We’ve seen about 10,000,000 tons come out of the Chinese refineries just in April. So we believe they’ll act economically going forward, and that is stabilizing the market maybe at that three fifty as a floor level.

Lawson, Interviewer: I just wanted to remind the audience that if any of you had any questions, we’d be happy to take them, And if that is the case, if you just put up your hand, we’ll ensure that you get a microphone. Perhaps while you’re thinking of potential questions, I wanted to ask about the idea of building new greenfield aluminum, particularly in your key markets of Europe and The United States. How do think about the CapEx intensity of new construction? We actually do get this question from time to time, and we think about it a lot in terms of our models. Or put another way, what is the incentive price necessary to sort of justify that level of CapEx intensity?

Molly Berman, CFO, Alcoa: Okay. First, I’ll start with we do believe the Chinese will stick to the 45,000,000 cap so that any expansion smelting will come outside of China. The prices for capital, the CapEx needed, I think, differ dramatically by region. If you look at the other Asian players, they could be anywhere from $2,000 to $3,500 per ton. Beyond that, outside of Asia, you could see prices over $5,000 in terms of CapEx.

We believe an incentive price now might be between 2,500 and 2,900 LME.

Lawson, Interviewer: Okay. Thank you for that. I’d like to ask about your assets in Australia, your bauxite assets in particular. So there’s this extensive permitting process ongoing. Right now, the anticipation is that you’ll have your license to access the higher grade bauxite by 2027.

There’s been some movement on this front so far this year. There was a public comment period in Q1. Can you just update us on where that process is? Are you still on track to get those permits for 2027? Is there a chance it could go earlier?

If it’s later, what does that mean for the Illumina business?

Molly Berman, CFO, Alcoa: So we’re still on track for approvals in early ’twenty six. However, the Western Australia EPA did delay the public comment period. So we’ve supplied all of our materials. They’re still reviewing it. We do expect it’s going to move into public comment very soon, and that will be a ten to twelve week period that the public will be able to weigh in on their views of the mining plan.

We’re encouraged though in that the EPA is still telling us that they’re committed to the schedule that we agreed early on, which is approvals in the first quarter of twenty six that would allow us to execute our mine moves and move into the new region with the higher quality bauxite no earlier than 2027. So a mine move is about an eighteen month process. When we reach the new mine areas, we will have a phase in. When we’re fully phased in, we would expect to pick up about a million metric tons of alumina production per year. So that’s how much the poor bauxite quality is hurting us now.

We also expect to improve our costs by about $15 to $20 per ton of alumina. So we’ll have a nice financial uptick both in terms of volume as well as the cost profile.

Lawson, Interviewer: Okay. Fantastic. Being in Spain, I’d be remiss not to ask about your Spanish assets. So San Ciprian, and they actually remain a focus of a lot of the conversations that we have. What is the path to profitability of those assets?

And can you speak to the current agreement you have with Ingles, how that functions and how that might evolve to help these assets ultimately become profitable?

Molly Berman, CFO, Alcoa: Let me tell you a little bit of what’s happening at operation there now. So we had committed to restarting the smelter this year. We began that at the end of the first quarter. We had about 40 pots running when the power outage, you know, remember nationwide power outage in Spain, both the refinery and the smelter did go down. They were without power for nine hours.

We were able to save a small group of pots, four or five pots initially. The team on-site did a fantastic job to then extend that to be able to save 14 pots. But 14 of the 40 pots we had running was all that was saved. That full capacity for that site is five twelve pots. We were very thankful that we were not fully running.

That would have been a safety incident, could have been environmental issues, not to mention the financial consequences of a loss of a full production. At this point, we’re waiting to get assurances from the Spanish government as well as the operator of the electrical grid there to find out the root cause, what actions will be taken to prevent a future power outage, as well as associated costs. And so our ramp up plans will wait pending the feedback from the government and the grid operator.

Lawson, Interviewer: And then just following up on the the English partnership, I mean, do you foresee that ultimately functioning in the long term and helping that asset work?

Molly Berman, CFO, Alcoa: So Ignis is a local power expert, and they have various renewable energy projects. They have been very helpful in changing the discussion within Spain. With the government, we’re seeking permits for our renewable power. Remember, we signed PPAs years ago with the expectation that we’d start to get power from them in 2024. They didn’t get permitted.

They didn’t get developed. Ignis is now helping us to get those permits through. They have their own projects, and they’re helping us to navigate. At this point, probably the earliest that we would see renewable power under those agreements is 2028. So in Spain, the key to profitability is energy.

We’ve got to find an energy solution that works not only for the smelter, but for the refinery as well. I just want to go back to the power outage and say the refinery has almost fully recovered from the power outage. They’ve got a small bit of quality issues that they’re sorting through, but we’re well on the way to recovery on the refinery side.

Lawson, Interviewer: Okay, fantastic. Can I

Molly Berman, CFO, Alcoa: make one more statement?

Lawson, Interviewer: Of course. I just want

Molly Berman, CFO, Alcoa: to say, because we’ve been asked about the financial impacts of the smelter going down in the second quarter, we do not see that as material to the second quarter because we only had so few pots running, but we don’t have an outlook for the rest of the year yet.

Lawson, Interviewer: Yeah. We have a question from the audience, so we’re going to take that right now.

Unidentified speaker: Thank you, Molly. Hi. I just wanted a question about the Elysis technology. Could you just remind us what how that’s going, what the rollout looks like, and what the cost of as you refurbish, how that’s gonna work? Thank you.

Molly Berman, CFO, Alcoa: So for Alcoa now, we are continuing to support the LSS partnership in its R and D phase. We make about a $50,000,000 contribution to the partnership on an annual basis, and we’re continuing that. We have several projects going on now at Rios. So one is at the Arvita smelter where we’re testing the 100 Ka cells. Alcoa is producing the electrodes for that in our Alcoa Technology Center in Pittsburgh.

So we’re continuing to participate in work, gaining the knowledge, also having access to some of the off take. However, Rio has the financial burden now because we’re testing the next step, the smaller cells at our Aveda and then the commercial cells at one of their other smelters. And so they’re funding that. For Alcoa, it was a great way for us to continue to participate in the Elysis joint venture, but in cash, a level of cash that’s more appropriate for us. We’ve already stated we are not going to make major investments to retrofit any of our smelters this decade.

We will wait a bit longer on that.

Lawson, Interviewer: Thank you for the question. I would like to ask about the potential to repurpose some of your old properties, particularly those that have electrical grade connectivity. We get asked this question a lot. I mean, really what investors want to know is what the potential is of those type of properties, and to what extent is your corporate development team getting interest in those, despite the recent de emphasis from investors on data centers and hyperscalers?

Molly Berman, CFO, Alcoa: So it’s actually our transformation team. So within Alcoa, we have a group of remediation specialists that work on our closed sites as well as work on redevelopment opportunities. We have about 20 closed sites that are currently in their portfolio. A handful of those still have the kind of energy structure that might be applicable for hyperscalers or data centers. One in particular, Messina East, we have our smelter running on West Side.

But on the East Side, we do have a lease now with a Bitcoin miner. So we’re already using the infrastructure. We see ability to grow that. So that’s one that’s active. These are deals that we’ve had a lot of interest.

I mean, folks had heard that we had been talking to some of the big hyperscalers. You have to understand they’re talking to everyone about projects. So we’re continuing to move them with pace, but there’s really nothing to announce now. And I’ll just remind you, when we did some of our big monetizations back in 2021, a couple of those were years in the making. Like Rockdale, we the first offer for Rockdale was only 60,000,000, and we held out for almost three years and got two fifty.

So these things don’t always, you know, come on a schedule that investors would like to know with certainty. We work them and make sure we get top value.

Lawson, Interviewer: Very good to hear. So speaking of top value, you sold your Middle Eastern smelting assets to Ma’aden. As part of that transaction, received a fairly significant equity position in the company. First of all, are we still on track to close? Then second of all, what are the options that are being considered for a potential monetization of that, or do you just sit on those shares until the lockup period ends?

Molly Berman, CFO, Alcoa: So we are on track to close as of now in June. The value of the transaction is now $1,300,000,000 When we originally announced it, it was $1,100,000,000 so the shares have increased in value. Part of that transaction includes $150,000,000 in cash. We’ll use more than half of that to pay the, capital gains tax as well as the fees on the transaction. As a part of the agreement, we structured it so that we would have the flexibility to be able to monetize it in advance of the lockup period.

So we’ve got a lockup period that allows us to sell a third on the third, fourth, and fifth anniversary of the transaction closing. If we would choose to monetize earlier, we know that we’ll have a significant discount and it’ll also look like debt. Now we wanted to keep that option open to us if we needed the cash or if we had a strategic opportunity that we wanted to fund. So we have that opportunity. Right now, no plans, though, to monetize it.

We don’t necessarily see ourselves being holders of modern shares in the long term. We understand that investors, if they wanna own modern shares directly, they can do that. They don’t need to do that through us. But we’ll also, when we do monetize them, if it is according to the three year schedule, we’ll do it in a way that’s most economically advantageous.

Lawson, Interviewer: Okay. I wanted to also touch on your capital allocation. I’d be totally remiss not to, given I’m sitting here with the Chief Financial Officer. So you have this new net debt target. When you think about that the context of the other investment opportunity sets, including capital return, how do you balance it all?

Molly Berman, CFO, Alcoa: So we still have some delevering to do. I mentioned in the opening comments, we’re at 2.1 adjusted net debt. And for us, that includes our pension and OPEB liabilities. And we’re working toward the top end of 1,500,000,000.0. When we originally started 2025, we had plans that we were going to be aggressively delevering.

The tariff uncertainty has jostled that a little bit, but we hope that we’ll be back on delevering later this year. As we start to approach the top end of our target, we’ll absolutely start looking across our capital allocation framework. So returns to shareholders, any additional portfolio actions that we might need to take, and also considering our growth opportunities.

Lawson, Interviewer: Fantastic. Right on time. This has been a lot of fun. Thank you for being here, joining us in Barcelona, and thank you all for being here to listen.

Molly Berman, CFO, Alcoa: Thank you.

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