Alcoa at Morgan Stanley’s Laguna Conference: Strategic Moves Amid Market Surplus

On Wednesday, 10 September 2025, Alcoa Corporation (NYSE:AA) presented at Morgan Stanley’s 13th Annual Laguna Conference, where CFO Molly Beerman outlined the company’s strategic positioning amid a predicted aluminum market surplus. While the surplus poses challenges, Alcoa remains optimistic about its strong order book in North America, despite tariff-related hurdles.

Key Takeaways

• Alcoa anticipates an aluminum market surplus from the second half of 2024 through 2026.
• The San Ciprián smelter restart is delayed to mid-2026 due to a power outage.
• Alcoa is reducing net debt to between $1 billion and $1.5 billion, with monetization of assets planned.
• The company is exploring strategic opportunities in recycling and low-carbon products.

Financial Results

• Aluminum shipments in Q3 are expected to be 15,000 metric tons lower than anticipated due to timing, though annual guidance remains unchanged.
• An additional $25 million in Q3 expenses is anticipated due to inventory margin changes.
• Q3 tax expenses are projected between $60 million and $70 million, reflecting higher projected annual earnings.
• Lower bauxite shipments will impact revenue by approximately $70 million.

Operational Updates

• The San Ciprián smelter is expected to reach full capacity by mid-2026, delayed from October 2025 due to a power outage. The Spanish government is working to improve grid resiliency.
• Alcoa is progressing with mine approvals in Western Australia, expecting a 1 million metric ton increase in aluminum production and cost reductions of $15 to $20 per metric ton.
• The Kwinana restart is not being considered at this time.

Future Outlook

• Despite the anticipated market surplus, long-term demand for aluminum looks strong, with industry analysis projecting robust prices over the next decade.
• Alcoa is well-positioned to capitalize on growing markets with its low-carbon product offerings.
• Strategic initiatives include exploring opportunities in recycling, although major acquisitions in this area are not planned.

Q&A Highlights

• Alcoa continues discussions with U.S. and Canadian governments regarding Section 232 tariffs, advocating for exemptions or preferential rates for Canada.
• The rising Midwest premium benefits Alcoa’s U.S. smelters, making it advantageous to ship aluminum from Canada into the U.S.
• The company observes no demand destruction but notes uncertainty among customers.

For full details on Alcoa’s strategic insights and operational updates, refer to the complete conference call transcript.

Full transcript - Morgan Stanley’s 13th Annual Laguna Conference:

Carlos, Host, Laguna Industrial Conference: Good morning, everyone. Thank you very much for joining the Laguna Industrial Conference and this session with Molly Beerman, Alcoa Corporation’s Chief Financial Officer. Thank you very much for being here. Molly, it’s becoming a nice tradition.

Molly Beerman, Chief Financial Officer, Alcoa Corporation: Thanks, Carlos. We appreciate the opportunity.

Carlos, Host, Laguna Industrial Conference: Very happy to host you. Why don’t we start maybe with an update on what you are seeing in the alumina and aluminum markets? Clearly, very relevant for the company. Perhaps any updates that you might have on your third-quarter earnings.

Molly Beerman, Chief Financial Officer, Alcoa Corporation: Okay, great. Thank you so much. Thanks, everyone, for joining us. Let’s start with aluminum. We’ve certainly seen the price of aluminum come down from the highs that we hit at the end of 2024, with the supply disruptions being resolved. We saw the Chinese take about 7 to 10 million annual capacity offline in the second quarter. That did stabilize the price, and we were right around $360, $370 for quite some time. We do expect the aluminum market to be in a surplus for the second half of the year, as well as into 2026. Some of the capacity will be coming online from Indonesia and China, again, later this year or early next. In addition, we’re also hearing some of the Indonesian smelting capacity has been delayed, and that should give us a bit more of a surplus.

Moving on to aluminum, I might start with Alcoa specific, and then I’ll go broader. For us, as we look at even with the uncertainty related to the tariffs, our order book is still strong. If you look at our North American order book, we see a lot of strength from the packaging, as well as in the electrical sectors. Our slab and our rod products, rod were completely sold out of capacity, and slab, we have a lot of active orders there. Foundry in North America continues to be weak. That’s the one area of weakness. There, we’re facing some challenges. We have finished wheels being imported because those are not subject to Section 232 tariffs. That has challenged some of the billet demand. In Europe, very strong also in slab and rod and really outselling. We cannot meet the demand there in those products.

Also, you see the foundry weakness. In the short to medium term, we do see that the market is overall balanced in aluminum. China is continuing to buy metal from the rest of the world, and North America and Europe remain in deficits. We do think in the longer term, both primary and secondary aluminum, the demand trends are looking very strong. We believe that additional capacity will need to come online. We do see the projects in Indonesia. We believe that capacity will be needed, and it will be absorbed by the market. Long term, the outlook is good. If you look across the industry analysis, you’re seeing the prices for the 10-year outlook very strong, stronger than what we’ve seen really in the last decade. Alcoa is well positioned to deliver in these growing markets.

We have a great low-carbon product, very well prepared to provide customers in North America and Europe. We’re still seeing the benefit of the higher Midwest premium on our U.S. smelters. We are well positioned for the markets. I do have some updates to our guidance that I’d like to share today. So far in the quarter, our operations are performing well and really maintaining stability. However, our aluminum shipments in the third quarter are going to be 15,000 metric tons lower than anticipated. That’s due to timing. Our annual guidance, though, remains unchanged. Beyond the standard sensitivities that we provide for inter-segment profit elimination, we expect an additional $25 million of expense in the third quarter due to the higher profit retained in inventory related to favorable changes in margin. The favorable changes in margin are related primarily to our Brazilian refinery operations, where we have higher production.

These are the tons that are supplied to our North American smelters and are held in inventory at the end of the quarter. At current prices, we expect a third-quarter tax expense to be in the range of $60 to $70 million. That’s a $10 million increase from our prior outlook. That is due to higher projected annual earnings concentrated in the jurisdictions where we pay taxes. I have one clarifying point as well. While our earlier outlook for the aluminum segment included the EBITDA impact of expected lower shipments for bauxite, we want to clarify the outlook specific to revenue. The lower shipments will have a sequential impact on revenue of approximately $70 million. All right. With that, we can move on to other Q&A.

Carlos, Host, Laguna Industrial Conference: Great. I want to tackle the Section 232 situation, right? It has kept us quite busy, you and our team as well. How are the discussions and the conversations with both the Canadian and the U.S. government? Bill and you have expressed in the past that you are in open discussions, sometimes trying to inform, sometimes trying to educate the administrations in both countries on the potential impacts of what is happening. Any update on how these discussions are going right now with the two governments?

Molly Beerman, Chief Financial Officer, Alcoa Corporation: We are continuing our discussions both at the CEO level, as well as our government affairs teams in the U.S., in D.C., as well as in Ottawa. The discussions are going well, and we’re moving beyond education. We’re no longer talking to them about the capacity and the imports and the power ramifications for smelting or for additional smelting capacity. As we continue to speak with them, we are encouraged by the dialogue that we see happening between the U.S. administration and the Canadian. The recent meeting between Commerce Secretary Lutnick, as well as the Canadian Trade Minister, those conversations were described as constructive and lengthy, and they did commission their teams to continue work. We’re getting word out of the progress of those teams, so we’re encouraged by the latest interaction. Alcoa stands ready to continue to support both sides as they need data or questions in these discussions.

We do believe that there are meaningful signs of progress and hope that we will have action for tariff relief ahead of the USMCA renegotiating, which is scheduled for the middle of next year.

Carlos, Host, Laguna Industrial Conference: Ultimately, is there any views to the extent that you can say as to what would be the scenario in terms of tariffs? Canada potentially getting some special treatment or no hope for that?

Molly Beerman, Chief Financial Officer, Alcoa Corporation: It’s very hard for us to say what the final outcome will be, but we’re advocating. We’re still working on the exemption. We’d love to have that. That’s a very meaningful number for Alcoa Corporation. I mean, over $800 million in tariffs that we’re paying. Of course, that’s at the current Midwest. Or looking at a preferential rate. If Canada can pay a lower tariff rate than any of the other importing companies, that will also be very beneficial for Alcoa Corporation’s financials.

Carlos, Host, Laguna Industrial Conference: You mentioned that the Midwest premium has been going up, which is beneficial for the company. Any updates as to the shipments that have been diverted from Canada to other regions that typically came to the U.S.? Are you now bringing them back, given the premium levels that we’re seeing?

Molly Beerman, Chief Financial Officer, Alcoa Corporation: Recall the scenario for Alcoa. Our U.S. smelting capacity is about 290,000 metric tons. That is getting the benefit of the higher Midwest premium. Our Canadian smelters are producing about 960,000 metric tons, with historically about 70% of that flowing into the U.S. and subject to tariffs. In Canada, we’ve had considerable margin compression. However, at the recent Midwest premium, it’s somewhat favorable to Alcoa because the U.S. benefit is fully offsetting the Canadian compression. As we look today, we would ship from Canada into the U.S. If you look at the Midwest premium, you look at the Rotterdam premium, the unpaid U.S. is the destination. We continue to run the net back calculations almost every time we’re placing spot volumes because it’s dynamic and it’s changing. We always want to be optimizing the margins for our shareholders. We’re continuing to do the test.

Today, it is better to ship into the U.S., where we have all the established logistics, the supply chain preference. That’s the natural flow.

Carlos, Host, Laguna Industrial Conference: Things have improved a little bit on that end. Given the rising prices, falling prices that we’re seeing in North America, the 50% tariff, have you seen or are you starting to see any demand disruption? Maybe different markets have different reactions. Any comments there would be very useful.

Molly Beerman, Chief Financial Officer, Alcoa Corporation: We are not seeing demand destruction per se. What we are seeing is uncertainty. We’re not getting the forward look from our customers that we typically do. This is the time of year where we’re working on the annual contracts, particularly for the North American customers. I expect we’ll have more feedback from them as we conclude those conversations in the next several weeks. This uncertainty throughout the supply chain, everyone is trying to figure out pricing so that they can protect the margins that they planned into the future if the tariffs are changing. It creates this uncertainty and a very low inventory environment as the customers only want to buy what they’re going to consume immediately. It is hand to mouth in terms of that pool.

Carlos, Host, Laguna Industrial Conference: All right. Now, why don’t we shift gears to Europe and talk about San Ciprián. Obviously, you were ramping that up, starting to ramp up when the power outage in Spain took place, disrupted the process. What are the latest conversations that you have had with both the government and the union? Any possibility of releasing the restricted cash? Clearly, a focus area for investors and definitely for the company.

Molly Beerman, Chief Financial Officer, Alcoa Corporation: Let me touch first on the, we restarted or reinitiated the restart at San Ciprián that began in July. It’s really progressing very well. We have, despite the labor tensions there, a tremendous team. They’re great operators, and that is progressing. Originally, when we started the restart in January, we had expected to reach full capacity by October 2025. At that point, at full capacity, the smelter is profitable. Unfortunately, with the delay from the power outage, now we restarted late and we’re not going to finish the restart until the middle of 2026. Again, we expect to be profitable then, later in 2026. That does put some pressure on the cash that we have available to the entity. Our discussions with the government now have been focused on the power outage. What is the root cause of the power outage?

What are they doing to strengthen the resiliency of the power grid? What costs are they going to pass on to industrial consumers of the power? We’re very disappointed that the Spanish Parliament did not pass the proposal that was put forward. They had, I think, 65 measures to strengthen the grid. That said, fortunately, the Spanish government did step in and used their fast-track process to get some of those improvements to the grid through the system. Spain still needs to deal with the energy practices and what they are going to do for industrials like Alcoa to survive there. They really still have an energy issue to address.

Carlos, Host, Laguna Industrial Conference: I’m sorry.

Molly Beerman, Chief Financial Officer, Alcoa Corporation: I was just going to move on to our workforce discussions next. Fortunately, great conversations with the workforce now because we’re focused on the restart and it’s going well. We do have restricted cash related to the restart and that is being released as we spend those funds. However, we still have about $60 million in restricted cash being held for the capital expenditures. No progress on getting that released to cover the losses from operations. No movement on that piece of the restricted cash.

Carlos, Host, Laguna Industrial Conference: Are there any comments beyond 2027 when the current agreement expires? What sort of conditions would you need to see for the company to continue running the smelting there?

Molly Beerman, Chief Financial Officer, Alcoa Corporation: As we look at that operation, we’re really focused on getting the smelter to profitability and cash generation that can cover the refinery. The refinery right now is very challenged at this API. Fortunately, the refinery made money in the first part of the year, but now they’re in a loss position. The EBITDA losses aren’t huge, but we’ve got capital projects going on there. We have about a $100 million capital project. The majority of that will be spent between 2025 and 2026. That capital project is both expanding the capacity of the residue storage area, as well as preparing it for eventual closure in the future. As we look at San Ciprián, getting the smelter to profitability, cash generation that will cover the refinery losses and cash needs, and trying to get to Spain to a neutral position.

When we get beyond 2027, we’ll then be able to look at other options. We won’t have the cash pool that we have today.

Carlos, Host, Laguna Industrial Conference: All right. Moving to Australia, there is an opportunity there eventually for the company to enter higher grade mining areas that would relieve a little bit the pressure that you have seen, improve operations, EBITDA, cash regeneration. Any updates on what is happening there, particularly after the consultation period ended? Do you have a clear timetable or timeline for the next steps following that coming period? Potentially, what are you waiting for the government to do and what is required from your end?

Molly Beerman, Chief Financial Officer, Alcoa Corporation: We are continuing to progress the mine approvals in Western Australia. This is for a new mine region, which is North Myara and Holyoake. We’ve just completed the public comment period at the end of August. We had tremendous input from the community and stakeholders, and we’re taking all of their responses. Very carefully, thorough responses will be provided. We had about 5,000 unique inputs out of a total of 59,000. This is the record responses. We take this very seriously. The EPA is summarizing those comments now. They will give them to us any moment now. We do expect them in coming days. We will then have a period of time to provide our responses. We’ll be getting those responses out of the thousands of pages that we’ve already made public about our mine plan, but we’ll tailor the responses to meet each of those.

From there, after we provide our responses, the EPA has to go through, analyze the responses. Obviously, they’ve already had our mine plan. They’re reviewing that. They’ve commissioned third-party studies. They’ll be getting those results in and formulating their recommendation. We expect from what they’ve told us that they will make their recommendation by the end of the second quarter of 2026. After that, there is a statutory required appeals period. After the appeals period, it will move to ministerial decision. We will have that time period. That is not a regulated time period, but as we have looked at benchmarking others in the approval, typically that takes several months. If we get the recommendation from the EPA in mid-2026, we would hope to be looking at getting several months later, getting the final ministerial decision.

Alcoa Corporation is committed to doing everything in our power to respond expeditiously on anything that’s required from our side to make sure that we can get those approvals as early as possible in 2026. Recall our original timeline was to have the approval in the first quarter, and that would allow us to start the mine move and start to reach into the new grades by the end of 2027, transition throughout 2028, and then by 2029 be fully into the new mine region. Clearly, that’s delayed. When we do get fully into the new mine region, we would expect to pick up a million metric tons of aluminum production.

It’s the same amount of throughput, but you have a higher aluminum grade, so you’re getting more aluminum out and also reduced costs, about $15 to $20 per metric ton of aluminum because we’ll have lower caustic soda consumption, as well as better energy usage. Tremendous financial benefits when we do complete the mine move.

Carlos, Host, Laguna Industrial Conference: A couple of questions on this topic. Would this potential increase in aluminum production lead you to increase in bauxite production, lead you to higher aluminum production, maybe operating the current facilities that are running at a higher rate, or maybe restart the facility that is idle?

Molly Beerman, Chief Financial Officer, Alcoa Corporation: Yeah. In Western Australia, we really are constrained. The refineries are running at full capacity because of the lower grade, though they’re getting about 1 million less tons than typically we would have seen in history out of Pinjarra and Wagerup. When we look at San Ciprián, they’re actually taking their bauxite from Guinea. There’s really no constraints on supply there. It’s more about getting our residue storage area, capital expenditures work done, and then we would be prepared to expand capacity at San Ciprián if the economics and the prices are right.

Carlos, Host, Laguna Industrial Conference: Kwinana would not come back. I mean, that’s what we’re thinking, that maybe Kwinana had an opportunity to come back.

Molly Beerman, Chief Financial Officer, Alcoa Corporation: At this point, we’re not looking at restarting Kwinana.

Carlos, Host, Laguna Industrial Conference: All right. Okay. On the second point on this topic, there are some concerns about the potential impact of mining in the new area in the water reservoir that feeds the City of Firth. What is the company’s position on this news that has been out there?

Molly Beerman, Chief Financial Officer, Alcoa Corporation: We have already, and this is in our public mine plan, already moved back from the areas that do come close to the drinking water catchments. We have already moved back. We have really reviewed with the EPA our enhanced procedures for mining on any sloped areas. We believe we put forward a mine plan that is addressing any of the perceived threats to the water, to the drinking water. Remember, we’ve been mining in this region for 60 years. We’ve never jeopardized the water, and we certainly don’t intend to now. I think the extra measures that we put in place are mitigating and de-risking some of those concerns.

Carlos, Host, Laguna Industrial Conference: All right. Moving to the balance sheet and capital allocation, the company has been focused on reducing net debt below $1.5 billion. Outside the positive free cash flow that the company has right now, there are different opportunities potentially to monetize assets. You have the Ma’aden shares. There’s some maybe timetable there. You also have some sites that have been idle that you could potentially sell for data centers or other purposes. How is the company seeing these other opportunities to, I guess, add to the cash flow generation and potentially return money to shareholders?

Molly Beerman, Chief Financial Officer, Alcoa Corporation: We are focused now on strengthening our balance sheet further, as well as reaching our new net debt target, so $1 billion to $1.5 billion. If you look at the close of the second quarter, we are at $1.7 billion, getting closer to the top end of our range. However, within that, our adjusted debt is still high, so we’re about $3.2 billion. We have some work to do on our gross debt, which was at $2.7 billion. We still have the pension and OPEB, but most of that is OPEB, and that will bleed out over time. We do have some economic opportunities to repay debt, so we will be looking at that. We are being a bit conservative now and holding some extra cash, probably more than we need for operations. Really, that’s due to the tariff uncertainty.

As we look ahead to Ma’aden, the shares that we’re holding there under that agreement, we can monetize those a third at each of the third, fourth, and fifth year anniversaries of the transaction closing, into the future. The agreement does come with provisions that would allow us to do that early. As we’ve looked at options to do that, it’s very complicated structures, and it’s going to look like debt on our balance sheet, which we don’t like. It’s not as economical as we would like. If we had a need or we had a strategic opportunity that we wanted to pursue, we could look at the Ma’aden monetization early. It’s an option for us, but one that would be unlikely to pull right now.

When we do sell those shares, and we don’t see ourselves holding those shares in the long term, if our shareholders want to own Ma’aden, they can do that directly. As we would monetize those, that would come into our capital allocation framework. It would be available for dividends or returns to shareholders, as well as any growth investment opportunities, and possibly if there’s more portfolio work to do. That would be the same as we look at our transformation sites, as we call them. We have about 20 former operating sites. We have a team within our company, the transformation team. They and outside experts are helping us look at what can be monetized. Some of those sites really have interesting energy infrastructures. They do get inquiries from data centers and hyperscalers. None of those, though, and this is where we get a lot of inquiries.

The Amazons, the Microsofts, they ask wide, but then those that come to fruition tend to be narrow. We do have opportunities we’re speaking of now. There’s nothing to report today, but I’ll share just more broadly. As we look at, of those 20 sites that have the most value, Messina East, which is the site that sits across from our operating Messina smelter, we already host Bitcoin miners under a lease there that has more opportunity. We do see the discussions there being productive. We also have the Point Comfort property in Texas. That was a former refinery. It’s got a great port, so there’s going to be some value there to be monetized. We’re still working on some remediation. It’s not ready for full marketing, but that’s another opportunity.

One that is being marketed right now is our former Port Henry smelter site near Geelong in Australia that does not necessarily have great energy infrastructure left, but it’s a beautiful piece of land. It’s sitting on a peninsula on the coast of Australia. That is being marketed. Any of those that we sell would also come into our capital allocation framework.

Carlos, Host, Laguna Industrial Conference: In terms of returning money to shareholders, you have a dividend in place. Would you increase potentially that dividend or would it be more a special dividend combined with maybe share buybacks? How does the company and you as the CFO decide on how to return money to shareholders?

Molly Beerman, Chief Financial Officer, Alcoa Corporation: We have a dividend today that we’re comfortable paying through all market cycles, so that we have continuing. We also have $500 million left on our share buyback authorization, so that would also be available. We do not do buybacks based on a share price. We’ll do a buyback when we have excess cash to return. That has been our philosophy.

Carlos, Host, Laguna Industrial Conference: You mentioned briefly that you will look for potential strategic opportunities. Anything that you feel that from a product perspective or a regional perspective maybe has a little bit more priority than others?

Molly Beerman, Chief Financial Officer, Alcoa Corporation: I’m sorry, from a?

Carlos, Host, Laguna Industrial Conference: Strategic investments or opportunities.

Molly Beerman, Chief Financial Officer, Alcoa Corporation: We are always active in looking at strategic opportunities. We don’t tend to comment on M&A rumors or others, but we’re always active talking to the other players, making sure that we’re aware and we’re looking where we could deliver more value to shareholders. One area that we have been pursuing is recycling, and not so much that we’re going to buy a major recycler. We have no talent really in collection or sorting, but we do have expertise in remelt. It would be very much aligned with where we’re seeing customer demand. For us, that shows up probably foremost in Europe foundry. Those customers are auto customers there, want a higher level of recycled content. As we’re looking at opportunities, it could come as additional CapEx. It could come partially as M&A if we find the right fit. That’s one of the opportunities that we have talked about publicly.

The others we’ll wait and see.

Carlos, Host, Laguna Industrial Conference: All right. You have an investor day coming up in late October. I think the first time in five years?

Molly Beerman, Chief Financial Officer, Alcoa Corporation: Four years.

Carlos, Host, Laguna Industrial Conference: Four years. Without revealing all the agenda and the surprise that you have for us, any high level, what would you mention, what would you like to convey in that session?

Molly Beerman, Chief Financial Officer, Alcoa Corporation: Yeah, we’re very excited about the upcoming investor day on October 30th. It’ll give us a chance to share our accomplishments and also talk about the latest Alcoa Corporation updates in terms of our markets, our operations, the strategies, and capital allocation. We’ll also be giving a forward outlook. Please join us for the event, October 30th.

Carlos, Host, Laguna Industrial Conference: Looking forward to that and hopefully a nice surprise on capital returns or something. At this point, let me open it up to the audience in case there are any questions, anything you would like to explore further.

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