US-based integrated aluminum producer Alcoa anticipates $90mn in tariff-related costs associated with importing primary aluminum from Canada during the second quarter.
For the full year, the Pennsylvania-based company foresees that figure rising to between $400mn-425mn, as 70pc of its production from Canada "is destined for US customers," Alcoa chief executive William Oplinger said in a first-quarter earnings call late Wednesday.
A higher Midwest premium should help offset most of those cost pressures in support of Alcoa's domestic smelters, but Oplinger warned that the company still faces a $100mn negative impact on its business in 2025 because of the higher Section 232 duties that US president Donald Trump implemented on 12 March.
The company noted that the US lacks the infrastructure to cover domestic aluminum consumption, even if all other idled smelting capacity here would restart.
"Until additional smelting capacity is built in the US, the most efficient aluminum supply chain is Canadian aluminum going into the US," Oplinger said.
By his estimate, at least five domestic smelters would need to be added, but construction would take "many years" and investment would be partially dependent on access to new — and cheap — energy sources.
"These new smelters would require additional energy production equivalent to almost seven new nuclear reactors or more than 10 Hoover dams," Oplinger said.
Still, Alcoa maintained its full-year production and sales volume guidance for aluminum products, ranging between 2.3mn-2.5mn metric tonnes (t) and 2.6mn-2.8mn t, respectively. It also kept its outlook for alumina output and shipments unchanged at 9.5mn-9.7mn t and 13.1mn-13.3mn t, respectively.
First-quarter aluminum production increased by 4pc to 564,000t from the prior-year period, while total sales volumes fell by 3.9pc in the same timeframe, reflecting timing of shipments and the end of its offtake agreement with Saudi Arabia Mining (Ma'aden) as part of its planned divestment from the entities' aluminum joint venture.
Alumina output in January-March dropped by 12pc to 2.4mn t on the year, while shipments fell by 12pc as well, to 2.1mn t. Alcoa attributed the drop in sales volumes to timing of shipments and reduced trading.
Quarterly bauxite production fell by 5.9pc to 9.5mn dry metric tonnes (dmt) from the prior-year period, while sales volumes increased by 67pc to 3mn dmt. The company was able to capitalize on supply tightness in the bauxite market that has helped elevate prices to $80-85/dmt, selling cargoes in the spot market.
Alcoa posted a $548mn profit in the first quarter compared to a loss of $252mn in the prior-year period. Revenues increased by 30pc to nearly $3.4bn in the same timeframe.
