Alcoa Corporation Jefferies Global Industrials Conference 2026
Review the key takeaways and the transcript of this earnings call.
- Alcoa Corporation reported strong momentum from Q2 into Q3, with production records at five operations and strong price realization contributing to improved EBIT and EBITDA over $900 million in Q2.
- The company serves primarily North American and European customers, where demand remains strong due to supply uncertainties from the Middle East.
- Alcoa announced its largest acquisition in history, acquiring South32's alumina, bauxite, alumina, and aluminum assets (the Elly Group), expected to close in H2 2027.
- Operational improvements included bringing 30,000 metric tons of smelting capacity back online across multiple sites and increasing value-add product production by 25,000 tons in Q2.
- Alcoa's working capital is over $2 billion, with typical seasonal build in Q1 and drawdown through the rest of the year, expecting solid cash generation in Q3 and Q4.
- The company issued $2.6 billion in debt related to the acquisition, increasing pro forma adjusted net debt to $4.7 billion against pro forma EBITDA of $3.2 billion.
- Alcoa’s power needs are 99% covered by long-term contracts or self-generation, with recent favorable 10-year contract renewal at the Messina smelter in New York.
- Demand is strong in packaging, rod, and foundry products in North America and Europe, with some weakness in billet demand in Europe due to geopolitical and end-customer uncertainty.
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Transcript
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All right. Good, I guess, late morning, everybody. Thank you for attending here at the Jefferies Global Industrials Conference 2026. We have Alcoa Corporation CFO, Molly Beerman. Alcoa is a global producer of aluminum, alumina, and bauxite. I think Molly has some just opening prepared remarks, and then we'll get into some Q&A here.
Welcome, everyone. Thanks for your time and interest to those in the room and those joining online. It's an exciting time for Alcoa. We are approaching our 10-year anniversary as a standalone company, and a lot going on. We're carrying great momentum from the second quarter into the third. Second quarter, we saw strong production, strong realization of prices dropping to the bottom line, stability throughout the portfolio. We hit production records in five of our operations, and again, continuing that into the third quarter. We also are making the most of strong market fundamentals. We serve customers primarily in North America and Europe, where the demand has remained strong. Customers are actively looking for our supply because they're looking for alternatives to the uncertainty with the Middle East supply.
Third, we announced an acquisition, the largest in our company's history, of South32's bauxite, alumina, and aluminum assets transaction we call Ally Group. We are on track to close that transaction in the second half of 2027. Lots going on, and open to all your questions, Albert.
Great. Thank you for that, Molly. I guess maybe we'll start higher level on maybe the more macro front with just alumina and aluminum markets. A lot of moving parts. You mentioned the war in the Middle East. Obviously, a good amount or maybe 10% of global supply has come from the Middle East in recent years. Maybe production being impacted there has impacted some of the global alumina supply-demand dynamics. Just what you're kind of seeing high level in each of those markets on the global front, and then maybe we'll get into regional premiums a little bit later.
In alumina, we still see the market in surplus. You've seen some price rebound recently, getting to about that 350 level. There was some disruption at Alunorte, which initially brought the price up. However, we're also seeing we're approaching the date with the Yarwun curtailment, so that will be taking 40% of that supply out. That's announced for October of 2026. You're also seeing sentiment about the Middle East smelters increasingly consuming alumina. A little bit of more supply control, demand pickup. But alumina as a whole is still in surplus and expected to remain so for the rest of this year and probably into next year until the Indonesian smelters start to come online and consume more of the alumina. In aluminum, we are still in a global deficit, again, with the Middle East out.
For Alcoa, this is showing up as very strong demand, as I mentioned in opening comments, from our North American and European customers. They are preferring supply that's regionally located. You see that showing up in the Midwest premium as well as the Rotterdam premium competition for tons. Now, units are still available. But from our value-add perspective, our order book is almost completely sold out for the rest of 2026, and we're heading into the 2027 contracting season on a good basis to secure good premiums into 2027.
I definitely want to go to maybe some of those regional premiums and how the tariffs have impacted that, and maybe some of the headlines on recent tariff changes. But I guess broader in the aluminum industry, do you think we're and it looks like this is the case, but we're continuing to move to maybe a developed economy aluminum market in North America, maybe Europe, some of the regions you play in, and then maybe kind of like rest of world where China and some of the growth in Southeast Asia, like Indonesia, would more so play.
I'm sorry. The question again?
I guess, are you seeing continued trends into kind of like a divergence between China, Southeast Asia, other global aluminum supply, and then North America and Europe? I assume as time goes on, you're seeing more divergence between those two markets, right?
Yeah. We do see in aluminum a divergence in the markets because China is largely self-sufficient. They have been exporting a small amount yet, but that's not material to the global market. Ex-China, the markets are, again, overall in deficit with North America and Europe at the greatest levels of deficit.
Okay. I guess moving to some of the recent tariff headlines, obviously you mentioned the Midwest premium. I think you guys have talked about how you're a net beneficiary of that. Maybe just speak on a lot of your production is in Canada, or a good amount of it is, and some of the recent headlines of maybe reducing Canadian tariffs to 25% into the U.S. on steel and aluminum. How would that impact your business? I would assume maybe that would impact the Midwest premium. Maybe you could talk about how you would be maybe a net beneficiary or how that would overall impact the business.
Alcoa is in a fortunate and unique position in that we can benefit almost from any of the trade proposals that are currently open. Even in the current environment with a 50% tariff, we have 900,000 Canadian tons. The majority of that is coming into the U.S. We're paying a tariff that's over $1 billion. However, the Midwest is fully compensating us for that, as well as returning a margin because of the tightness in the tons. If we were to receive a favorable tariff rate on Canada, think of that $1 billion in tariff being cut in half. So that'd be a major benefit to Alcoa. A favorable rate for Canada works in our favor. Some of the proposals even had a quota rate that would also be favorable to us. We have a good history of supplying Canadian metal into the U.S.
We are well-positioned for whatever the trade negotiations land on.
We have talked in our research where, and I think most in the market would agree that, maybe more so on the steel side, but the steel and aluminum, it seems like the administration is treating them the same with respect to tariff policy that Canada and Mexico would eventually get some type of exemption, whether that is a reduction to 25%, whether that is some type of quota system, just given how intertwined those metal industries have become since Trump originally gave them free trade. I guess, what we have talked about is maybe the risk that this could expand to other trading partners in Europe, in Southeast Asia. How would your business be impacted if we start to see tariff reductions coming from Japan or South Korea or Europe, things of that nature?
The U.S. needs to import 4 million metric tons of supply. Canada only has the possibility to supply about 3 million of that. If additional trade partners get tariff relief or waivers and the last 1 million metric tons is covered, then you can expect Midwest premium to reduce, in response to essentially wipe out the tariff benefit. But with the U.S. still needing to incent the import of 1 million tons, even if we were to have a favorable rate with Canada, we do not see Midwest dropping significantly. It might come off a little bit, but we would not see it returning to pre-tariff levels.
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