Despite some enduring headwinds and a weighty decision looming about his team’s Spanish plant, Alcoa Corp. President and CEO Bill Oplinger said Jan. 17 that 2024 is “starting to look like a positive turning point.”
All the same, the global aluminum producer’s leaders are more focused for now on cost savings while tweaking their portfolio, curtailing some operations while restarting others.
Speaking to analysts after reporting Alcoa’s fourth quarter results, Oplinger said Pittsburgh-based Alcoa is in line to save $310 million on raw material purchases this year versus 2023 through various actions and has launched a program to trim another $100 million in operating costs beyond materials, energy and transportation. The latter push, Oplinger said, will take until early 2025 to hit full stride.
Those moves will help Alcoa ride out a mediocre market for its products, although Oplinger said his team is seeing signs of improvement.
“Demand has stabilized in North America and Europe, and we see the potential for a moderate recovery throughout the year,” he said on the conference call. “In our order book, value-add product orders are stabilizing and premiums appear to be firming up. While lower than their peaks, those premiums remain above historical levels.”
Alcoa can use a boost from pricing: The company posted a net loss of $227 million on sales of $2.6 billion in the last three months of 2023 and lost $773 million during all of last year after posting a small profit in 2022. For the year, the company shipped 2.49 million tonnes of aluminum, down from 2.57 million the year before; Oplinger and his lieutenants are forecasting 2024 shipments of between 2.5 million and 2.6 million tons this year.
Weighing heavily on results in recent quarters has been the company’s San Ciprian complex in northwest Spain that’s focused on alumina, the synthetically produced starting material for the smelting of aluminum. Alcoa partially curtailed its operations there in early 2022 due to high natural gas costs and early last year committed to unions and government leaders that it would restart some production this month, ramping up activity through October 2025.
But the facility lost $150 million last year and a solution to the high energy costs isn’t in sight. Oplinger said Jan. 17 that Alcoa is committed to “fulfilling the spirit of the obligations and the viability agreement” but said that restarting operations now would drain the plant’s coffers even more quickly. And, he added, “Alcoa entities will provide no further funding to an operation that is not viable.”
There’s no timeline for any decision, Oplinger said.
The state of San Ciprian and other struggling assets are one reason UBS analyst Curt Woodworth recently rated Alcoa stock a ‘sell.’ Fixing those or altogether closing them, Woodworth said, could hurt the company’s cash flow while the overall market looks to regain strength. Alcoa shares (Ticker: AA) fell about 1.6% to $26.75 on Jan. 18; they have lost more than 20% of their value over the past six months.
