Alcoa Says 2021 Looks Better for Aluminum, but Don't Expect Any Miracles

Researched by Industrial Info Resources (Sugar Land, Texas)--Alcoa Corporation (NYSE:AA) (Pittsburgh, Pennsylvania) is warning its peers in the Metals & Minerals Industry that their market will not look substantially better in the near future. The aluminum producer expects rising costs and lower selling prices (particularly for bauxite) will hit its bottom line in first-quarter 2021, while its aluminum shipments for the full year are expected to be between 2 million and 2.8 million metric tons--down from 3 million in 2020. Industrial Info is tracking more than $1.3 billion in active projects involving Alcoa, with Australia accounting for the highest number of projects.

In a broader sense, Alcoa's outlook for the coming year is more optimistic. The company believes aluminum demand will outpace supply globally; when coupled with an expected post-COVID-19 recovery and various fiscal stimulus measures from different governments, Alcoa anticipates the worldwide primary aluminum market will be "closer to balance" by the end of the year. Nonetheless, the company acknowledged the pandemic's "magnitude and duration continue to be unknown," as it likely will spend much of the year recovering from drastically reduced consumption from end users, such as auto manufacturers.

Even before the pandemic, Alcoa was laying out extensive plans to close or curtail production at any facilities deemed uneconomic. Last year, Alcoa closed the doors at its aluminum refinery in Point Comfort, Texas, which had been operational for more than 70 years. The facility, which produced 2.3 million metric tons per year at its height, halted its production in 2016 and is now a Superfund site managed by the U.S. Environmental Protection Agency (EPA). For more information, see Industrial Info's project report.

Foreign Governments Toss Lifelines to Struggling Plants
Alcoa is at work on an expansion of its smelter in Deschambault, Quebec, which it expects to wrap up in the fourth quarter. Construction began in early 2019, with an estimated price tag of C$85 million (US$63.85 million) and was bolstered by a C$10 million (US$7.92 million) funding grant from Canada's federal government. For more information, see Industrial Info's project report.

Alcoa's Australian subsidiary got a boost last month from Australia's federal government, which agreed to provide AU$76.8 million (US$59.5 million) in funding in a bid to secure the future of Alcoa's aluminum smelter in Portland, Victoria. In return, Alcoa must reduce its use of energy from the power grid at the facility, which currently accounts for about 10% of Victoria's electricity demand, according to Reuters. Alcoa also is preparing to begin a baghouse changeout program at the 358,000-ton-per-year facility. For more information, see Industrial Info's project report.

Click on the image at right for a map of Alcoa's Australian facilities with active projects.

"We are working on options for the Portland aluminum smelter in the state of Victoria and Eastern Australia, which faces challenges from a difficult energy environment," said Roy Harvey, the chief executive officer of Alcoa, in a recent quarterly earnings-related conference call. "To find a long-term workable solution, there are two key requirements: an internationally competitive power price, including generation and transmission fees, and flexibility to manage the continued risks of grid instability. We are encouraged by positive engagement with stakeholders in Australia."

Harvey also said Alcoa is working to reduce its use of water in places where the resource is scarce, such as its Kwinana and Pinjarra aluminum refineries in Western Australia, where the company recently installed press filtration technology. Alcoa is considering an expansion of the Pinjarra Refinery, which would increase production from 5 million to 5.25 million tons per year of aluminum. For more information, see Industrial Info's project report.

Industrial Info is tracking 18 maintenance-related projects at the Kwinana and Pinjarra aluminum refineries that are set to kick off through 2023. Click here for a list.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.