Alcoa Corporation "LME/premia higher for longer - Upgrade to Buy" (Buy) Shaw

Research evidence excerpt

Alcoa Corporation "LME/premia higher for longer - Upgrade to Buy" (Buy) Shaw

irm,

NYDIG (LINK). AA have indicated a potential sale in 2026; we do not factor this into our net debt

forecasts but this could lead to accelerated cash returns.

Q: Could AA benefit from tariff de-escalation?

Maybe. Current Midwest Premiums more than offset annualized tariff costs of ~$1.1bn @ a 50%; if

tariffs on Canadian imports (AA ~670kt) are reduced we would expect MWP to average closer to the

marginal tariff rate (50%) resulting in a potential material net benefit for AA. We estimate a 10%

reduction in tariffs on Canadian imports would lift EBITDA by ~$225m (7% vs 2026 cons). We are not

aware of any timeline for discussions but note that USMCA discussions are scheduled for mid-2026.

UBS VIEW We are constructive on the outlook for aluminium and believe tighter fundamentals will support

elevated prices of >$3,000/t over the next 1-2yrs. Supply disruptions & tariffs have already caused

material increases in physical premiums in US/Europe/Japan; we expect this tightness to persist

resulting in higher premiums over the next 1-2yrs. We remain cautions on alumina but this more than

offset by higher LME & premiums. Using conservative LME price assumptions (2H26 below spot) we

forecast sequentially higher EBITDA & FCF in 2Q with sustained FCF & potential divestments

(Massena East) expected to drive net debt reduction to well below AA's target range of $1.0-1.5bn;

opening the door for buybacks in 2H26 that will act as a positive catalyst. We rate the shares Buy.

EVIDENCE Detailed analysis of the alumina/aluminium markets & AA operations underpin our FCF & valuation.

WHAT´S PRICED IN? @ 5.0x EV/EBITDA AA is pricing in ~$3,000/t aluminium with alumina @ $320/t vs spot ~$3,600/t.Please