Alcoa: 2Q Results: Cost Headwinds and Supply Fears Overshadow Solid Execution

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Alcoa: 2Q Results: Cost Headwinds and Supply Fears Overshadow Solid Execution

(prior $55) for N-rated AA. Quarterly Forecasts (FYE Dec)

• 3Q guidance: Management guided Alumina +$10M, driven by improved Adj. EPS ($) 2025A 2026E 2027E

stability at Pinjarra (+$30M) and lower energy prices (+$5M vs. 2Q’s -$20M), Q1 2.18 1.41A 0.92

partly offset by planned maintenance (implied -$25M), which should be Q2 0.40 2.13A 1.02

recouped in 4Q. Caustic soda prices soured Mar-Apr, but have since recovered Q3 (0.02) 1.46 1.04

Q4 1.23 1.13 0.95

to pre-war levels, implying a likely 1x 4Q impact holding all else equal. FY 3.80 6.13 3.93

Alumina shipments guidance was cut 3% due to 2Q’s lost Pinjarra tonnes.

Aluminum was guided flat, with improved production/efficiencies offsetting Style Exposure

steadily elevated carbon prices (-$15M) and seasonally lower Brazil energy

sales. API in Aluminum should be a $10M headwind offset by $10M lower

S232 costs. Corporate costs guidance was lifted 3% to $180M reflecting

unfavorable FX and strategic initiatives. We also note despite NY’s recent

moratorium on datacenters (link), management remains confident in pushing

the Massena East sale through the finish line.

• Market outlook & sentiment: JPM’s Base Metals Research team (led by Greg

Shearer) forecasts a >2Mt aluminum deficit over 2Q–4Q26, noting that the

deficit has been masked by draws in “invisible” inventories (i.e. producer/

trader/consumer stocks). The latter is nearing depletion (~2mos coverage),

with the market likely to shift to visible inventory draws (~75% in China)

supporting China’s export arb and nearer-term pricing (~$3,750/t 2H avg.).

Looking ahead, the team sees a gradual restart of Middle East supply and

Chinese-funded ramps outside China ending a period of global supply