Alcoa reported on Thursday that its second-quarter order book remains strong and has not yet been affected by US tariffs.
The aluminium producer also noted that the recent power outage in Spain presents potential risks to its operations in that country.
In an effort to bolster domestic aluminum production, US President Donald Trump, since assuming office, has implemented a uniform 25% tariff on all aluminum imports, stating there would be “without exceptions or exemptions.”
“Our first quarter order book was strong. Our second quarter order book remains strong. So we have yet to see a fall off in orders associated with the tariffs,” CEO William Oplinger was quoted as saying in a Reuters report.
When we’re talking to our customers, they’re uncertain about the future. So we just don’t have good insight much past the first half now.
US aluminium trade and manufacturing
During its first-quarter earnings call last month, Alcoa stated that it anticipates US tariffs on Canadian aluminum imports will cost the company approximately $90 million in the second quarter.
Alcoa’s Oplinger stated the company supports Trump’s goal of a competitive US manufacturing sector, adding that ensuring Canadian aluminum can enter the United States is the optimal way to realise this vision.
The US faces a substantial annual deficit of approximately four million tonnes of aluminum, he added.
This shortfall is compounded by the absence of economically viable domestic deposits of bauxite, the primary raw material necessary for aluminum production.
Consequently, the US is heavily reliant on imports to meet its aluminum demand, creating potential vulnerabilities in its supply chain.
This dependence on foreign sources for a critical industrial metal has implications for various sectors, including manufacturing, construction, and transportation, and raises concerns about national security and economic competitiveness.
Securing a stable and reliable supply of aluminum is therefore a significant strategic challenge for the country.
Alcoa currently has no plans to construct any smelters in the United States, a process that generally requires 5 to 7 years.
It would take seven new US aluminium smelters to produce the 4 million tonnes, costing an estimated $35 billion, Oplinger said.
Alcoa, the largest aluminium producer in the U.S., has a market value of $6.5 billion, he pointed out.
“So this concept of creating manufacturing in the near term is simply not going to happen in primary aluminum.”
Power outage in Spain and operational risks
The recent, still-unexplained power outage affecting Spain and Portugal has increased the potential risks for Alcoa’s San Ciprián aluminium complex in Spain, according to Oplinger.
He stated that they currently lack an explanation for the energy situation in Spain and anticipate needing several days to assess the potential risks of additional power outages.
If the grid doesn’t understand what happened, it is very difficult to have an electro-intensive business in a place that can’t guarantee that the electricity will stay on.
Alcoa is currently reviewing the damage at its plant. According to Oplinger, the facility’s smelter was in the process of restarting and was 8-10% complete.
Due to elevated power costs in 2021, plant production was reduced. Restart efforts are underway, with a complete production increase anticipated by October.
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