Alcoa (AA) 16th Annual Wells Fargo Industrials & Materials Conference summary

Market environment and operational performance

• Strong operational performance in recent quarters, driven by safe operations and high aluminum prices, despite cost pressures from Middle East conflict and supply disruptions.

• Alumina segment faces $15M in additional fuel costs at São Luís and $30M higher production costs at Pinjarra due to LNG supply disruption.

• Pinjarra’s third-party shipments reduced by 120,000 metric tons in Q2, with recovery efforts underway by year-end.

• Alumina segment is under significant cost pressure, with Western Australia refineries operating at a loss, while Alumar remains profitable.

• Net unfavorable cost impact versus prior guidance is $45M, mainly from São Luís and Pinjarra.

Supply chain, pricing, and market dynamics

• Middle East conflict has led to supply constraints, high LME prices, and elevated regional premiums, pressuring global alumina refinery margins and reducing demand.

• 4 million of 12 million alumina shipments go to the Middle East; shipments are being redirected, mainly to China, with minimal contract impact.

• Alumina prices remain resilient due to creative logistics by Middle East smelters and limited global capacity shutdowns.

• About 45%-50% of global alumina refiners outside China are operating below cost at current API levels.

• Guinea’s push for bauxite export restrictions is not expected to impact operations, as quotas are being respected.

Capacity, production, and capital allocation

• Recent restarts at San Ciprián, Alumar, Lista, and Portland add 20,000 metric tons in Q2, with most lines running at full capacity except for some at Portland and Warrick.

• Warrick restart would require $100M and two years due to staffing, technology, and power complexities.

• Capital allocation focuses on growth projects, such as a $65M investment in Mosjøen for recycled content, and disciplined M&A within the aluminum value chain.

• $500M share buyback authorization and a modest quarterly dividend are in place, with special dividends considered based on excess cash.

• Investment decisions prioritize access to economical power, especially in the U.S., and long-term asset viability.