Key takeaways:

• Alcoa’s supply chain shift: In response to US import tariffs, Alcoa has diverted 100,000 tonnes of Canadian aluminium to other markets, reshaping its global supply strategy and reducing metal availability in the US
• Energy costs over tariffs: Alcoa emphasizes that competitive energy prices, not tariffs, are the primary factor for new US smelting investments, with energy costs needing to drop to $30 per MWh for feasibility
• Focus on low-carbon aluminium: Alcoa is prioritizing low-carbon aluminium production, with advancements like the Elysis technology, which aims to commercialize carbon-free aluminium by 2025

Alcoa rethinks global supply chain amid US tariff uncertainty

William Oplinger told Fastmarkets in an interview late on Wednesday July 16 that what began as financial modelling last year has turned into full-scale supply chain reengineering, particularly after US President Donald Trump doubled his country’s Section 232 tariffs on most aluminium imports to 50% from 25% in June.

The company, which produced 2.2 million tonnes of aluminium last year, is working to divert Canada-origin metal to other destinations where possible, depending on the netback.

“Where we have any ability to divert metal outside of the US – for instance, if we have a long position of P1020 [material] – we will divert that either to Europe or to traders in Canada,” he said.

That shift is not being offset by new imports from other Alcoa assets, he noted. “We are not bringing metal from other parts of the world into the US,” Oplinger said.

The effect will be a structurally shorter US market and a Midwest premium likely to rise when availability tightens, he warned. “Ultimately, all things [being] equal, the Midwest premium will go even higher, based on the fact that the US will become shorter on metal,” he added.

Fastmarkets assessed the aluminium P1020A premium, ddp Midwest US, at 68-70 cents per lb on July 17, unchanged since Tuesday.

That was however, up by more than 200% since the start of the year, with most of the increase appearing after tariffs doubled in June.

Oplinger said that the company will continue to arbitrate between markets.

“Right now, the netbacks suggest that we should be shipping into Europe, away from the US,” he said. “But over time, as the US becomes very short [of] metal, the Midwest premium will react and remotivate us and others to ship back.”

Energy trumps tariffs

Alcoa has met multiple times with US officials, and industry body the Aluminum Association is also actively engaged in policy discussions, Oplinger said.

The message, he said, is consistent: that reshoring aluminium production is a long, capital- and energy-intensive process, complicated further by structural limitations in the US supply chain, including limited access to alumina and bauxite.

Oplinger called for a North American trade architecture that preserves tariff-free flows between Canada and the US.

“If the US and Canadian governments feel the need to have tariffs on aluminium,” he said, “there should be a coordinated trade wall that sits outside – at the border of North America – and allows metal to flow from Canada to the US without tariffs.”

But tariffs are not the ‘gating’ factor for new US investment, he said.

“It comes back to energy,” he told Fastmarkets, adding that for a smelter to be competitive in the US, energy prices must be around $30 per MWh.

“Data centers are willing to pay triple what an aluminium smelter would pay for energy. That puts pressure on reshoring aluminium capacity,” he said.

Until energy prices fall – or policy helps to secure long-term, low-cost renewable energy – major new US smelting investments by Alcoa are unlikely, he said.

“For us to make an investment in the US, we’d be looking at either an opportunity to create value through synergies, or a brownfield or a greenfield [location] that has an advantaged power position,” he said.

Oplinger also emphasized that the company is not rushing into major capital commitments amid the current market dynamics.

“We won’t make long-term decisions based on short-term dynamics in a market, and right now, we need to see how long tariffs will be around,” he added.

Capital deployment delayed

Tariffs are already weighing on Alcoa’s investment outlook abroad, with the volatility having an effect on the company’s ability to make long-term capital decisions, Oplinger said.

“We were moving down the path of making plans for expanding our Quebec assets over time. With the tariffs in place, Quebec becomes that much less competitive,” Oplinger added. “It just makes decision making that much harder and slows down investment around the world.”

The company’s sale of its 25.1% stake in the Ma’aden joint venture to the Saudi Arabian Mining Company, Ma’aden, also reflects shifting strategy. The deal was completed on July 2.

“There is no plan around growth currently in the Persian Gulf region,” Oplinger said, explaining that the joint venture’s value was not adequately reflected in Alcoa’s stock. By swapping the stake for equity in Ma’aden’s parent company, Alcoa hopes to crystallize that value on balance sheets.

For now, the priority is deleveraging.

“We believe that the best way to create value for our shareholders is by getting to an optimal capital structure,” Oplinger said. At the same time, the company will pursue incremental projects such as a creep expansion in Norway and cast house upgrades tailored to low-carbon customers in Europe, he added.

But Alcoa is keeping the door open for larger growth opportunities, including inorganic moves such as the $2.8 billion deal to consolidate control of the Alumina Ltd joint venture.

“It was a joint venture that confused our shareholders and that’s why we rolled it up,” Oplinger said. “So, we’ll consider those [kinds of] opportunities in the future as they become available.”

The rationale, he said, was to eliminate complexity and unlock value. “We will look for opportunities where we can create value by buying additional facilities,” he added, “but it will be based on a value-based decision that says that we can add value by bringing synergies or expertise to a facility.”

Future opportunities

Despite the trade turbulence, Oplinger expressed confidence in the strength and flexibility of Alcoa’s global portfolio. “We have flexibility that others don’t – where we ship alumina, where we ship bauxite, what customers we serve,” he said.

Alcoa has no intention of reintegrating further downstream. “We split Alcoa Inc to create Arconic and Alcoa Corporation for a reason,” Oplinger told Fastmarkets, adding that mining, refining and smelting all require distinct management and regulatory approaches.

“Our downstream business is really casting… and we’re investing there to meet specific customer needs,” he said.

One of those customer demands was for low-carbon aluminium. Oplinger pointed to the recently extended agreement with European cable-maker Prysmian [LINK] as an example of market appetite for green metal.

Meanwhile, Alcoa’s breakthrough technology venture, Elysis, is progressing toward commercialization.

In a partnership between Alcoa, Rio Tinto, Apple and the governments of Canada and Quebec, the technology will produce carbon-free aluminium using inert anodes instead of carbon anodes.

“The smaller cell we built has operated for long periods and produced high-quality P1020 metal,” Oplinger said, adding that a commercial-scale cell is on track to be operational in 2025.