Alcoa Stock

Alcoa Corporation (Alcoa) operates as a vertically integrated aluminum company consisting of bauxite mining, alumina refining, aluminum production (smelting and casting), and energy generation.

The company is active in all aspects of the upstream aluminum industry with bauxite mining, alumina refining, and aluminum smelting and casting. The company has direct and indirect ownership of 27 locations across nine countries on six continents.

Alcoa smelts and casts aluminum in various shapes and sizes for global customers, including developing and creating various alloy combinations for specific applications. Aluminum, as an element, is abundant in the earth’s crust, but a multi-step process is required to manufacture finished aluminum metal. Aluminum metal is produced by refining alumina oxide from bauxite into alumina, which is then smelted into aluminum and can be cast into many shapes and forms.

The company’s operations in 2023 comprised two reportable business segments: Alumina and Aluminum.

The Alumina segment primarily consists of a series of affiliated operating entities held in Alcoa World Alumina and Chemicals, a global, unincorporated joint venture between Alcoa and Alumina Limited.

The Aluminum segment consists of the company’s aluminum smelting and casting operations along with most of the company’s energy production assets.

Business Strategy

Alcoa's business strategy is designed to create shareholder value while aligning with the company’s purpose, vision, and values.

In the near term, the company has an acute focus on the strategic priority of reducing complexity and developing a portfolio of mining, refining, and smelting assets that is profitable, safe, stable, low cost, low carbon emitting, and supported by a strong balance sheet.

At the same time, Alcoa maintains two additional strategic priorities for creating value into the long term: advancing sustainably and driving returns.

To advance sustainably, the company seeks to increase value from a leading sustainability position, which includes the industry’s most comprehensive suite of products made with lower carbon emissions. The Sustana brand includes EcoDura aluminum (recycled content), EcoLum aluminum (low carbon), and EcoSource alumina (also low carbon).

The third strategic priority is drive returns. To do so, the company is developing targeted growth opportunities that leverage its competitive advantages to meet the evolving demands of stakeholders and customers and create lasting sources of value.

Joint Ventures

Alcoa World Alumina and Chemicals (AWAC)

AWAC is an unincorporated global joint venture between Alcoa and Alumina Limited, a company incorporated under the laws of the Commonwealth of Australia and listed on the Australian Securities Exchange. AWAC consists of a number of affiliated entities that own, operate, or have an interest in bauxite mines and alumina refineries, as well as an aluminum smelter, in seven countries. Alcoa owns 60% and Alumina Limited owns 40% of these entities, directly or indirectly. The scope of AWAC generally includes the mining of bauxite and other aluminous ores; the refining, production, and sale of smelter grade and non-metallurgical alumina; and the production of certain primary aluminum products.

Alcoa provides the operating management for AWAC, which is subject to direction provided by the Strategic Council of AWAC. The Strategic Council consists of five members, three of whom are appointed by Alcoa (of which one is the Chair) and two of whom are appointed by Alumina Limited (of which one is the Deputy Chair).

AWAC Operations

AWAC entities’ assets include the following interests:

100% of the bauxite mining, alumina refining, and aluminum smelting operations of Alcoa’s affiliate, Alcoa of Australia Limited (AofA);

100% of the Juruti bauxite deposit and mine in Brazil;

45% interest in Halco (Mining) Inc., a bauxite consortium that owns a 51% interest in Compagnie des Bauxites de Guinee (CBG), a bauxite mine in Guinea;

39.96% interest in the São Luís refinery in Brazil;

55% interest in the Portland, Australia smelter that AWAC manages on behalf of the joint venture partners;

25.1% interest in the mine and refinery in Ras Al Khair, Saudi Arabia;

100% of the refinery and alumina-based chemicals assets at San Ciprián, Spain;

100% of Alcoa Steamship Company LLC, a company that procures ocean freight and commercial shipping services for Alcoa in the ordinary course of business;

100% of the refinery assets at the closed facility in Point Comfort, Texas, United States; and

100% interest in various assets formerly used for mining and refining in the Republic of Suriname (Suriname).

Saudi Arabia Joint Venture

In December 2009, Alcoa entered into a joint venture with the Saudi Arabian Mining Company (Ma’aden), which was formed by the government of Saudi Arabia to develop its mineral resources and create a fully integrated aluminum complex in Saudi Arabia. The joint venture complex includes a bauxite mine with estimated capacity of 5 million dry metric tons per year; an alumina refinery with a capacity of 1.8 million metric tons per year (mtpy); and an aluminum smelter with a capacity of 804,000 mtpy.

The joint venture is consisted of two entities: the Ma’aden Bauxite and Alumina Company (MBAC) and the Ma’aden Aluminium Company (MAC). Ma’aden owns a 74.9% interest in the MBAC and MAC joint venture. Alcoa owns a 25.1% interest in MAC, which holds the smelter; AWAC holds a 25.1% interest in MBAC, which holds the mine and refinery. The refinery and smelter are located within the Ras Al Khair industrial zone on the east coast of Saudi Arabia.

ELYSIS

ELYSIS Limited Partnership is between wholly-owned subsidiaries of Alcoa (48.235%) and Rio Tinto Alcan Inc. (Rio Tinto) (48.235%), respectively, and Investissement Quebec (3.53%), a company wholly-owned by the Government of Quebec, Canada. The purpose of ELYSIS is to advance larger scale development and commercialization of its patent-protected technology that eliminates direct greenhouse gas emissions from the traditional aluminum smelting process and, in the production of aluminum, instead emits oxygen. Alcoa first developed the inert anode technology for the aluminum smelting process that served as the basis for the formation of ELYSIS in 2018. Development scale quantities of aluminum produced by ELYSIS have been sold for commercial purposes, including to RONAL Group for the wheels for the Audi eTron GT. ELYSIS has also supplied metal to Apple Inc., a non-equity investor in the technology, for use in some of its products, such as the 16-inch MacBook Pro and the iPhone SE.

Others

The company is party to several other joint ventures and consortia.

The Aluminerie de Becancour Inc. (ABI) smelter is a joint venture between Alcoa and Rio Tinto located in Becancour, Quebec. Alcoa owns 74.95% of the joint venture through its 50% equity investment in Pechiney Reynolds Quebec, Inc., which owns a 50.1% share of the smelter, and two wholly-owned Canadian subsidiaries, which own 49.9% of the smelter. Rio Tinto owns the remaining 25.05% interest in the joint venture through its 50% ownership in Pechiney Reynolds Quebec, Inc.

CBG is a joint venture between Boke Investment Company (51%) and the Government of Guinea (49%) for the operation of a bauxite mine in the Boke region of Guinea. Boke Investment Company is owned 100% by Halco (Mining) Inc.; AWA LLC holds a 45% interest in Halco. AWA LLC is part of the AWAC group of companies and is ultimately owned 60% by Alcoa and 40% by Alumina Limited.

On April 30, 2022, Alcoa completed the sale of its investment in Mineração Rio Do Norte (MRN). In addition, the company entered into several bauxite offtake agreements with South32 Minerals S.A. (South32). to provide bauxite supply for existing long-term supply contracts.

Alumar is an unincorporated joint venture for the operation of a refinery, smelter, and casthouse in Brazil. The refinery is owned by AWAB (39.96%), Rio Tinto (10%), Alcoa Alumínio (14.04%), and South32 (36%). AWAB is part of the AWAC group of companies and is ultimately owned 60% by Alcoa and 40% by Alumina Limited. With respect to Rio Tinto and South32, the named company or an affiliate thereof holds the interest. The smelter and casthouse are owned by Alcoa Alumínio (60%) and South32 (40%).

Strathcona calciner is a joint venture between affiliates of Alcoa and Rio Tinto. Calcined coke is used as a raw material in aluminum smelting. The calciner is owned by Alcoa (39%) and Rio Tinto (61%).

Hydropower

Machadinho Hydro Power Plant (HPP) is a consortium located on the Pelotas River in southern Brazil in which the company has a 27.3% ownership interest through Alcoa Alumínio. The remaining ownership interests are held by unrelated third parties.

Barra Grande HPP is a joint venture located on the Pelotas River in southern Brazil in which the company has a 42.2% ownership interest through Alcoa Alumínio. The remaining ownership interests are held by unrelated third parties.

Estreito HPP is a consortium between Alcoa Alumínio, through Estreito Energia S.A. (25.5%) and unrelated third parties located on the Tocantins River, northern Brazil.

Serra do Facão HPP is a joint venture between Alcoa Alumínio (35%) and unrelated third parties located on the Sao Marcos River, central Brazil.

Manicouagan Power Limited Partnership (Manicouagan) is a joint venture between affiliates of Alcoa and Hydro-Quebec. Manicouagan owns and operates the 335 megawatt McCormick hydroelectric project, which is located on the Manicouagan River in the province of Quebec, Canada. Alcoa owns 40% of the joint venture.

Alumina segment

This segment consists of the company’s worldwide refining system, including the mining of bauxite, which is then refined into alumina, a compound of aluminum and oxygen that is the raw material used by smelters to produce aluminum metal. Bauxite is the principal raw material used to produce alumina and contains various aluminum hydroxide minerals, the most important of which are gibbsite and boehmite. Bauxite is refined into alumina using the Bayer process. The company obtains bauxite from its own resources, including those belonging to AWAC, as well as through long-term and short-term contracts and mining leases. Tons of bauxite are reported on a zero-moisture basis in millions of dry metric tons (mdmt) unless otherwise stated.

Alcoa’s alumina sales are made to customers globally and are typically priced by reference to published spot market prices. The company produces smelter grade alumina and non-metallurgical grade alumina. The company’s largest customer for smelter grade alumina is its own aluminum smelters, which in 2023 accounted for approximately 32 percent of its total alumina shipments. A small portion of the alumina (non-metallurgical grade) is sold to third-party customers who process it into industrial chemical products. This segment also includes AWAC’s 25.1% share of MBAC.

In 2023, Alcoa-operated mines, mines operated by partnerships in which Alcoa, including AWAC, has equity interests, and bauxite offtake agreements supplied 83 percent of volume to Alcoa refineries and the remaining 17 percent was sold to third-party customers. Alcoa-operated mines produced 36.3 mdmt of bauxite and mines operated by partnerships produced 4.7 mdmt of bauxite on a proportional equity basis, for a total Company bauxite production of 41.0 mdmt.

On April 30, 2022, Alcoa completed the sale of its investment in MRN. The company entered into several bauxite offtake agreements with South32 to provide bauxite supply for existing long-term supply contracts.

Based on the terms of its bauxite supply contracts, the amount of bauxite AWAC purchases from its minority-owned joint ventures, MRN (until its sale in April 2022) and CBG, differ from its proportional equity in those mines. Therefore, in 2023, Alcoa had access to 45.2 mdmt of production from its portfolio of bauxite interests and bauxite offtake and supply agreements and sold 7.6 mdmt of bauxite to third parties; 37.6 mdmt of bauxite was delivered to Alcoa refineries.

The company primarily sells alumina through contracts containing two pricing components: (1) the API price basis and (2) a negotiated adjustment basis that takes into account various factors, including freight, quality, customer location, and market conditions, as well as through fixed price spot sales. In 2023, approximately 95 percent of the company’s smelter grade alumina shipments to third parties were sold on an adjusted API price or fixed price spot basis.

Beginning in January 2023, financial information for the activities of the bauxite mines and the alumina refineries was combined into the Alumina segment and the company began reporting its financial results in the following two segments: (i) Alumina and (ii) Aluminum.

As of December 31, 2023, Alcoa had approximately 1,452,000 mtpy of idle capacity relative to total Alcoa consolidated capacity of 13,843,000 mtpy. Idle capacity of 800,000 mtpy at the San Ciprián refinery is due to the partial curtailment of the refinery in 2022, 438,000 mtpy of idle capacity at the Kwinana refinery is due to the partial curtailment in 2023, and 214,000 mtpy of idle capacity at the Poços de Caldas facility is a result of the previous full curtailment of the Poços de Caldas smelter.

In October 2019, the company announced a five-year review of its production assets that includes a range of potential outcomes for these facilities to improve cost positioning, including curtailment, closure, or divestiture. The review includes 4 million metric tons of global refining capacity, of which 2,305,000 mtpy of capacity has been permanently closed since the announced review. In January 2024, the company announced an additional curtailment of 2,190,000 mpty of capacity through the full curtailment of the Kwinana refinery beginning in the second quarter of 2024. The refinery has been operating at approximately 80 percent of its nameplate capacity since January 2023, when the company reduced production by decreasing process flows and taking offline one of five digesters in response to a domestic natural gas shortage in Western Australia due to production challenges experienced by key gas suppliers. While the supply of natural gas improved in April 2023, the company kept the one digester offline due to the prolonged annual mine plan approvals process.

In 2022, production at the San Ciprián refinery was reduced to approximately 50 percent of the 1.6 million metric tons of annual capacity to mitigate the financial impact of high natural gas costs. In December 2023, the company initiated engagement with government stakeholders and workers’ representatives to discuss ongoing financial difficulties at the San Ciprián operations, identify all potential forms of relief, and work collaboratively on a long-term solution.

Aluminum segment

This segment consists of the company’s worldwide smelting and casthouse system; and a portfolio of energy assets in Brazil, Canada, and the United States. The smelting operations produce molten primary aluminum, which is then formed by the casting operations into either common alloy ingot (e.g., t-bar, sow, and standard ingot) or into value add ingot products (e.g., foundry, billet, rod, and slab). The energy assets supply power to external customers in Brazil and the United States, as well as internal customers in the Aluminum segment (Baie-Comeau (Canada) smelter and Warrick (Indiana) smelter) and, to a lesser extent, the Alumina segment (Brazilian refineries). This segment also includes Alcoa’s 25.1% share of MAC, the smelting joint venture company in Saudi Arabia.

Smelting and Casting Operations

The company’s five-year review of the company’s production assets first announced in October 2019 includes 1.5 million metric tons of smelting capacity. The portfolio review includes evaluations to improve cost positioning, including curtailments, closures, or divestitures. As of December 31, 2023, the company had approximately 465,000 mtpy of idle smelting capacity relative to total Alcoa consolidated capacity of 2,645,000 mtpy. The idle capacity includes 228,000 mtpy of idle capacity at the San Ciprián smelter, 84,000 mtpy of idle capacity at the Alumar smelter, 80,000 mtpy of idle capacity at the Warrick smelter, 42,000 mtpy of idle capacity at the Portland smelter, and 31,000 mtpy of idle capacity at the Lista smelter.

During the fourth quarter of 2023, Alcoa began the restart of 54,000 mtpy of capacity at its Warrick Operations site (Indiana) that was curtailed in July 2022 due to operational challenges related to labor shortages in the region. The company also approved the permanent closure of 54,000 mtpy of previously curtailed capacity (which had not operated since 2016) to prepare the site for future capital investments for improved casting capabilities.

During 2023, the company continued the controlled pace for the restart of the Alumar smelter in São Luís, Brazil. The site was operating at approximately 69 percent of the site’s total annual capacity of 268,000 mtpy (Alcoa share) as of December 31, 2023.

In the fourth quarter of 2023, Alcoa began the restart of 16,000 mtpy of previously curtailed capacity at the Portland smelter. The smelter had previously been operating at approximately 75 percent of the site’s total annual capacity of 197,000 mtpy (Alcoa share) since March 2023 due to instability and challenges related to the production of rodded anodes. The site was operating at approximately 79 percent of its capacity as of December 31, 2023.

The company announced the closure of the previously curtailed Intalco aluminum smelter (279,000 mtpy) after evaluating various options for the asset in March 2023. The facility has been fully curtailed since 2020.

The San Ciprián smelter was curtailed in January 2022, as a result of an agreement with the workers’ representatives in December 2021. In February 2023, under the terms of an amended viability agreement, Alcoa agreed to a phased restart of the smelter beginning in January 2024, to operate an initial complement of approximately 6 percent of total pots, to restart all pots by October 1, 2025 and to maintain 75 percent of the annual capacity of 228 kmt from October 1, 2025 until the end of 2026. In December 2023, the company initiated engagement with government stakeholders and workers’ representatives to discuss ongoing financial difficulties at the San Ciprián operations, identify all potential forms of relief, and work collaboratively on a long-term solution. In January 2024, the company began the restart process for the initial complement of pots in accordance with terms of the viability agreement while the discussions on future solutions progress.

Energy Facilities and Sources

In 2023, energy comprised approximately 25% of the company’s total alumina refining production costs and electric power comprised approximately 23% of the company’s primary aluminum production costs.

In 2023, Alcoa generated approximately 9% of the power used at its smelters worldwide and generally purchased the remainder under long-term arrangements.

Each facility listed above generates hydroelectric power except the Warrick facility, which generates substantially all of the power used by the Warrick smelting facility from the co-located Warrick power plant using coal reserves from the Alcoa-owned Liberty Mine and coal purchased from third parties at nearby coal reserves. Liberty Mine has a production capacity of approximately 0.8 million tons per year. During 2023, approximately 33% of the generation from the Warrick power plant was sold into the market under its operating permits. Alcoa Power Generating Inc., a subsidiary of the company, also owns certain Federal Energy Regulatory Commission (FERC)-regulated transmission assets in Indiana, Tennessee, New York, and Washington.

Below is an overview of the company’s external energy for the company’s smelters and refineries.

North America

Electricity

Quebec, Canada

Alcoa’s smelter located in Baie-Comeau, Quebec, purchases approximately 25 percent of its electricity needs from Manicouagan Power Limited Partnership. Otherwise, all electricity consumed by the three smelters in Quebec is purchased under contracts with Hydro-Quebec that expire on December 31, 2029.

Massena, New York (Massena West)

The Massena West smelter in New York receives power from the New York Power Authority (NYPA) pursuant to a contract between Alcoa and NYPA that expires in March 2026.

Natural Gas

Alcoa generally procures natural gas on a competitive bid basis from a variety of sources, including natural gas producers and independent gas marketers.

Australia

Electricity

Portland

This smelter purchases power from the National Electricity Market (NEM) variable spot market in the state of Victoria. During 2021, the smelter entered into fixed-for-floating swap contracts with AGL Hydro Partnership, Origin Energy Electricity Limited, and Alinta Energy CEA Trading Pty Ltd, for a combined 515 MW. In addition, in November 2021 the Portland Aluminium joint venture announced the restart of 35,000 mtpy of idle capacity (19,000 mtpy Alcoa share), and the smelter entered into an additional fixed-for-floating swap contract with AGL Hydro Partnership for 72 MW. These swap contracts for a combined 587 MW expire on June 30, 2026.

In August 2023, the smelter entered into a nine-year fixed-for-floating swap contract with AGL Hydro Partnership for 300 MW effective July 1, 2026, when current contracts end.

Each of these swap contracts manage exposure to the variable energy rates from the NEM spot market.

Natural Gas

Western Australia

AofA uses gas to co-generate steam and electricity for its alumina refining processes at the Kwinana, Pinjarra and Wagerup refineries, and to fuel the calcination furnaces at each site. In 2015, AofA secured a significant portion of gas supplies to 2032. In 2020 and 2022, AofA contracted for additional gas supplies starting in 2024. On a combined basis, AofA’s gas supply arrangements are expected to cover approximately 80 percent of the refineries’ gas requirements through 2027, with decreasing percentages thereafter through 2032.

On January 8, 2024, the company announced the full curtailment of the Kwinana refinery beginning in the second quarter of 2024. The company is evaluating alternatives to resell, swap or redeploy the gas secured for the Kwinana refinery when fully curtailed.

Europe

Electricity

San Ciprián, Spain

The San Ciprián smelter was fully curtailed in January 2022 pursuant to the agreement reached with the workers’ representatives on December 29, 2021. The smelter purchased its reduced electricity requirements under a bilateral spot power contract that expired on June 30, 2022.

In February 2023, the company reached an updated viability agreement with the workers’ representatives to commence the restart process in phases beginning in January 2024.

In the anticipation of the phased restart beginning in 2024, Alcoa entered into two long-term power purchase agreements (PPAs) with renewable energy providers in 2022 for up to 75 percent of the smelter’s future power needs. In 2023, relevant authorities denied some permits related to the development of windfarms included in the PPAs and the PPAs are now expected to supply up to 50 percent of the smelter’s future power needs at its full capacity. The supply of energy will continue to depend on the permitting and development of the remaining windfarms included in the PPAs. As the company engages stakeholders for a long-term solution for San Ciprián operations, it also continues discussions with other generators to secure long-term power.

Lista and Mosjøen, Norway

Beginning in 2017, Alcoa entered into several long-term power purchase agreements, which secured approximately 50 percent of the necessary power for the Norwegian smelters for the period of 2020 to 2035.

In 2023, approximately 25 percent of the necessary power at the Mosjøen smelter was purchased at spot rates.

Iceland

Landsvirkjun, the Icelandic national power company, supplies competitively priced electricity from a hydroelectric facility to Alcoa’s Fjarðaál smelter under a 40-year power contract, which will expire in 2047 with a price renegotiation effective from 2028.

Natural Gas

Spain

The San Ciprián refinery has been operating at 50 percent of its capacity since the third quarter of 2022.

In January 2022, Naturgy terminated its contract supplying 50 percent of the refinery’s natural gas demand until June 2022 and 25 percent from July to December 2022. Subsequent to February 2022, the company has access to adequate supply at spot gas rates.

South America

Electricity

Alumar

The Alumar smelter was operating at 69 percent of the site’s total annual capacity of 268 kmt (Alcoa share) as of December 31, 2023, following the restart that was announced in September 2021.

Alcoa entered into several short-term power purchase agreements which secured substantially all of the necessary power for its share of the Alumar smelter for the restart period in 2022 through the end of 2023.

Alcoa also entered into multiple long-term power purchase agreements which collectively secured all of the necessary power for its share of the Alumar smelter for the period of 2024 through 2038. All short- and long-term power secured is from renewable sources.

Competition

Alumina

The company’s main competitors in the third-party alumina market are Aluminum Corporation of China, South32, Hangzhou Jinjiang Group, Rio Tinto, and Norsk Hydro ASA. The company’s principal competitor in the third-party bauxite market is Rio Tinto.

Aluminum

The company competes with commodity traders, such as Glencore, Trafigura, J. Aron and Gerald Group; and aluminum producers, such as Emirates Global Aluminum, Norsk Hydro ASA, Rio Tinto, Century Aluminum and Vedanta Aluminum Ltd.

Patents, Trade Secrets and Trademarks

As of December 31, 2023, Alcoa’s worldwide patent portfolio consisted of approximately 420 granted patents and approximately 170 pending patent applications. The company also has a number of domestic and international registered trademarks that have significant recognition within the markets that are served, including the name ‘Alcoa’ and the Alcoa symbol.

Government Regulations and Environmental Matters

Alcoa is committed to the Global Industry Standard on Tailings Management (GISTM), an integrated approach to the management and operations of the company’s tailings storage facilities to enhance the safety of these facilities. In August 2023, Alcoa’s impoundments with very high or extreme consequence classification were audited by an independent third party and assessed as in conformance with GISTM as required by the International Council on Mining and Metals Conformance Protocol.

The company maintains remediation and reclamation plans for various sites, and the company manages environmental assessments and cleanups at approximately 60 locations, which include owned or operated facilities and adjoining properties, previously owned or operated facilities and adjoining properties, and waste sites, such as the U.S. Superfund (Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)) sites.

History

Alcoa Corporation was founded in 1886. The company was incorporated in 2016.