Alcoa Faces $15 Million Hit from Lower Bauxite Grades, Confirms Kwinana Closure
Alcoa, headquartered in Pittsburgh, has reported that lower grades at its South West bauxite mines in Western Australia will cost the company nearly $15 million next quarter. This impact was detailed in the company's quarterly report, where it revised its earnings projections.
The unfavorable Australian bauxite grades are expected to result in a $US10 million ($14.8 million) impact, contributing to ongoing challenges for Alcoa's Western Australian operations. This follows a recurring issue of lower bauxite grades due to mining constraints at the Willowdale and Huntly mines in the Darling Range. These mines produced 30.9 million tonnes of Alcoa's global 41 million tonnes of bauxite in 2023.
Despite these setbacks, Alcoa's adjusted Q2 EBITDA stood at $US419 million. The company anticipates that higher prices for its aluminium products produced abroad will offset some of the negative impacts of the lower bauxite grades. However, this will be weighed down by a $US60 million increase in costs in its alumina segment.
The company also confirmed the completion of the curtailment of its Kwinana alumina refinery in June, marking the end of 60 years of continuous production. The workforce at Kwinana has been significantly reduced, with predictions indicating that only 250 people would remain employed at the facility by the current quarter, down from 1,200 staff and contractors in January. By 2025, the number of staff is expected to further decrease to 50, with the facility being maintained under care and maintenance.
Alcoa's other alumina production in Australia continues at its Wagerup and Pinjarra refineries. However, global alumina production and shipments fell by five percent each during the period, partly due to the Kwinana curtailment.
The company reported a $US30 million profit after adjustments for the three months ending June, a recovery from a $US145 million loss in the previous quarter. Alcoa is also advancing its acquisition of its Australian joint venture partner Alumina Limited, with the transaction expected to be completed next month. This move is part of Alcoa's strategy to reduce costs and improve profitability, targeting a $645 million improvement against 2023 figures.
