Alcoa sees global aluminum demand up 7%, market balance in 2021: CEO

Alcoa projects global aluminum consumption in 2021 to rise 7% year on year and move the market closer to balance as the economy continues to recover from the negative impacts of the coronavirus pandemic, company CEO Roy Harvey said Jan. 20.

"The speed of recovery from COVID-19 and the impact of additional stimulus measures will be key drivers in achieving this growth rate," Harvey said during a quarterly earnings call with investors.

"At the same time, 2021 smelting supply growth led by China is projected to be lower than demand growth. As a result, the global primary aluminum market should be closer to balance this year," he added.

Global demand is estimated to reach about 67 million mt in 2021, according to data presented by Alcoa to analysts. Harvey said the anticipated 7% growth in consumption represented the highest year-over-year increase since 2014.

Aluminum consumption in China and ex-China is projected to climb 5% and 10%, respectively, Alcoa added.

If the estimated 10% uptick for ex-China demand is realized in 2021, Harvey said "this would be only the second time we have seen double-digit growth in the past of 20 years."

Harvey said the strong market sentiment, especially in China, would be boosted by demand in all key end-markets including infrastructure, ultra-high voltage electrical systems, packaging, machinery, passenger vehicles and new energy vehicles.

Alcoa reported a loss of $4 million on $2.39 billion in revenue in the fourth quarter, compared with a $303 million loss on revenue of $2.44 billion in the same period a year ago.

For the full year, the aluminum producer posted a net loss of $170 million on revenue of $9.29 billion in 2020, compared with a $1.13 billion loss on $10.43 billion revenue in 2019.

Markets rebound, value-added aluminum sales up in Q4

Harvey said the positive 2021 outlook was based on significant market recovery and returning demand for value-added aluminum products in Q4.

"A broad recovery in the market from COVID-19 impacts, particularly in China, supported a resurgence in the fourth quarter in aluminum demand, with the price rally reinforced by a weakening US dollar as prices ended 2020 higher than a year earlier," Harvey said.

"In December of 2020, less than 5% of global smelting and refining capacity was cash negative," he added.

The market's resurgence was driven by a re-establishment of normalized operating conditions in regions where the effects of the pandemic had decreased, the ability of global manufacturers to mitigate the risks from the pandemic and government stimulus programs, Harvey added.

Alcoa also reported a 15% increase in revenue from value-added aluminum product sales in Q4, compared with the previous quarter, due to improved demand from the automotive sector.

"In 2021, with demand continuing to improve and considering the impact from portfolio changes, we expect our value-added product volumes to represent almost half of our third-party shipments," Harvey said. "While uncertainty remains, we see clear signs that give us confidence that demand in our markets is recovering."

Alcoa did not disclose exact sales or capacity figures for specific products.

Year-on-year, Alcoa's overall primary aluminum production rose 4.5% to 559,000 mt in Q4 and 9.5% to 2.3 million mt in full-year 2020.

Future remains uncertain for Spain, Australia smelters

The fate of Alcoa's San Ciprian smelter in Spain and Portland smelter in Australia remain unclear as the company progresses on its ongoing asset review, Harvey said.

Alcoa announced plans to close San Ciprian in October 2020. However, the curtailment plans stalled in December after a court ruled in favor of the plant workers' union in a decision regarding the company's labor dismissal process.

The court ruled Dec. 17 that the collective dismissal process was "null and void."

"We will continue to seek a resolution for the ongoing situation at San Ciprian," Harvey said. "We're continuing to examine alternatives, including a potential sale of the smelter to a state-owned company."

At the Portland smelter, Alcoa continues to work towards a new power deal with the regional government.

In working on a contract, Harvey said Alcoa was looking to obtain an internationally competitive power price and address continued risks of grid instability.

"We've had significant issues where the power has simply not been delivered to the plant," Harvey said. "As you can imagine, you only can spend a couple hours before the plant gets into serious trouble."

Harvey said Alcoa has been "encouraged" by positive engagement with the relevant stakeholders in Australia.