Alcoa reports Q4 2023 earnings with focus on cost reduction, production curtailment

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Image credit: Alcoa

In the wake of Alcoa Corp’s fourth-quarter 2023 earnings release, ASX-listed Alumina Limited has highlighted key developments in the AWAC joint venture and underscores the company’s commitment to navigating the challenging market conditions.

AWAC, the joint venture between Alcoa and Alumina Limited, witnessed a notable improvement in its financial performance during the fourth quarter of 2023.

A significant factor contributing to this success was the reduction in production costs, primarily attributed to the impact of lower caustic prices, Alumina said in a media release.

The system cash cost dropped from $303 per ton in the third quarter of 2023 to $291 per ton in the fourth quarter, marking a continued trend of improvement from the peak of $329 per ton in the second quarter of the same year.

However, amid the positive financial report, Alcoa announced on 9 January 2024, its plans to fully curtail production at the Kwinana alumina refinery in Western Australia, effective in the second quarter of 2024.

This strategic move follows the December 2023 announcement regarding Alcoa’s intention to take action at the San Ciprian refinery to further reduce losses and work towards a long-term solution.

Excluding the higher-cost San Ciprian and Kwinana refineries, the AWAC system’s cash cost of production was reported at $263 per ton in the fourth quarter of 2023, down from $274 per ton in the previous quarter.

The metallurgical alumina market is experiencing tight supply, exacerbated by recent production cuts in China.

This tightness is anticipated to persist following the full curtailment of the Kwinana refinery in the second quarter of 2024.

In response to the challenging market dynamics, the API (Alumina Price Index) has surged by more than $40 per ton since mid-December 2023, reaching $370 per ton as of 17 January 2024.

Alumina Limited maintains a robust financial position, with significant debt capacity within its total debt facility limit of $500 million. As of 31 December 2023, the net debt stood at $294.3 million.

Mike Ferraro, CEO of Alumina Limited, expressed satisfaction with the ongoing reduction in AWAC’s cash costs of production in the fourth quarter of 2023.

He emphasized the significance of the recently announced actions at the Kwinana and San Ciprian refineries, aligning with Alcoa’s commitment to portfolio improvement.

Ferraro stated, “As a result, AWAC is well placed to benefit from the prevailing tight alumina market and the positive long-term outlook for aluminium.”