Alcoa Corporation Price & Performance (AA)

Any reference in our discussion today to EBITDA means adjusted EBITDA. Finally, as previously announced, the earnings press release and slide presentation are available on our website. Now, I'd like to turn over the call to Bill. Thanks, Louis, and welcome to our first quarter twenty twenty five earnings conference call. Alcoa had strong first quarter financial and production results. We maintained a fast pace of execution on our priorities despite economic uncertainty while progressing operational excellence through safety, stability and continuous improvement. Underlying the strength of our performance were positive market conditions. Let's start with safety. First and foremost, a strong safety culture supports operational excellence. Had no fatal or serious injuries in the first quarter, we continue to improve our safety performance. Operational stability is shown by solid production where the majority of our operations improved sequentially on a tons per day basis. We also continued to improve stability at the Alumar smelter in Brazil currently operating at approximately 91% capacity. We completed a $1,000,000,000 debt offering in Australia using most of the proceeds to repay existing debt. The new debt has extended the maturities at a lower after tax interest expense than our previously outstanding debt. Lastly, we formed a joint venture with Ignis EQT our San Ciprian operations and are now resuming production at the smelter in accordance with the viability agreement.

Now I'll turn it over to Molly to take us through the strong financial results. Thank you, Bill. Revenue was down 3% sequentially to $3,400,000,000 In the Alumina segment, third party revenue decreased 8% on lower average realized third party price lower shipments due to timing and decreased trading. In the Aluminum segment, third party revenue was flat due to an increase in the average realized third party price offset by lower shipments in the first quarter after strong sales in the fourth quarter of twenty twenty four. First quarter net income attributable to Alcoa was $548,000,000 versus the prior quarter of $2.00 $2,000,000 with earnings per common share more than doubling to $2.7 per share. The sequential improvement reflects increased aluminum prices and lower intersegment profit elimination, partially offset by increased alumina costs, and tariffs on our Canadian aluminum imported into The United States for U. S. Customers. On an adjusted basis, net income attributable to Alcoa was $568,000,000 or $2.15 per share. Adjusted EBITDA increased $178,000,000 to $855,000,000 Let's look at the key drivers of EBITDA. First quarter adjusted EBITDA reflects higher aluminum prices and lower intersegment profit elimination which more than offset lower alumina prices. Lower volume, increases in raw material and energy prices, and higher production costs were more than offset by improvements in price mix and other costs.

Lower volume in the first quarter was expected after a strong fourth quarter shipping schedule, mainly alumina from our Australian refinery. Other costs primarily relate to inter segment eliminations. The Alumina segment adjusted EBITDA decreased $52,000,000 primarily due to lower alumina prices, lower volume and unfavorable currency impacts only partially offset by favorable production costs and other costs. The Aluminum segment adjusted EBITDA decreased $60,000,000 with higher metal prices and favorable currency more than offset by higher alumina costs and higher production, energy, raw material and other costs.

Included in other costs are approximately $20,000,000 for U. S. Section two thirty two tariffs of 25% on aluminum imports from Canada which became effective on March 12. Outside the segments, other corporate costs decreased and the intersegment elimination expense decreased as expected, with significantly lower average alumina price requiring less inventory profit elimination. Moving on to cash flow activities for the first quarter. We ended the first quarter with cash of $1,200,000,000 Strong EBITDA led to positive cash from operations in the first quarter, despite high consumption of cash for working capital build, which is typical in our first quarter period. Working capital increased as inventories in both segments rose. In alumina, on higher raw material price, and volume and in aluminum on timing of raw material and aluminum shipments. Accounts payable decreased following elevated alumina trading payables in the fourth quarter.

In the first quarter, we progressed our objective to reposition debt and delever with the issuance of $1,000,000,000 of debt in Australia the tender of $890,000,000 related to our outstanding 2027 and 2028 notes. It is our intention to continue to delever with an initial focus on the remainder of the 2027 notes. Moving on to other key financial metrics. The year to date return on equity was positive at 39.1%. Days working capital increased thirteen days sequentially to forty seven days same level year over year, but elevated from our year end 2024 level. Our first quarter dividend added $26,000,000 to stockholder capital returns. We had positive free cash flow plus net non controlling interest contributions for the quarter, which includes the €25,000,000 contribution from Ignis EQT related to the San Ciprian joint venture formation. Proceeds from the debt issuance in Australia less debt tendered added $95,000,000 to the ending cash balance of $1,200,000,000 As we turn to the next slide, we would like to share an update on our capital allocation target. Our overall capital allocation framework remains It starts with maintaining a strong balance sheet throughout the cycle, and sufficiently funding our operations to sustain and improve them.

The optimal capital structure for our company is reached when investment grade leverage metrics are achieved reducing our WACC and creating value for our stockholders through a higher company valuation, lower cost of financing and improved project viability. We want to maintain investment grade leverage metrics throughout all business cycles, not only at the mid or top part of the cycle. Based on this, we first defined a target for adjusted debt which includes pension and OPEB liabilities. This target is 2,100,000,000.0 to $2,500,000,000 Then considering our historical use rate of cash, we target a cash balance between 1,000,000 and $1,500,000 Netting the cash with the adjusted debt results in our targeted range of adjusted net debt of $1,000,000,000 to $1,500,000,000 We believe this range fits our profile and anticipated use of leverage as a company. I want to clarify that we are not committing to receiving and or maintaining investment grade credit ratings. The credit ratings are assessed by the rating agencies. We want to maintain the flexibility to raise additional debt for strategic opportunities at any point in the cycle. Adjusted net debt was $2,100,000,000 at the end of the first quarter. As we get closer to the 1,000,000,000 to $1,500,000,000 target, we will look at all of our capital allocation priorities including cash returns to stockholders, in parallel to paying down debt.

Turning to the outlook. We have one adjustment to our full year outlook. We are updating depreciation expense from $640,000,000 to $620,000,000 due primarily to favorable currency impacts.

For the second quarter of twenty twenty five, in the Alumina segment, we expect to maintain the strong level of performance delivered in the first quarter. In the Aluminum segment, we expect performance to be unfavorable by approximately $105,000,000 due to U. S. Section two thirty two tariff costs on imports of our Canadian aluminum increasing approximately $90,000,000 sequentially as well as operating costs associated with the restart of the San Ciprian smelter of approximately $15,000,000 While the lower average price of alumina will decrease overall Alcoa adjusted EBITDA, alumina cost in the Aluminum segment is expected to be favorable by $165,000,000 For inter segment eliminations, with the current market volatility, we recommend that you use the low end of the sensitivity range in your model. Below EBITDA, within other expenses, equity investment losses are expected to increase by $10,000,000 in the second quarter. The first quarter included favorable impacts of $20,000,000 due to foreign currency gains, which may not recur. Based on last week's pricing, we expect second quarter operational tax to be a benefit of 50,000,000 to $60,000,000 which includes timing and catch up adjustments related to lower alumina prices. In the appendix to the earnings material, will see that our Midwest paid and Midwest unpaid premium sensitivities have been updated to reflect the expected trade flows as a result of tariff impact.

We also revised our regional premium distribution for your reference. Updates to the Midwest Premium do not include the cost component of the tariff. There is a new column on the sensitivity slide for the tariff cost impact which will appear in the other bar of our EBITDA bridge. Since the second quarter will be the first full quarter of tariffs, should consider a quarterly tariff cost of approximately $105,000,000 as a baseline calculated based on an LME of $2,400 and the Midwest premium of $0.39 per pound. We will update our sensitivities as needed if our trade flows adjust to the tariff structure. Now I'll turn it back to Bill.

Thanks, Molly. Let me take the opportunity to speak to the current status of U. Tariffs applicable to the aluminum industry from Alcoa's perspective. While The U. S. Section two thirty two tariff structure has been in place for some time, in March the tariff increased from 10% to 25% and the exemption for Canadian metal imported into The U. S. Was removed. This is the most material impact to Alcoa. As approximately 70% of our aluminum produced in Canada is destined for U. S. Is now subject to 25% tariff cost which totals an estimated 400,000,000 to $425,000,000 annually. Of course, there is a higher Midwest premium, which offsets some of this cost and certainly benefits our U. S. Smelters but currently the net annual result is approximately $100,000,000 negative for our business. Next are the IEPA tariffs on imports from Canada, Mexico and China. Since our aluminum products and the majority of our input materials from Canada and qualify under the USMCA provisions Alcoa does not have a significant impact from this tariff at this time. The reciprocal tariffs specifically exclude Canada and Mexico as well as aluminum products already subject to Section two thirty two tariffs. So no impact on Alcoa's aluminum sales.

While alumina and other raw materials are excluded from the reciprocal tariffs, there is a portion of our input materials provided by Chinese suppliers that is now subject to the high reciprocal tariff.

Expect these tariffs will increase our input costs by $10,000,000 to $15,000,000 annually as there are no suitable replacement suppliers. In 2024, The U. S. Imported approximately 4,200,000 metric tons of primary aluminum with imports of Canadian aluminum representing approximately 70% or 2,900,000 metric tons. Four operating smelters in The U. S. Produced 700,000 metric tons of aluminum each year, If all idle smelting capacity in The U. S. Would restart, which is approximately 600,000 metric tons, U. S. Would still be short by 3,600,000 metric tons. It takes many years to build a new smelter and at least five to six smelters would be required to address The U. S. Demand for primary aluminum. These new smelters would require additional energy production equivalent to almost seven new nuclear reactors or more than 10 Hoover Dams. Until additional smelting capacity is built in The U. S, the most efficient aluminum supply chain is Canadian aluminum flowing into The U. S. That being said, our global smelting portfolio and commercial experience give us options to shift metal supply as needed if trade policies and economics warrant. We've operated for more than one hundred and thirty five years in the aluminum industry.

Building on our experience, we will continue our engagement efforts with the U. S. Government and policymakers to advocate for the best outcome possible. Now let's discuss our markets.

In alumina, after reaching an all time high in the fourth quarter of twenty twenty four, alumina prices declined in the first quarter of twenty twenty five. This was due to relatively higher liquidity mainly driven by the Chinese refinery ramp ups and normalized production outside China following several disruptions last year. As well as more recent alumina price declines on soft sentiment given global market uncertainty. Though the market has resolved most of the issues leading to its tightness in 2024, there's still uncertainty about the timing of the planned refinery ramp ups in Indonesia, and India this year. With bauxite prices remaining relatively high and the current lower alumina price, we estimate that over 80% of Chinese refineries are unprofitable. Additionally, a recent announcement by the Chinese government stated that there would be higher scrutiny on new alumina projects regarding air pollution control bauxite sourcing and red mud processing which could bring additional constraints on growth in Chinese alumina production may accelerate curtailment.

This is a dynamic market in Alcoa's global network of refineries provides security and supply of alumina both to Alcoa smelters and our major customers which are primarily in The Middle East.

Final point to highlight here is the opportunity we had in the first quarter to capitalize on the tightness in the bauxite market. With the high prices in the first quarter, we participated in the spot market to capture benefits for some volumes from our joint venture in Guinea. Let's move on to aluminum. The LME aluminum price was generally resilient in the first quarter even with the decreasing alumina price. With tariff announcements earlier this month, the LME responded by turning lower reflecting the uncertainty of the impact of tariffs the global economy and aluminum market. The Midwest premium increased with the introduction of tariffs, it has not reached the $880 to $990 per ton level which analysts predict supports shipments from any region to The U. S. The logistics still favor shipments from Canada to The U. S. Compared to other potential potential major suppliers. In our view, the Midwest premium has not fully responded due to the uncertain market as well as inventory build in The U. S. Ahead of the tariffs.

The depletion of these inventories should trigger some upward response.

Despite the uncertainty caused by The U. S. Tariff, there were some supportive signs on the demand side in the first quarter. Namely the Chinese stimulus and European fiscal loosening. Aluminum supply growth in the first quarter was very limited as smelter ramp ups were offset by the effect of closures that took place at the end of last year. North America, our aluminum value add product shipment volumes increased both sequentially and year over year with healthy demand for slab, billet and rod. However, it is difficult to say whether our customers were anticipating tariffs and therefore buying in advance. In Europe, were slightly lower VAP volumes in the first quarter compared to the fourth quarter but up year over year with strong demand for rod and slab and billet demand finally improving. For both regions, we saw the negative impact of tariffs in our foundry order book which is closely tied with the automotive market and faces the largest amount of uncertainty from the tariff impact.

Turning to Spain, we recently announced the formation of the joint with Ignis EQT, support the continued operation of the San Ciprian Complex.

The idled smelting capacity is now being restarted to meet our obligation of the viability agreement which was signed with our workforce when we curtailed the smelter in 2021 due to exorbitant energy prices. We are now focused on safely restarting the idle capacity. We will focus on repeating the strong operational results delivered in the first quarter. However, we are now adding the challenge of navigating uncertainty in our markets. It's a good time to consider the actions we've taken both recently and in the past to be well positioned to address adversity and capture opportunities. As a pure play aluminum company, vertically integrated from mine to metal with a global footprint and cost effective portfolio of assets assets. Alcoa has the ability to maneuver and respond to challenging and changing markets and policies. Security of supply through long term contracts is valued by our customers. We also have the most comprehensive low carbon products portfolio the aluminum industry to meet customer needs. Company has a significant cash balance and a strong capital structure with no near term debt maturities or other obligations requiring significant cash outlays beyond normal operations.

Have taken strategic actions that strengthen the company over time including the recent acquisition of Alumina Limited and the announcement of the sale of the Maarten joint ventures. Which is expected to close in the second quarter. We have a track record of monetizing non core assets including transformation sites which drive value for our stockholders. We also executed initiatives to be more cost effective as demonstrated by our over delivering on our $645,000,000 profitability program last year. These competitive advantages and actions support Alcoa's resilience. In summary, as we close out the presentation, Alcoa had a strong first quarter with improved safety and stable production. As a company, we made good progress on strategic actions. Looking ahead, we plan to maintain a fast pace of on our twenty twenty five key areas of focus and strategic initiatives improve the competitiveness of our operations and navigate market challenges to deliver value to our stockholders. Operator, let's start the question and answer portion of the session.

We will now begin the question and answer session. Our first question today is from Timna Tanners with Wolfe Research. Please go ahead.

Good evening. Hope you're all well. Wanted to ask a little bit more about the tariff math, if we could. I know that we heard from Molly 105,000,000 quarterly hit and then I heard another $100,000,000 from Bill. I just want to make I understood the distinction there. And I know that in the past, Molly had talked about tens of millions of impact. I think that was assuming a higher Midwest premium, but just was hoping for a bit more clarification please.

Hi, Timna. So the first 100 that we talked about, the negative 100 to our overall business, That is when you consider we are getting a higher Midwest premium on our U. S. [indiscernible] That brings a value of about 95,000,000 We'll also get a higher value within our Canadian asset sales our Canadian metal sales into The U. S. At $222,000,000 but going against that is the $400,000,000 that Bill spoke of the cost of the Canadian tariff. So that net to the $100,000,000 and that's for the year. So that is a net number the revenue considered against the tariff cost. When I spoke of the 105 that is a quarterly figure. That $105,000,000 is calculated based on an LME of $2,400 and Midwest premium of $0.39 and those are the same assumptions that are in the in first $100,000,000 for the company as a whole. When we spoke to Timna about the impact earlier, we were using different Midwest premium assumptions. We had expected that the Midwest premium would respond more quickly It is not. It is still down from what we would hope. We see that because of the negative sentiment in the market. As well as the fact that some tons did get stockpiled in inventory in The U. S. Ahead of the tariff and until that stockpile we don't have the impetus for price pressure up.

Understood. That's helpful. And then my follow-up on tariffs again would be any updated thoughts on the stickiness of these tariffs and if sticky do you think about restarting Warrick and what timeframe? Thanks a lot.

Timna, thanks for the question. Hard to make a restart decision based on a tariff that can change And I really can't comment on the six because we've seen the volatility of discussions around the tariffs over the last sixty days. So, we just don't know whether they will stick And we wouldn't necessarily make a decision to restart simply based on tariffs. Just because they can change.

Understood.

Thanks again.

The next question is from Bill Peterson with JPMorgan. Please go ahead.

Yes. Hi. Good afternoon and thanks for taking the questions. Maybe following up on the tariffs a bit. So you talk about engaging with governments, policymakers, U. S. And abroad. But can you provide, I guess, additional color on the level on engagement, who amid Trump and maybe Canadian administrations are dealing with? And I guess, are you going at it alone as Alcoa or partnership with other aluminum companies or maybe potentially customers of your products? I'm asking the second part in the context of some competitors either with larger portion of domestic production, or even like Middle Eastern competitors that are evidently announcing intentions to build U. S. Capacity. I'm basically wondering are there some in the administration that are sympathetic to your arguments that The U. S. Really isn't going to be able to close the gap anytime soon?

So it's a wide ranging question. I'll give you wide ranging answer. We are engaging with both the U. S. Government and the Canadian government where we're doing that as Alcoa. We're also doing that through the U. S. Aluminum Association. We have met either through ourselves or through the association with a number of President Trump's direct reports. And the message is fairly simple. The message is that The U. S. Imports a lot of its primary aluminum and that in order to support the downstream processing jobs, we need to have economic upstream aluminum production that can come in through preferably through Canada, but through other countries.

We've met with the Canadian government both the outgoing Prime Minister, Mr. Trudeau, also the current Prime Minister Mr. Carney and have had very good discussions there. So a lot of engagement both through us and the Aluminum Association and the way I would characterize it is that and I should say it's been with the administration, it's been with the House members it's also been with the Senate and Senators. I would characterize it that people are listening to us. They're understanding the situation and we'll see where we get to. But it has been at least a reception to message that we've provided.

Yes. Thanks for that. Thanks for those insights. And then you had the cost curve on alumina, but I'm wondering where alumina pricing is tracking today as well as potentially challenging fundamental backdrop ahead do you think the marginal cost support of aluminum stands today globally?

So as of today, as I said in my prepared remarks, over 80% of the Chinese refining system is underwater. And so we believe that there's good support level at today's pricing We just saw today and this is very recent news that alumina prices came back up overnight by $17 So it feels like there's some support at the levels that it's at.

Now that is all based on bauxite And bauxite pricing has been strong through the first three point five months of the year. And it still sits at $80 to $85 a ton bauxite pricing. And that is support for alumina cost.

Thanks, Bill.

Thanks, Bill.

The next question is from Chris Lefevina with Jefferies. Please go ahead.

Hi, thanks operator. Hi Bill, thanks for taking my question. Just wanted to ask on Sancipient, So the slide that you have here, you talk about the impact on 2025 and then also the hedging strategy you've deployed to mitigate financial risk from 2025 to 2027. So if we're looking at don't know, 100,000,000 to $120,000,000 of negative cash flow from the restart of the smelter in 2025, What happens beyond 2025? How do the hedges help? And then secondly, think there was the guidance had been that if you burn through roughly $200,000,000 at San Ciprian, a point where you just can't continue to subsidize us? And does this hedging strategy that you're referring here protect you from that over the 2025 to 2027 period?

Chris, I'll take this one. Thanks, Molly.

Unfortunately, did start to put the hedges in place several weeks ago. And we have secured hedge pricing that will help us to manage the cost within the funding envelope. Are focused year by year on 2025. We released the guidance for the smelter. We expect to lose about 70,000,000 to 90,000,000 in EBITDA The cash used by those operations will be about 90,000,000 to 110,000,000 The CapEx that we referred to is already included in CapEx guidance.

Okay. So sorry.

It's important to remember also that a portion of that CapEx we would need to spend [indiscernible] A portion of that CapEx is going toward the raise of the refinery at Mud Lake that no matter whether we are running it or not, we would need to be able to make that because it also assists us in the final closure of that Red Mud Lake. Right. And could you quantify what the EBITDA impact would be in 2026 if you assume that prices don't change? I mean how much of 70,000,000 to $90,000,000 negative impact in 2025 is a function of restart and kind of other one off costs that are not going to repeat? Also much of that is protected by tariffs and sorry, by hedging in 2026? In other words, is this going to be 70,000,000 to $90,000,000 a year? Or it going to be a lot less than that in terms of the loss in 2026 if we assume prices don't change? Thank you.

The smelter losses are heavier in 2025 because we have the inefficiencies of the restart. We've not yet released the '26 numbers, Chris. We'll look to do that as we get closer to the end of the year.

Okay. Thank you.

The next question is from Nick Giles with B. Riley Securities. Please go ahead.

Thanks, operator. Good evening, everyone. My first question was you mentioned the higher scrutiny on future alumina production in China. But if 80% are unprofitable today, what do you think it will ultimately take for Chinese alumina refineries to curtail output? We're seeing part of it today already. The Chinese in in my history in this industry, the Chinese are very quick to react to negative economic scenarios. And so we're seeing it today with maintenance outages, extended maintenance outages [indiscernible] I really believe that they will react quickly to loss making [indiscernible] Thanks for that Bill. And then maybe just a follow-up there. You mentioned spot bauxite opportunities in 1Q and so with the lower alumina prices but bauxite prices remaining more resilient. Could it make sense to reduce alumina production and sell more bauxite directly to Chinese refineries for instance?

I think the economics would be really, really difficult to do that. And the reason why I say that is the marginal tons that you run through the refineries are generally pretty low cost. And so I don't believe and I don't haven't looked at the numbers recently, but I don't believe it would support curtailing refining capacity to sell bauxite into China. So I just don't think that would solve at this point.

All right. Thanks for that Bill. My second question would be what's the what's the impact of lower oil and other input prices on the cost side? Could you speak to when some of that could flow through? And if if not, the second quarter, could we ultimately see some benefit in the third quarter that might not be reflected in your current guide?

As we look at our raw material cost in the second quarter, we are seeing caustic price increasing We have about a $5,000,000 negative. We didn't call that out in the guidance because we have productivity initiatives to offset it. And likewise on the smelting side, have price pressure primarily in Coke. That's about another 5,000,000 but the same, we didn't call that out because we expect to overcome that with productivity.

Got it. Thanks very much. Continue best of luck.

Thank you. Thank you.

The next question is from Carlos De Alba with Morgan Stanley. Please go ahead.

Yes. Thank you very much. Just on working capital, obviously, we're expecting all the consensus ourselves increase in working capital in the quarter, but it was a little bit more than expected. How do you you see that playing out in the remaining quarters?

Hi, Carlos. We will see more working capital come down significantly throughout the year as we typically do. We do expect a pretty sizable drop off in the second quarter just coming off some of the high pricing. As we looked at the timing of shipments as well as some of the buildup in raw material prices and volumes, we did hit a higher working capital level in the first quarter than we had expected.

Fair enough. And then in your guidance, I just want to confirm that so you're expecting the second quarter to have a tax benefit. Between 50,000,000 and $60,000,000 So this is fair to say that it's because the expectation is to have negative profits in the quarter?

It's not negative profit Carlos, it's the remember, we calculate our taxes always on a year to date basis. And so we earned quite a bit in the first quarter. And as you look at declining alumina prices, then we have to do a catch up entry for taxes to the first quarter. So it's really the catch up entry that creates us into a net benefit position.

All right. Great. Thank you very much. Is that clear to you, Carlos, because that's a tough concept? You forecast out for the year when you close your books at the March, what your taxes will be. And you book the taxes accordingly.

Essentially what we're saying is that profitability will be at least with our current view will be lower in the second quarter because of pricing coming down. And we will be booking a tax benefit associated with our full tax year tax guidance. So it's not that we're projecting don't don't think that hey, they're projecting tax income because they're going to have an EBITDA loss. That's not the case. You project out the full year taxes and adjust it each quarter. And just I don't want you to walk away thinking wow, these guys are going to be projecting negative PBT in the second pre tax profit. In the second quarter because of the tax guidance that we're providing. Yes. That's correct. Thank you, Barb. You can be my You're using layman terms?

I'm sorry, but it's complex And the tone of the question was, man, you're going have big losses No, that's not. It's just a catch up.

If you look at the two details, we will actually have regular tax expense related to earnings in the second quarter. But we will have a catch up entry. That will trigger a benefit related to the first quarter. [indiscernible] Great. Thank you. I'm sure Lily can clear everything up for everyone.

The next question is from Daniel Major with UBS. Please go ahead.

Hi. Yes, thanks. Can you hear me okay? Yes. Hi, Daniel.

Great.

Yes, thanks. Just follow-up on just clarify the sensitivities around the tariffs. So I think you clarified before that the tariff is based on the LME plus the duty unpaid premium that's about $300 I believe at the moment. So [indiscernible] the 25% tariff, that was applied to that, would it be right that, that would be about SEK $975,000,000 against the current Midwest of about $850,000,000 So is it the right assumption that if things normalize the premium list by around $100 All else equal, that would be broadly neutral to the business relative to the $100,000,000 guide you've given based on the $39 Is that the right way of thinking about those sensitivities?

We're not completely following the logic. And what I would suggest to you is you take that logic offline with Louie later and he can answer it. What we can say is that the Midwest hasn't reacted as it's back to Timna's question. The Midwest has not reacted as high as what we would have anticipated based on a twenty five percent two thirty two tariff. And the reasons for that are the two that Molly listed. One, there's still uncertainty around the tariffs. And I think the market bakes in uncertainty around the tariffs given some of the swings that we seen. And then secondly, there was some importation of aluminum in advance of the tariffs that will need to burn through in The United States until you see that marginal ton be really necessary to drive the marginal ton to come to The United States. Okay. Okay, thanks for that. And then just the second question on San Ciprian, that's following up from question. Think previously, you said you'd indicated that one of the requirements to put more cash into the into the complex was the release of the restricted cash I think that still sits about 88,000,000 Can you give us an update on when you expect that to be released and how that will be kind of distributed?

Will that go into funding cash burn beyond 2025? Or will it move back onto Alcoa's balance sheet and into the sort of net debt bridge We have had success having a portion of it released. So the money that was related to the restart there's about $12,000,000 that's been released and we continue to have discussions the workers' representatives on getting the balance released. There's about $75,000,000 more there.

And do you have expected timing on release of that $75,000,000 Those discussions continue. We expect that we will get recoveries related to the restart costs. Those will come in as we spend get those pieces released. But the part that is held related to the anode bake furnace build, that's a a CapEx project that we are not going to do during this recovery period. That's about $50,000,000 and that is the contentious points in the discussion.

We are not planning on rebuilding the Bay furnace through 2027. So, the thinking is that that would be held up. That cash. Okay. And then just final follow-up if I could on the guidance you gave on the cash burn for San Ciprian 90,000,000 to $110,000,000 is that for the smelter just the smelter and not the refinery?

Just the smelter.

I would assume the refinery is burning cash at three fifty alumina as well.

Yes, the refinery has been near breakeven through the first quarter as well. But it will move into a loss position with the lower API.

Okay.

Thanks for the questions.

The next question is from Katja Jantzik with BMO Capital Markets. Please Hi. Thank you for taking my questions. Maybe going back to the Midwest premium and I apologize this if I missed that, but what was the higher Midwest premium assumed in the net $100,000,000 calculation? Of the tariff impact? Sasha, we comparing the January 31 Midwest premium. We kind of consider that the base before tariffs. $0.24 and then comparing it to the Midwest premium earlier this week at point $39 So that's the comparison.

So the $100,000,000 is based on a point $39 Midwest premium.

And Bill you said you mentioned the Midwest premium didn't react as expected based on the 25% tariffs. What would be the right Midwest premium with the tariffs?

I had it in my slides presentation, so you're going to ask me to go back to that. It was 80 to 9 Thank Thank you. Molly, you know my numbers better than I do.

Eight eighty, it's on Page 17 of the slide presentation, 80 to nine nine ninety. And that's what we would think the equilibrium would be a 25% Midwest premium. I'm sorry 25% tariff.

Thanks. And then maybe lastly just on the permitting in Western Australia, is that still progressing as expected?

It is. We have a public comment period coming up here towards the beginning of the second quarter. So it is progressing as expected. Okay. Thank you.

The next question is a follow-up from Nick Giles with B. Riley Securities. Please go ahead.

Thank you very much for taking my follow-up. Iceland's Prime Minister made some comments around concerns that shipments from Iceland to the EU could be subject to trade restrictions. Whether or not that's true. Just wondering if you could comment on how Alcoa could be impacted by any trade action in the EU and maybe separately, how Alcoa your desire to participate in the EU's effort to ultimately reshore capacity? Nick, it's a great question. That doesn't have a great answer. And the reason why I say that is, there is just too much uncertainty still about what the EU will do in relation to The U. S. Tariffs for us to speculate at this point. The U. S. Tariffs are pretty well settled around the February However, the IEFA tariffs and the reciprocal tariffs are still a lot of questions there. So for me to speculate what the Europeans will do is probably premature at this point. As far as reshoring capacity, we have capacity in two plants in Norway. One in Iceland and we're restarting the Spanish facility. We've talked a lot about the restart of the Spanish facility and financial burden that that creates on the company.

The reason why we're doing that is because we had a contractual commitment to restart it. And that's that's why we are restarting that capacity. So that in and of itself reshores a couple hundred thousand tons of smelting capacity into Europe. So that's very helpful. Appreciate all the color. Thanks, Tim.

This concludes our question and answer session. I would like to turn the conference back over to Mr. Oplinger for any closing remarks.

Thanks for joining our call today. Molly and I look forward to sharing further progress when we speak again in July. Thank you. Concludes our call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.