Alcoa Sinks as Aluminum Shipments Fall in Sign of Waning Demand

(Bloomberg) — Alcoa Corp. sales slumped as prolonged supply chain disruptions curbed shipments, raising concern that the tie-ups may erode customer demand for metal.

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The Pittsburgh-based aluminum producer posted sales of $3.29 billion in the first quarter, below the $3.44 billion average of estimates compiled by Bloomberg. The company reported higher amounts of inventory due to a lack of available train cars and vessels, especially in North America. Chief Executive Roy Harvey told analysts on a call Wednesday that Russia’s invasion of Ukraine has exacerbated the supply chain crisis, making the chip shortage for car makers more difficult.

Uncertainties caused by rising inflation, Russia’s invasion of Ukraine and China’s recent slowdown could be creeping into the global market for aluminum, which is used in everything from automobiles to construction to appliances. Harvey said the company is witnessing some demand erosion due to the supply chain problems. He sees aluminum demand growing this year by about 2%, down from a prior forecast of about 2% to 3%.

“We just saw the IMF bring down their expectations for economic growth,” Harvey said on the call. “I think that that tends to start to erode a little bit some of the demand that we see, because aluminum is so tied to the general economic cycle.”

Aluminum prices are down about 20% since hitting an all-time high at the beginning of March amid concerns about demand. Covid-19 lockdowns throughout China, the world’s biggest consumer, add to questions about how the Ukraine war will affect one of the top aluminum-consuming regions. Demand in China, the world’s biggest consumer, may rise just 1% this year, well below the 5.1% growth in 2021, according to Bloomberg Intelligence.

Credit Suisse Group AG analysts see aluminum prices near peak levels and expect the supply-and-demand balance to normalize in the second half of 2022 as trade flows gradually realign. Current geopolitical events, though, give lasting support for aluminum prices, analyst Curt Woodworth said.

The shares fell as much as 6.2% during after-market trading in New York. The company’s forecast for shipments of aluminum were unchanged from a prior estimate of 2.5 million to 2.6 million metric tons. Meanwhile, earnings before interest, taxes, depreciation and amortization were $1.072 billion, higher than the $1.04 billion average estimate of 10 analysts compiled by Bloomberg. It marked the best quarter since Alcoa split from its jet- and car-parts business in 2016.