Alcoa expects its production costs will start to decline in the months ahead, which will help to buoy the largest US aluminum producer after lower prices meant the company reported worse-than-expected earnings for the second quarter.
Lower costs are expected for both raw materials and production in the third quarter, the company said in a statement Wednesday as it maintained its outlook for aluminum shipments this year. Shares were up about 3% in after-hours trading to $35.88 as of 4:30 pm in New York.
The outlook for lower costs mirrors a trend across the commodities and energy sectors, which has helped producers to see better margins and bolstered supplies for raw materials.
“While we saw lower pricing during the second quarter, our global teams have worked to address short-term challenges and drive operational improvements,” Roy Harvey, Alcoa’s chief executive officer, said in a statement. “We expect to see financial improvement in the third quarter of 2023 as the alumina and aluminum segments are both forecast to have reduced costs for raw materials and production.”
The Pittsburgh-based company reported adjusted earnings before special items of $137-million, below an estimate of $158-million. The company said it saw low pricing during the second quarter.
Aluminum prices are down more than 7% this year amid a sluggish recovery from pandemic-related restrictions in China, the world’s top consumer, and uncertainty in US economic growth. Alcoa shares are on pace for a second straight annual decline as underlying fundamentals for the market remain weak and as analysts warn the aluminum market will be in a surplus this year.
Alcoa left its aluminum shipments forecast unchanged, saying it expects to ship between 2.5-million and 2.6-million metric tons of the metal.