Alcoa is the latest commodity producer that’s cutting costs and output to mitigate the fallout from the coronavirus pandemic.

The company is the top US producer of aluminum, which is found in everything from jets to iPhones and has been among the worst-performing commodities during the crisis. As governments shut down large swathes of their economies, Alcoa said the extent and duration of the pandemic is unknown and suspended its market outlook.

With supply far outpacing demand, the Pittsburgh-based company announced it will shut remaining production capacity at one of its US plants. It will also cut $100-million in capital expenditures and defer $220-million in pension contributions, among other measures, according to a statement Wednesday.

“The world has fundamentally shifted due to the Covid-19 global pandemic, and we are taking decisive actions to address this crisis,” said CEO Roy Harvey.

OUTLOOK PULLED
Alcoa forecast in January that global supply would exceed demand by as much as 1 million tons this year. It pulled that outlook Wednesday “due to the uncertainty regarding the Covid-19 pandemic and its effect on the global economy.”

Since the company provided its previous outlook, things have only gotten worse, with aluminum prices in March posting the biggest monthly drop since 2011 amid supply-chain disruptions and shutdowns of manufacturers ranging from automakers to aerospace producers.

“With primary aluminum demand expected to fall 13% in the US in 2020, a response from one of the major producers was what the market needed,” said Doug Hilderhoff, an analyst at CRU Group. “However, wider spread capacity curtailments are necessary to avoid a massive build in stocks that could keep London Metal Exchange prices under pressure for several years.”

Speculation was already rising that the pandemic will spur shutdowns of smelters, which extract the metal from ore for use in applications. Alcoa will curtail the remaining 230 000 metric tons of “uncompetitive” smelting capacity at its Intalco facility in Ferndale, Washington by the end of July.

“This comes as no surprise. The smelter was not competitive, losing money, and the market is awash with metal,” Jorge Vazquez, the managing director at researcher Harbor Intelligence, said of the Intalco facility. “More US smelter curtailments or shutdowns are in the cards.”

Alcoa’s decision to curb production in Washington comes even as US President Donald Trump’s 10% import tariffs on all aluminum imports remains in effect. While imposing the levies, he had said that keeping domestic production was critical to securing national security.

With the Intalco curtailment, the country now only has five smelters remaining and all of them are losing money.

Alcoa cut its outlook for annual aluminum segment shipments to between 2.9-million and 3-million tons from its earlier view of 3-million to 3.1-million tons due to the impact of the Intalco curtailment on the second half of 2020. For the first quarter, the company reported an adjusted loss per share of 23c that was in line with analyst estimates.

It also amended covenants on a $1.5-billion revolving credit facility, providing additional flexibility to the company and borrower, according to a filing.

The company released its statement following the close of regular trading in New York. Its shares rose 3.6% to $7.82 in after-market trading. The stock is down 65% this year through Wednesday’s close.

The announcement comes two months after CEO Harvey sounded an early warning that the toll from the coronavirus would pressure aluminum consumption worldwide.

It’s not just the aluminum industry that’s been affected by the pandemic. The energy market has been thrown in turmoil as demand cratered during the crisis, with several producers announcing deep curbs to spending.