Alcoa spikes to new highs; sees higher aluminum prices, tighter alumina supply

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Alcoa (AA +6.1%) shares surge as much as 14% to an all-time high $85.73 before paring gains, as aluminum prices extend their recent rise as financial sanctions on Russia for invading Ukraine prompt concerns about supplies.

London Metal Exchange benchmark aluminum (LMAHDS03:COM) recently was +2.8% at $3,463/metric ton after touching a record high of $3,525/ton on Monday; Russia produces ~6% of the world's aluminum.

Russian aluminum producer Rusal (OTC:UNRIF) halted production at its Nikolaev alumina refinery in Ukraine, citing logistical challenges on the Black Sea and surrounding areas.

"The key risk to the aluminum market is that the loss of this alumina supply results in an eventual suspension of primary smelting capacity in Russia, with ~900K tons/year production at risk," Goldman Sachs analysts say.

Alcoa CFO William Oplinger told a Deutsche Bank conference on Monday that while the company is not directly affected by Russia's invasion, he expects higher aluminum prices and tighter alumina supply as a result of sanctions placed on Russia, according to S&P Global Platts.

Russian aluminum producers may not be able to fill the incremental market needs in Europe and the U.S., which will keep "upward pressure" on recent high premiums in both regions, Oplinger reportedly said.

In the U.S., Oplinger said Alcoa still has two curtailed lines at its 269K tons/year Warrick smelter in Indiana, while its 279K tons/year Intalco smelter in Washington, remains fully curtailed.

Goldman Sachs recently raised its forecast price for aluminum to $4K/ton.