AA Alcoa Corporation

By Austen Hufford and Bob Tita 

Shares of Alcoa Corp. fell 13% to $41.56 on Thursday after the aluminum maker said the recently enacted U.S. tariffs are hurting its earnings.

The Pittsburgh company, which made only about 14% of the aluminum it produced globally last year in the U.S., relies on imports from Canada. Those imports have become more expensive because of the new tariffs.

Alcoa said Wednesday that it incurred $15 million of costs last month stemming from the newly implemented tariffs on imports from its foreign operations, primarily from Canada.

Tariffs on steel and aluminum imported into the U.S. went into effect at the start of June. Going forward, Alcoa expects to pay $12 million to $14 million a month while the tariffs are in place.

"Tariffs will not solve the challenges facing the aluminum industry," Chief Executive Roy Harvey said on a conference call Wednesday.

Alcoa recently restarted a portion of its idle smelter in southern Indiana, but Mr. Harvey said the company has no immediate plans to bring other curtailed smelters in the U.S. back into service.

Shares of Century Aluminum Co., another U.S. producer, fell 12% to $13.09.

Alcoa, which cut its profit outlook for the year, citing the tariffs, reiterated its opposition to them, saying they are not the right way to help the U.S. industry. The company has been critical of companies in China over producing aluminum and supports reining them in through negotiated reductions.

Alcoa made about 14% of the aluminum it produced globally last year in the U.S.

Industry watchers say that the U.S. dependence on aluminum from Canada is unlikely to change, as not enough aluminum is made domestically, and U.S. smelters are some of the oldest and most expensive in the world.

"There is no reasonable scenario where the U.S. does not remain a very large importer of aluminum," said Peter Ward, an analyst from market research firm Renaissance Macro Research, in a note.

Still, Mr. Harvey said that U.S. producers are benefiting from higher domestic aluminum prices caused by the tariffs. Alcoa saw its average realized price on primary aluminum rise 19% from the year before in the latest quarter.

Domestic steelmakers are also benefiting from higher prices from the tariffs. Nucor Corp., the largest U.S.-based steelmaker, said Thursday that it has benefited from the rising prices. The company's average sale price per ton in its second quarter rose 17% from a year earlier as the company ramped up production.

Nucor Chief Executive John Ferriola said the tariffs on imported steel aren't the only reason for the steelmakers' strong second-quarter results, but that they helped.

"The U.S. steel market is benefiting from a reduction in unfairly traded imports entering our country," he told analysts on conference call. Mr. Ferriola, one of the steel industry's most vocal supporters of the tariffs, praised the Trump administration's emphasis on reducing the U.S. trade deficit with other countries. "We believe these efforts will lead to a freer, fairer trade."

Alcoa wants to get Canada exempt from the tariff as the company operates three smelters there.

For its second quarter, revenue at Alcoa rose 25% to $3.58 billion. The company brought in $75 million in earnings in the quarter, the same as a year before. On a per-share basis, earnings fell to 39 cents from 40 cents, as the average number of shares rose. Adjusted for certain items, earnings per share came in at $1.52, above the $1.32 expected by analysts.

For adjusted earnings before interest, taxes, depreciation, and amortization, known as Ebitda, the company expects $3 billion to $3.2 billion this year, down from $3.5 billion to $3.7 billion previously.

Write to Austen Hufford at austen.hufford@wsj.com and Bob Tita at robert.tita@wsj.com

(END) Dow Jones Newswires

July 19, 2018 19:32 ET (23:32 GMT)

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