Alcoa resumes San Ciprian smelter restart, facing economic loss first

Alcoa Corporation, with its joint venture partner, IGNIS Equity Holdings, SL, have recently made an announcement of commencing the restart process of the San Ciprian smelter in Spain. Previously, on April 28 2025, Alcoa's complex in this location received a wide power outage all across Spain, affecting the operations of both the smelter and the refinery.

The production of this joint venture was curtailed in 2021 due to the high power prices. It began the process of restart, but again took a pause due to nationwide power outage in Spain on April 28 2025, disrupting the overall operations in the adjacent smelter and refinery. Before the curtailment, the facility held the total production capacity of 228,000 tonnes annually, representing a substantial portion of the European aluminium manufacturing infrastructure.

Concerning energy, many times the global aluminium industry underwent struggles, facing production disruption and price volatility. Similarly, the situation in Spain created immense challenge for Alcoa and the joint venture. Within the overall aluminium production cost, 40% of it consists of electricity, an economic equation which created fuss in Spanish energy rates back in 2021.

Besides the high record of the electricity prices in Spain's wholesale market, other challenges, like no long-term power purchase agreements at competitive prices, led to the curtailment of the aluminium smelter, putting it in a disadvantaged position compared to other producers, especially in regions with lower energy costs. Lastly, ineffective governmental support mechanisms give rise to offsetting energy price volatility.

After the previous outrage, the joint venture held back the restart till the time the Spanish government could dispense required details regarding the cause behind the power outage, as well as the deemed measures to be taken in preventing the recurrence. In addition to this, the joint venture also faced issues related to the blackout, indicating a catastrophic grid failure.

Within an aluminium smelter, a sudden power disruption can create immense damage because the electrolytic cells, also known as pots, are operated at extremely high temperatures. The abrupt power cut can result in solidification of molten aluminium and the electrolyte in the production cells, cracks in the cell lining and components due to the thermal shock and much more.

The strategic decision to pause the restart of the overall smelter's operation was initiated until assurances from the respective authorities are provided, likely the comprehensive analysis of the root cause of the nationwide power failure, incorporation of technical safeguards, governmental energy security in mining and ither energy-intensive industries and regulatory reforms protecting critical industrial infrastructure.

Rob Bear, Vice President, Spain for Alcoa, stated, "We have reviewed the Spanish Government's report on the circumstances that caused the power outage, and the planned measures and investments aimed at providing improved grid resilience. We have also met with national and regional government representatives and received assurances they will continue to promote measures to provide reliable and competitive energy. Based on these factors and the government's recent public statements, the joint venture has decided to resume the restart of the smelter."

The restart should be completed by mid-2026. Concerning the current pricing strategy, the firm shall revise the prior estimates and is expected to incur a loss amounting to nearly $90 million to $110 million. In terms of per common share in 2025, the loss is calculated as $0.35 to $0.42.

Beyond this, the associated cash employed for operations of the smelter should be somewhere between $110 million and $130 million in the same year. The sudden change from the previously provided estimates happened due to the completion of the restart and related margins between 2025 and 2026.

Other financial turnabouts to be faced include maintenance expenses to preserve critical equipment in the restart-ready condition, security costs for protecting valuable assets and infrastructure. Additionally, development of regulatory compliance for meeting environmental and safety requirements when idle, retained personnel and restart preparation.

Current capacity of the San Ciprian site, including the alumina plant, is estimated to be 1.5 million tonnes per year, with adequate supply to Alcoa and prominent producers. This shall also benefit the external customers who are in the non-metallurgical sectors, including chemicals, water purification and ceramics.

Over 12-17 months, the restart process includes assessing damage from power disruptions, repairing or replacing affected equipment and upgrading control systems. Power is then restored and tested progressively, ensuring stable electrical loads and verifying backup systems.

Pot line reconstruction involves rebuilding electrolytic cells, relining with specialised materials and installing new anodes and cathodes. Finally, production resumes in phases, starting with gradual pot line activation, operational stabilisation, and scaling up to full commercial output.

The extended delay at San Ciprian underscores deep-rooted challenges in the European aluminium production, including high energy costs, strict regulations and grid instability. With around 30% of primary capacity lost since 2008, Europe risks growing dependence on imports. Yet, sustaining domestic production is vital for supporting key sectors like renewable energy, transport electrification and construction.

The San Ciprian outage is set to deepen Europe's reliance on aluminium imports, raise regional price premiums and force supply chain adjustments. With CBAM coming into effect, import economics will shift further. For the joint venture, this means losing market share and missing out on price gains, while weighing restart risks against long-term strategic impact.

Achieving the mid-2026 restart at San Ciprian hinges on several critical factors. Power grid reliability must be improved through stability upgrades, islanding solutions and backup systems. Energy cost stability is essential, requiring competitive power agreements, government support and efficiency upgrades.

The joint venture at focus must ensure aligned incentives and clear roles. Technically, the restart faces challenges like equipment replacement, workforce retraining and process recertification. However, the success will depend on 2026 market conditions, including aluminium prices, regional premiums, energy costs and global competition.

Note: This article is published in accordance with an article exchange agreement between Mysteel and AL Circle.