Yahoo Finance

Molly Beerman

Thank you, Bill. Revenue was down 3% sequentially to $3.4 billion. In the aluminum segment, third-party revenue decreased 8% on lower average realized third-party price and lower shipments due to timing and decreased trading. In the aluminum segment, third-party revenue was flat due to an increase in the average realized third-party price, offset by lower shipments in the first quarter after strong sales in the fourth quarter of 2024.
First-quarter net income attributable to Alcoa was $548 million versus the prior quarter of $202 million, with earnings per common share more than doubling to $2.07 per share. The sequential improvement reflects increased aluminum prices and lower intersegment profit elimination, partially offset by increased aluminum costs, and tariffs on our Canadian aluminum imported into the United States for US customers.
On an adjusted basis, net income attributable to Alcoa was $568 million, or $2.15 per share. Adjusted EBITDA increased $178 million to $855 million.
Let's look at the key drivers of EBITDA. First quarter adjusted EBITDA reflects higher aluminum prices and lower intersegment profit elimination, which more than offset lower alumina prices. Lower volume, increases in raw material and energy prices, and higher production costs were more than offset by improvements in price mix and other costs. Lower volume in the first quarter was expected after a strong fourth quarter shipping schedule, mainly alumina from our Australian refineries.
Other costs primarily relate to intersegment elimination. The Alumina segment adjusted EBITDA decreased $52 million primarily due to lower alumina prices, lower volume, and unfavorable currency impacts only partially offset by favorable production costs and other costs.
The Aluminum segment adjusted EBITDA decreased $60 million with higher metal prices and favorable currency more than offset by higher alumina costs and higher production, energy, raw material, and other costs. Included in other costs are approximately $20 million for US Section 232 tariffs of 25% on aluminum imports from Canada, which became effective on March 12.
Outside the segments, other corporate costs decreased, and the intersegment elimination expense decreased as expected with significantly lower average alumina price requiring less inventory profit elimination.
Moving on to cash flow activities for the first quarter. We ended the first quarter with cash of $1.2 billion. Strong EBITDA led to positive cash from operations in the first quarter, despite high consumption of cash for working capital build, which is typical in our first quarter periods. Working capital increased as inventories in both segments rose.
In Alumina, on higher raw material price and volume, and an Aluminum on timing of raw material and aluminum shipments. Accounts payable decreased, following elevated alumina trading payables in the fourth quarter. In the first quarter, we progressed our objective to reposition debt and de-lever with the issuance of $1 billion of debt in Australia, and the tender of $890 million related to our outstanding 2027 and 2028 notes. It is our intention to continue to deliver with an initial focus on the remainder of the 2027 notes.
Moving on to other key financial metrics. The year-to-date return on equity was positive at 39.1%. Days working capital increased 13 days sequentially to 47 days, the same level year over year, but elevated from our year-end 2024 level. Our first quarter dividend added $26 million to stockholder capital returns. We had positive free cash flow plus net non-controlling interest contributions for the quarter, which includes the EUR25 million contribution from IGNIS EQT related to the San Ciprián Joint Venture Formation. Proceeds from the debt issuance in Australia, less debt tendered, added $95 million to the ending cash balance of $1.2 billion.
As we turn to the next slide, we would like to share an update on our capital allocation targets. Our overall capital allocation framework remains unchanged. It starts with maintaining a strong balance sheet throughout the cycle, and sufficiently funding our operations to sustain and improve them. The optimal capital structure for our company is reached when investment-grade leverage metrics are achieved, reducing our WAC, and creating value for our stockholders through a higher company valuation, lower cost of financing, and improved project viability. We want to maintain investment-grade leverage metrics throughout all business cycles, not only at the mid or top part of the cycle.
Based on this, we first defined a target for adjusted debt, which includes pension and OPEB liability. This target is $2.1 billion to $2.5 billion. Then, considering our historical use rate of cash, we target a cash balance between $1 billion and $1.5 billion. Netting the cash with the adjusted debt results in our targeted range of adjusted net debt of $1 billion to $1.5 billion. We believe this range fits our profile and anticipated use of leverage as a company.
I want to clarify that we are not committing to receiving and or maintaining investment-grade credit ratings. The credit ratings are assessed by the rating agencies. We want to maintain the flexibility to raise additional debt for strategic opportunities at any point in the cycle.
Our adjusted net debt was $2.1 billion at the end of the first quarter. As we get closer to the $1 billion to $1.5 billion target, we will look at all of our capital allocation priorities including cash returns to stockholders in parallel to paying down debt.
Turning to the outlook, we have one adjustment to our full-year outlook. We are updating depreciation expense from $640 million to $620 million due primarily to favorable currency impacts. For the second quarter of 2025, in the Alumina segment, we expect to maintain the strong level of performance delivered in the first quarter.
In the Aluminum segment, we expect performance to be unfavorable by approximately $105 million due to US Section 232 tariff costs on imports of our Canadian aluminum, increasing approximately $90 million sequentially, as well as operating costs associated with the restart of the San Ciprián smelter of approximately $15 million. While the lower average price of alumina will decrease overall Alcoa-adjusted EBITDA, Alumina cost in the Aluminum segment is expected to be favorable by $165 million.
For intersegment eliminations with the current market volatility, we recommend that you use the low end of the sensitivity range in your model. Below EBITDA, within other expenses, equity investment losses are expected to increase by $10 million in the second quarter. The first quarter included favorable impacts of $20 million due to foreign currency gains, which may not recur.
Based on last week's pricing, we expect second quarter operational tax to be a benefit of $50 million to $60 million, which includes timing and catch-up adjustments related to lower Alumina prices.
In the appendix to the earnings material, you will see that our Midwest paid and Midwest unpaid premium sensitivities have been updated to reflect the expected trade flows as a result of tariff impacts. We also revised our regional premium distribution for your reference.
Updates to the Midwest premium do not include the cost component of the tariff. There is a new column on the sensitivity slide for the tariff cost impact, which will appear in the other bar of our EBITDA bridge. Since the second quarter will be the first full quarter of tariffs, you should consider a quarterly tariff cost of approximately $105 million as a baseline, calculated based on an LMA of $2,400 and a Midwest premium of $0.39 per pound. We will update our sensitivities as needed if our trade flows adjust to the tariff structure.
Now, I'll turn it back to Bill.

William Oplinger

Thanks, Molly. Let me take the opportunity to speak to the current status of US tariffs applicable to the aluminum industry from Alcoa's perspective. While the US Section 232 tariff structure has been in place for some time, in March the tariff increased from 10% to 25% and the exemption for Canadian metal imported into the US was removed. This is the most material impact Alcoa, as approximately 70% of our aluminum produced in Canada is destined for US customers and is now subject to 25% tariff cost, which totals an estimated $400 million to $425 million annually.
Of course, there is a higher Midwest premium, which offsets some of this cost and certainly benefits our US smelters, but currently the net annual result is approximately $100 million negative for our business. Next are the IEEPA tariffs on imports from Canada, Mexico, and China. Since our aluminum products and the majority of our input materials from Canada and Mexico qualify under the USMCA provisions, Alcoa does not have a significant impact from this tariff at this time.
The reciprocal tariffs specifically exclude Canada and Mexico, as well as aluminum products already subject to Section 232 tariffs, so no impact on Alcoa's aluminum sales. While Alumina and other raw materials are excluded from the reciprocal tariffs, there is a portion of our input materials provided by Chinese suppliers that is now subject to the high reciprocal tariff. We expect these tariffs will increase our input costs by $10 million to $15 million annually as there are no suitable replacement suppliers.
In 2024, the US imported approximately 4.2 million metric tons of primary aluminum with imports of Canadian aluminum, representing approximately 70% or 2.9 million metric tons. The four operating smelters in the US produce 700,000 metric tons of aluminum each year. If all idle smelting capacity in the US would restart, which is approximately 600,000 metric tons, the US would still be short by 3.6 million metric tons.
It takes many years to build a new smelter, and at least five to six smelters would be required to address the US demand for primary aluminum. These new smelters would require additional energy production equivalent to almost seven new nuclear reactors, or more than ten Hoover dams. Until additional smelting capacity is built in the US, the most efficient aluminum supply chain is Canadian aluminum going into the US.
That being said, our global smelting portfolio and commercial experience give us options to shift metal supply as needed if trade policies and economics warrant. We've operated for more than 135 years in the aluminum industry. Building on our experience, we will continue our engagement efforts with the US government and policymakers to advocate for the best outcome possible.
Now let's discuss our market. In AIumina, after reaching an all-time high in the fourth quarter of 2024, Alumina prices declined in the first quarter of 2025. This was due to relatively higher liquidity, mainly driven by the Chinese refinery ramp-ups and normalized production outside China following several disruptions last year, as well as more recent price declines on softened sentiment given global market uncertainty.
Though the market has resolved most of the issues leading to its tightness in 2024, there is still uncertainty about the timing of the planned refinery ramp-ups in Indonesia and India this year. With bauxite prices remaining relatively high and the current lower alumina price, we estimate that over 80% of Chinese refineries are unprofitable.
Additionally, a recent announcement by the Chinese government stated that there would be higher scrutiny on new alumina projects regarding air pollution control, bauxite sourcing, and red mud processing, which could bring additional constraints on growth in Chinese alumina production and may accelerate curtailment. This is a dynamic market, and Alcoa's global network of refineries provides security of supply of alumina both to Alcoa smelters and our major customers, which are primarily in the Middle East.
A final point to highlight here is the opportunity we had in the first quarter to capitalize on the tightness in the bauxite market. With the high prices in the first quarter, we participated in the spot market to capture benefits for some volumes from our joint venture in Guinea.
Let's move on to Aluminum. The LME aluminum price was generally resilient in the first quarter, even with the decreasing aluminum price. With tariff announcements earlier this month, the LME responded by turning lower, reflecting the uncertainty of the impact of tariffs on the global economy and aluminum market. While the Midwest premium increased with the introduction of tariffs, it has not reached the $880 million to $990 million per ton level, which analysts predict supports shipments from any region to the US.
The logistics still favor shipments from Canada to the US compared to other potential major suppliers. In our view, the Midwest premium has not fully responded due to the uncertain market sentiment, as well as inventory build in the US ahead of the tariffs. The depletion of these inventories should trigger some upward response.
Despite the uncertainty caused by the US tariffs, there were some supportive signs on the demand side in the first quarter, namely the Chinese stimulus and European fiscal loosening. Aluminum supply growth in the first quarter was very limited, as smelter ramp-ups were offset by the effect of closures that took place at the end of last year.
In North America, our aluminum value-add product shipment volumes increased both sequentially and year over year, with healthy demand for slab, billet, and rod. However, it is difficult to say whether our customers were anticipating tariffs and therefore buying in advance.
In Europe, there were slightly lower VAT volumes in the first quarter compared to the fourth quarter, but up year over year with strong demand for rod and slab and billet demand finally improving. For both regions, we saw the negative impact of tariffs in our Foundry order book, which is closely tied with the automotive market and faces the largest amount of uncertainty from the tariff impact.
Turning to Spain, we recently announced the formation of the joint venture with IGNIS EQT to support the continued operation of the San Ciprián complex. The idled smelting capacity is now being restarted to meet our obligation under the viability agreement, which was signed with our workforce when we curtailed the smelter in 2021 due to exorbitant energy prices. We are now focused on safely restarting the idled capacity.
We will focus on repeating the strong operational results delivered in the first quarter. However, we are now adding the challenges navigating uncertainty in our markets. It's a good time to consider the actions we've taken, both recently and in the past, to be well-positioned to address adversity and capture opportunities. As a pure-play aluminum company, vertically integrated from mine to metal, with a global footprint and cost-effective portfolio of assets, Alcoa has the ability to maneuver and respond to challenging and changing markets and policies.
Security of supply through long-term contracts is valued by our customers. We also have the most comprehensive low-carbon products portfolio in the aluminum industry to meet customer needs. The company has a significant cash balance and a strong capital structure, with no near-term debt maturities or other obligations requiring significant cash outlays beyond normal operations.
We have taken strategic actions that strengthen the company over time, including the recent acquisition of Alumina Limited and the announcement of the sale of the Ma'aden joint ventures, which is expected to close in the second quarter. We have a track record of monetizing non-core assets, including transformation sites which drive value for our stockholders. We also executed initiatives to be more cost-effective as demonstrated by our over-delivering on our $645 million profitability program last year. These competitive advantages in action support Alcoa's resilience.
In summary, as we close out the presentation, I'll call ahead a strong first quarter with improved safety and stable production. As a company, we make good progress on strategic actions. Looking ahead, we plan to maintain a fast pace of execution on our 2025 key areas of focus and strategic initiatives, improve the competitiveness of our operations, and navigate market challenges to deliver value to our stockholders.
Operator, let's start the question-and-answer portion of the session.

Question and Answer Session

Operator

(Operator Instructions) Timna Tanners, Wolfe Research.

Timna Tanners

Yeah, good evening. Hope you're all well. I wanted to ask a little bit more about the tariff math, if we could. I know that we heard from, Molly, $105 million quarterly hit, and then I heard another $100 million from Bill. I just wanted to make sure I understood the distinction there.
And I know that in the past, Molly had talked about tens of millions of impact. I think that was assuming a higher Midwest premium, but just was hoping for a bit more clarification, please?

Molly Beerman

Hi, Timna. So the first $100 million that we talked about, the negative $100 million to our overall business, that is when you consider we are getting a higher Midwest premium on our US tons. That brings a value of about $95 million. We'll also get a higher value within our Canadian metal sales into the US at $222 million.
But going against that is the $400 million that Bill spoke of, the cost of the Canadian tariff. So that nets to the $100 million, and that's for the year. So that is a net number of the revenue considered against the tariff cost.
When I spoke of the $105 million, that is the quarterly figure. That $105 million is calculated based on an LME of $2,400 and a Midwest premium of $0.39. And those are the same assumptions that are in the first $100 million for the company as a whole.
When we spoke, Timna, about the impact earlier, we were using different Midwest premium assumptions. We had expected that the Midwest premium would respond more quickly. It is not, it is still down from what we would hope. We see that because of the negative sentiment in the market, as well as the fact that some tons did get stockpiled in inventory in the US ahead of the tariffs. And until that stockpile depletes, we don't have the impetus for price pressure up.

Timna Tanners

Understood. That's helpful. And then my follow-up on tariffs again would be any updated thoughts on the stickiness of these tariffs, and if sticky, do you think about restarting Warwick and what timeframe? Thanks a lot.

William Oplinger

Hey Timna, thanks for the question. It's hard to make a restart decision based on a tariff that can change. And I really can't comment on the stickiness, because we've seen the volatility of discussions around the tariffs over the last 60 days. So we just don't know whether they will stick. And we wouldn't necessarily make a decision to restart capacity simply based on tariffs, just because they can change.

Timna Tanners

Understood. Thanks, again.

Operator

Bill Peterson, JPMorgan.

Bill Peterson

Yeah, hi. Good afternoon. Thanks for taking the questions. Maybe following up on the tariffs a bit. So you talk about engaging with governments, policymakers, you know, US and abroad. But can you provide, I guess, additional color on the level of engagement, who in the Trump and maybe Canadian administrations you're dealing with?
And I guess, are you going at it alone as Alcoa, or in partnership with other aluminum companies, or maybe potentially customers of your products? I'm asking the second part in the context of some competitors, either with larger portions of domestic production or even like Middle Eastern competitors that are evidently announcing intentions to build US capacity?
And basically, wondering are there some in the administration that are sympathetic to your arguments that the US really isn't going to be able to close the GAAP anytime soon?

William Oplinger

Bill, so it's a wide-ranging question, and I'll give you a wide-ranging answer. We are engaging with both the US government and the Canadian government. We're doing that as Alcoa. We're also doing that through the US Aluminum Association.
We have met either through ourselves or through the association with a number of President Trump's direct reports and the message is fairly simple. The message is that the US imports a lot of its primary aluminum and that in order to support the downstream processing jobs, we need to have economic upstream aluminum production that can come in through, preferably through Canada, but through other countries.
We've met with the Canadian government, both the outgoing Prime Minister, Mr. Trudeau; also the current Prime Minister, Mr. Carney, and have had very good discussions there. So a lot of engagement, both through us and the Aluminum Association, and the way I would characterize it is that -- and I should say it's been with the administration, it's been with House members, it's also been with senators.
I would characterize it that people are listening to us, they're understanding the situation, and we'll see where we get to, but it has been at least a reception to the message that we've provided.

Bill Peterson

Yeah, thanks for those insights. And then you had the cost curve on aluminum, but I'm wondering where aluminum pricing is striking today as well as the potentially challenging fundamental backdrop ahead? Where do you think the marginal cost support of aluminum stands today globally?

William Oplinger

So as of today, as I said in my prepared remarks, over 80% of the Chinese refining system is underwater. And so, we believe that there's good support level at today's pricing. We just saw today, this is very recent news, that aluminum prices came back up overnight by $17. So it feels like there's some support at the levels that it's at.
Now, that is all based on bauxite pricing. And bauxite pricing has been strong through the first 3.5 months of the year. And it still sits at $80 to $85 a ton, bauxite pricing. And that is support for aluminum costs.

Bill Peterson

Thanks, Bill.

William Oplinger

Thanks, Bill.

Operator

Chris LaFemina, Jefferies.

Chris LaFemina

Hi. Thanks, operator. Hi, Bill. Thanks for taking my question. Just wanted to ask on San Ciprián. So the slide that you have here, you talk about the impact on 2025 and then also the hedging strategy you've deployed to mitigate financial risks from 2025 to 2027. So if we're looking at, I don't know, $100 million to $120 million of negative cash flow from the restart of the smelter in 2025, what happens beyond 2025? How do the hedges help?
And then secondly, I think there was the guidance had been that if you burn through roughly $200 million at San Ciprián comes a point where you just can't continue to subsidize this. And does this hedging strategy that you refer to here protect you from that over the 2025 to 2027 period?

Molly Beerman

I'll take this one. Unfortunately, we did start to put the hedges in place several weeks ago. And we have secured hedge pricing that will help us to manage the costs within the funding offload. We are focused year by year. On 2025, we released the guidance for the smelter.
We expect to lose about $70 million to $90 million in EBITDA. The cash used by those operations will be about $90 million to $110 million. The CapEx that we referred to is already included in our CapEx guidance.

William Oplinger

Okay. So, it's important to remember also that a portion of that CapEx we would need to spend anyway. A portion of that CapEx is going toward the raise of the refinery at mud lake. That no matter whether we were running it or not, we would need to be able to make that, because it also assists us in the final closure of that red mud lake.

Chris LaFemina

Right. And could you quantify what the EBITDA impact would be in 2026, if you assume that prices don't change? I mean, how much of that $70 million to $90 million negative impact in 2025 is a function of restart and kind of other one-off costs that I'm not going to repeat?
And also, how much of that is protected by tariffs -- or sorry, by you're hedging in 2026. In other words, is this going to be $70 million to $90 million a year or is it going to be a lot less than that in terms of the loss in 2026 if we assume prices don't change? Thank you.

Molly Beerman

The smelter losses are heavier in 2025, because we have the inefficiencies of the restart. We've not yet released the '26 numbers, Chris. We'll look to do that as we get closer to the end of the year.

Chris LaFemina

Okay, thank you.

Operator

Nick Giles, B. Riley Securities.

Nick Giles

Thanks, operator. Good evening, everyone. My first question was, you mentioned the higher scrutiny on future aluminum production in China. But if 80% are unprofitable today, what do you think it will ultimately take for Chinese aluminum refineries to curtail output?

William Oplinger

We're seeing part of it today, already. In my history in this industry, the Chinese are very quick to react to negative economic scenarios. So we're seeing it today with maintenance outages, extended maintenance outages. So I really believe that they will react quickly to loss-making sites.

Nick Giles

Thanks for that, Bill. And then maybe just to follow up there. You mentioned the spot bauxite opportunities in 1Q, and so with the lower alumina prices but bauxite prices remaining more resilient, could it make sense to reduce alumina production and sell more bauxite directly to Chinese refineries, for instance?

William Oplinger

I think the economics would be really, really difficult to do that. And the reason why I say that is the marginal tons that you run through the refineries are generally pretty low cost. And so I don't believe -- and I haven't looked at the numbers recently, but I don't believe it would support curtailing refining capacity to sell bauxite into China. So I just don't think that would solve at this point.

Nick Giles

All right, thanks for that, Bill. My second question would be, what's the impact of lower oil and other input prices on the cost side? Could you speak to when some of that could flow through? And if not, in the second quarter, could we ultimately see some benefit in the third quarter that might not be reflected in your current guide?

Molly Beerman

As we look at our raw material costs in the second quarter, we are seeing a caustic price increasing. We have about a $5 million negative. We didn't call that out in the guidance, because we have productivity initiatives to offset it. And likewise, on the smelting side, we have price pressure primarily in coke. That's about another $5 million. But the same, we didn't call that out because we expect to overcome that with productivity.

Nick Giles

Got it. Thanks very much. Continue. Best of luck.

William Oplinger

Thank you.

Operator

Carlos De Alba, Morgan Stanley.

Carlos De Alba

Yeah. Thank you very much. Just on working capital, obviously, we're expecting all the consensus are ourselves increasing in working capital in the quarter, but it was a little bit more than expected. How do you see that playing out in the remaining quarters?

Molly Beerman

Hey, Carlos, we will see working capital come down significantly throughout the year, as we typically do. We do expect a pretty sizable drop-off in the second quarter, just coming off some of the high pricing. As we looked at the timing of shipments, as well as some of the buildup in raw material prices and volumes, we did hit a higher working capital level in the first quarter than we had expected.

Carlos De Alba

Fair enough. And then in your guidance, I just want to confirm that you're expecting the second quarter to have a tax benefit between $50 million and $60 million. So this is fair to say that it's because the expectation is to have negative profit in the quarter?

Molly Beerman

It's not negative profit, Carlos. Remember, we calculated our taxes always on a year-to-date basis. And so we earned quite a bit in the first quarter. And as you look at declining Alumina prices, then we have to do a catch-up entry for taxes to the first quarter. So it's really the catch-up entry that creates us into a net benefit position.

Carlos De Alba

All right, great. Thank you very much.

William Oplinger

Is that clear to you, Carlos? Because that's a tough concept. You forecast out for the year when you close your books at the end of March what your taxes will be and you book the taxes accordingly.
Essentially, what we're saying is that profitability will be, at least, with our current view, will be lower in the second quarter because of pricing coming down. And we will be booking a tax benefit associated with our full-year tax guidance. So it's not that we're projecting. Don't think that, hey, they're projecting tax income because they're going to have an EBITDA loss. That's not the case.
You project out the full-year taxes and adjust it each quarter. And I don't want you to walk away thinking, wow, these guys are going to be projecting negative PVT in the second pre-tax profit in the second quarter, because of the tax guidance that we're providing. And feel free to --

Molly Beerman

That's exactly correct. Thank you, Carlos.

William Oplinger

You can be my -- using layman terms? I'm sorry. It's complex stuff. And the tone of the question was -- man, you can have big losses. No, that's not. It's just a catch-up.

Molly Beerman

If you look at the two details, we will actually have regular tax expense related to earnings in the second quarter, but we will have a catch-up entry that will trigger a benefit related to the first quarter.

William Oplinger

Yeah.

Carlos De Alba

Great. Thank you.

William Oplinger

Clear as mud, but I'm sure Molly can clear everything up for everyone.

Operator

Daniel Major, UBS.

Daniel Major

Hi. Yeah, thanks. Can you hear me okay?

William Oplinger

Yeah. Hi, Daniel.

Daniel Major

Great. Yeah, thanks. Just to follow up on -- just to clarify the sensitivities around the tariffs. So I think you clarified before that the tariff is based on the LME plus the duty unpaid premium that's about [$300 million], I believe, at the moment.
So the 25% tariff, if that was applied to that, would it be right that that would be about $975 million against the current Midwest of about $850 million? So is it the right assumption that if things normalize the premium list by around [$100 million], all else equal, that would be broadly neutral to the business relative to the $100 million guidance you've given, based on the 39%? Is that the right way of thinking about those sensitivities?

William Oplinger

We're not completely following the logic. And what I would suggest to you, is you take that logic offline with Louis later and he can answer it.
What we can say is that the Midwest hasn't reacted -- back to Timna's question, the Midwest has not reacted as high as what we would have anticipated based on a 25% 232 tariff. And the reasons for that are the two that Molly listed.
One, there's still uncertainty around the tariffs. And I think the market bakes in uncertainty around the tariffs given some of the swings that we've seen. And then secondly, there was some importation of aluminum in advance of the tariffs that will need to burn through in the United States until you see that marginal ton be really necessary to drive the marginal ton to come to the United States.

Daniel Major

Okay. Okay, thanks for that. And then the second question on San Ciprián, that's following on from Chris's question. I think previously, you'd indicated that one of the requirements to put more cash into the complex was the release of the restricted cash. I think that still sits about $88 million. Can you give us an update on when you expect that to be released and how that will be distributed? Will that go into funding cash burn beyond 2025, or will it move back onto Alcoa's balance sheet and into the net debt bridge?

Molly Beerman

We have had success having a portion of it released. So the money that was related to the restart, there's about $12 million that's been released. And we continue to have discussions with the workers' representatives on getting the balance released. There's about $75 million more there.

Daniel Major

And do you have an expected timing on the release of that $75 million?

Molly Beerman

Those discussions continue. We expect that we will get recoveries related to the restart costs. Those will come in as we spend. We'll get those pieces released. But the part that is held related to the anode bake furnace build, that's a CapEx project that we are not going to do during this recovery period. That's about $50 million, and that is the contentious point in the discussion.

William Oplinger

We are not planning on rebuilding the bay furnace through 2027. So the thinking is that that would be held up, that cash.

Daniel Major

Okay. And then just a final follow-up, if I could, on the guidance you gave on the cash burn for San Ciprián, the $90 million to $110 million. Is that for the smelter, just the smelter and not the refinery?

Molly Beerman

Just the smelter.

Daniel Major

I would assume the refinery is burning cash at $350 million, Alumina as well.

Molly Beerman

The refinery has been near breakeven through the first quarter as well, but it will move into a lost position with the lower API.

Daniel Major

Okay. Thanks for the questions.

Operator

Katja Jancic, BMO Capital Markets.

Katja Jancic

Hi, thank you for taking my questions. Maybe going back to the Midwest premium, and I apologize if I missed that, but what was the higher Midwest premium assumed in the net $100 million calculation of the tariff impact?

Molly Beerman

We were comparing the January 31 Midwest premium. We kind of considered that the base before tariffs of $0.24, and then comparing it to the Midwest premium earlier this week at $0.39. So that's the comparison.

William Oplinger

So the $100 million is based on a $0.39 Midwest premium.

Katja Jancic

And Bill, you said -- you mentioned the Midwest premium didn't react as expected based on the 25% tariffs. What would be the right Midwest premium with the tariffs?

William Oplinger

I added in my slides presentation, so you're going to ask me to go back to that. It was --

Molly Beerman

$880 million to $990 million.

William Oplinger

Thank you. You know my numbers better than I do. It's on page 17 of the slide presentation, $880 million to $990 million. That's what we would think the equilibrium would be at a 25% Midwest premium -- I'm sorry, 25% tariff.

Katja Jancic

And then maybe lastly, just on the permitting in Western Australia, is that still progressing as expected?

William Oplinger

It is. We have a public comment period coming up here toward the beginning of the second quarter, so it is progressing as expected.

Katja Jancic

Okay, thank you.

Operator

Nick Giles, B. Riley Securities.

Nick Giles

Thank you very much for taking my follow-up. Iceland's Prime Minister made some comments around concerns that shipments from Iceland to the EU could be subject to trade restrictions. Whether or not that's true, I was just wondering if you could comment on how Alcoa could be impacted by any trade action in the EU? Maybe separately, how Alcoa -- your desire to participate in the EU's effort to ultimately reach your capacity? Thank you very much.

William Oplinger

Nick, it's a great question that doesn't have a great answer. And the reason why I say that is, there is just too much uncertainty still about what the EU will do in relation to the US tariffs for us to speculate at this point. The US tariffs are pretty well settled around the 232.
However, the IEEPA tariffs and the reciprocal tariffs are still a lot of questions there. So for me, to speculate what the Europeans will do is probably premature at this point.
As far as reshoring capacity, we have capacity in two plants in Norway, one in Iceland, and we're restarting the Spanish facility. We've talked a lot about the restart of the Spanish facility and the financial burden that that creates on the company. The reason why we're doing that is because we had a contractual commitment to restart it, and that's why we are restarting that capacity. So that, in and of itself, reshores a couple hundred thousand tons of smelting capacity into Europe.

Nick Giles

Bill, that's very helpful. Appreciate all the color.

William Oplinger

Thanks, Nick.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Oplinger for any closing remarks.

William Oplinger

Thanks for joining our call today. Molly and I look forward to sharing further progress when we speak again in July. Thank you. This concludes our call.

Operator

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.