Alcoa Corporation (ASX: AAI) shares are under pressure on Thursday as investors react to the company's latest update.
At the time of writing, the Alcoa share price is down a sizeable 7.86% to $94.39.
That adds to a difficult week for the stock. Alcoa shares are now down almost 20% over the past 5 trading days.
But zoom out, and the stock is still sitting on a huge 12-month gain. Alcoa remains up 114% over the past year, so today's fall is testing investor confidence after a very strong run.
So, what has spooked the market today?
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Earnings hit from WA plant issues
According to The Australian, Alcoa has flagged "expected sequential impacts" to second quarter earnings, largely due to ongoing problems at its Pinjarra facility in Western Australia.
The company expects alumina segment performance to be unfavourable by about US$60 million. This includes about US$30 million of higher production costs at the Pinjarra refinery following disruption caused by Cyclone Narelle.
In addition, Alcoa is facing about US$20 million of higher energy costs, mainly from fuel oil and diesel linked to the Middle East conflict.
Lower price and volume impacts from bauxite offtake agreements are expected to add another US$10 million hit.
On top of that, third-party shipments are expected to be 120,000 tonnes lower in the second quarter because of the issues at Pinjarra.
Altogether, that adds about US$45 million to the earnings headwind compared with Alcoa's previous outlook.
Aluminium price pulls back
The timing of the update isn't helping either, with aluminium prices also easing after hitting a multi-year high.
According to Trading Economics, aluminium futures in the UK recently fell below US$3,500 per tonne, their lowest level in a month.
The price was around US$3,475.50 per tonne, down 1.43%. That leaves aluminium down about 2.9% over the past month, but up almost 40% since this time last year.
The pullback has been linked to demand concerns, higher US interest rates, and rising oil prices as tensions in the Middle East escalated.
Has the rally gone too far?
After a 114% gain in 12 months, expectations were already high.
Today's update does not change the fact Alcoa is still a major aluminium producer. But it does make the recent rally harder to justify.
Higher costs, lower shipments, and a softer aluminium price are not what investors want to see after such a big share price run.
This may leave some investors waiting for a better update before getting more confident on the stock.
