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Alcoa has struck a $4.8bn deal to buy Australian miner South32’s aluminium, bauxite and alumina assets, expanding its global footprint at a time when prices for the grey metal have been driven higher by the war in the Middle East.
Bill Oplinger, chief executive of the US aluminium manufacturer, told the FT he expected the market for the metal to “get tighter” as a result of the conflict, and that it would take as long as 12 months for global aluminium production to return to prewar levels.
“We entered 2026 in aluminium deficit, that led to higher prices — and then the conflict exacerbated the high prices,” the Alcoa chief executive said.
Prices for the metal hit a four-year high of more than $3,787 a tonne on June 2, although they have pulled back since the US and Iran struck a tentative peace deal two weeks ago.
The Middle East accounts for about one-tenth of global aluminium production.
The total value of the deal could hit $5.6bn comprising $3.1bn in cash, $1bn in Alcoa shares, $750mn of debt to be assumed by Alcoa and $750mn of future cash payments contingent on aluminium prices, South32 said.
The aluminium sector has previously seen acquisitions made at the top of the cycle go poorly. Rio Tinto’s $44bn purchase of Alcan in 2007 — as commodity prices soared on the eve of the financial crisis — has been cited as one of the most value-destructive deals in mining by executives who were involved in the deal.
Alcoa, however, said the deal would boost its alumina production by more than 50 per cent and its smelting capacity by more than a third.
To produce aluminium, bauxite mined from the ground is first refined into alumina, which is then smelted to make the grey metal.
The US company expects about $900mn in synergies from the assets, which span from South Africa to Australia to Brazil. Two of the projects — the Alumar refinery and the Brazil Aluminium smelter — are already operated by Alcoa.
“We are acquiring assets that are in our sweet spot,” said Oplinger, adding that he was “very excited” about the deal.
Graham Kerr, the outgoing chief executive of South32, said: “This transaction will unlock significant value for shareholders and repositions South32 as a leading upstream base metals-focused company with high-margin assets and transformational growth.”
Kerr has led South32 since the business was spun out of BHP in 2015. He will now hand over to former Anglo American executive Matthew Daley who was announced as the Australian company’s new leader last year.
While the war in the Middle East has bolstered aluminium prices, it has simultaneously pulled down prices for alumina because several large smelters in the region have halted or reduced their purchases of the feedstock.
Alcoa’s chief financial officer Molly Beerman said on June 10 that the alumina segment “as a whole will be underwater” this quarter, causing the company’s share price to drop nearly 10 per cent that day.
The deal to acquire South32’s stakes in certain bauxite, alumina and aluminium assets will include $3.1bn in cash and $1bn in Alcoa shares. The total enterprise value includes net debt primarily related to leases associated with the assets.
An additional payment of up to $750mn will be made by Alcoa if certain commodity price thresholds are met over the next four years.
South32, which has a primary listing in Sydney with secondary listings in London and Johannesburg, was spun out of BHP in 2015 and is a key producer of copper, zinc and silver.
