Tuesday, March 30, 2010

Alcoa (NYSE:AA) Profits Vulnerable

Alcoa Profits in 2010

Even though there are some positive signs a global economic recovery may be on its way (forget the media assertions), Alcoa (NYSE:AA) is vulnerable to aluminum prices falling, which would make their profit picture look pretty weak.

This doesn't mean aluminum prices will fall this year, as it seems there is enough demand support out there, but the economies around the world are still very tenuous and weak, and downward pressures on aluminum prices could be a factor in 2010 for Alcoa and other aluminum suppliers, and that has to be watched closely by investors.

We all know China and India are undergoing fast changes, and their demand for aluminum should continue for some time, but that's not the same type of surety related to the steel industry, where iron ore and coking coal are pretty much assured to be strong in demand for 2010 and beyond.

Long term aluminum looks good, and so Alcoa should participate in that success, but short-term, everything is up in the air for any company, and there is still enough uncertainty out there to remain cautious about Alcoa and aluminum.

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