The expected positive disruption in the commodity sector has happened in a big way after the announcement by the Federal Reserve that they were going to resume inflating, and natural resource companies like Cliffs Natural Resources (NYSE:CLF), BHP Billiton (NYSE:BHP), Rio Tinto (NYSE:RTP), Vale SA (NYSE:VALE) all soared with the inevitable plunge in value of the U.S. dollar accompanying the quantitative easing.
Gold prices are soaring to new highs, as spot gold approached $1,400 an ounce at the end of closing on Thursday. Aluminum prices also reached levels not seen since April.
BHP closed Thursday at $91.20, gaining $5.12, or 5.95 percent. Cliffs ended the session at an even $70, rising $3.13, or 4.68 percent. Rio Tinto surged to close in New York at $70.52, increasing by $3.74, or 5.60 percent. Vale SA ended the day at $33.80, rising by $1.34, or 4.13 percent.
The overall commodity sector exploded Thursday as what appears to be pent-up expectation and anticipation concerning the Fed move poured out through investors putting their money into the commodity sector in a big way.
Showing posts with label Aluminum Prices. Show all posts
Showing posts with label Aluminum Prices. Show all posts
Friday, November 5, 2010
Alcoa (NYSE:AA), Century (NASDAQ:CENX), Kaiser (NASDAQ:KALU), Noranda (NYSE:NOR) Soar on Fed QE
Alcoa Inc. (NYSE:AA), Century Aluminum Company (NASDAQ:CENX), Kaiser Aluminum Corp. (NASDAQ:KALU), Noranda Aluminum Holding Corporation (NYSE:NOR) soared on the inflationary steps taken by the Federal Reserve, which will dilute the U.S. dollar even more via its $600 billion quantitative easing fiasco.
Commodities, which are denominated, for the most part, in U.S. dollars, will benefit strongly from this, and aluminum companies mentioned above, and others, will partake in that benefit.
Aluminum prices rose to their highest level since April, reaching about $2,450 a ton.
Higher commodity prices, in whatever segment they're in, can overcome a lot of resistance and operational problems, and that is the case with aluminum and aluminum producers, who are poised to move up in share price based on the expected and ongoing rise in aluminum prices.
Commodities, which are denominated, for the most part, in U.S. dollars, will benefit strongly from this, and aluminum companies mentioned above, and others, will partake in that benefit.
Aluminum prices rose to their highest level since April, reaching about $2,450 a ton.
Higher commodity prices, in whatever segment they're in, can overcome a lot of resistance and operational problems, and that is the case with aluminum and aluminum producers, who are poised to move up in share price based on the expected and ongoing rise in aluminum prices.
Monday, October 11, 2010
Alcoa (NYSE:AA) Helps Century (NASDAQ:CENX), Alumina (NYSE:AWC) Soar on Quarterly Results, Guidance
Although there are a lot of uncertainties remaining in the aluminum market, that didn't stop investors from pushing up the share prices of Alcoa Inc. (NYSE:AA), Alumina Limited (NYSE:AWC) and Century Aluminum Company (NASDAQ:CENX).
Alcoa beat revenue estimates and increased their aluminum demand outlook.
Alcoa closed the week at $12.89, gaining $0.69, or 5.66 percent on Friday. Century Aluminum ended the session at $13.99, rising $0.63, or 4.72 percent. Alumina surged $7.80, increasing $0.37, or 4.98 percent.
Among the top aluminum performers for the day was Noranda Aluminum Holding (NYSE:NOR), which rose to $10.08, gaining $0.89, or 9.68 percent.
Others in positive territory were Aluminum Corporation Of China Limited (NYSE:ACH). Reliance Steel and Aluminum (NYSE:RS) and Kaiser Aluminum (NASDAQ:KALU)
Aluminum Corporation closed at $24.79, rising $0.19, or 0.77 percent. Reliance finished the week at $43.89, gaining $1.44 on Friday, or 3.39 percent. Kaiser Aluminum ended the session at $44.38, an increase of $1.17, or 2.71 percent.
The market is starting to believe emerging markets can carry aluminum demand without much help from mature economies.
Alcoa beat revenue estimates and increased their aluminum demand outlook.
Alcoa closed the week at $12.89, gaining $0.69, or 5.66 percent on Friday. Century Aluminum ended the session at $13.99, rising $0.63, or 4.72 percent. Alumina surged $7.80, increasing $0.37, or 4.98 percent.
Among the top aluminum performers for the day was Noranda Aluminum Holding (NYSE:NOR), which rose to $10.08, gaining $0.89, or 9.68 percent.
Others in positive territory were Aluminum Corporation Of China Limited (NYSE:ACH). Reliance Steel and Aluminum (NYSE:RS) and Kaiser Aluminum (NASDAQ:KALU)
Aluminum Corporation closed at $24.79, rising $0.19, or 0.77 percent. Reliance finished the week at $43.89, gaining $1.44 on Friday, or 3.39 percent. Kaiser Aluminum ended the session at $44.38, an increase of $1.17, or 2.71 percent.
The market is starting to believe emerging markets can carry aluminum demand without much help from mature economies.
Friday, October 8, 2010
Citigroup (NYSE:C) Maintains "Buy" on Alcoa (NYSE:AA) JPMorgan (NYSE:JPM) Upgrades Them
The response to Alcoa (NYSE:AA) beating street estimates yesterday for the last quarter has resulted in the stock of the company rising almost 7 percent in early trading. Citigroup (NYSE:C) maintained their "Buy" on Alcoa and JPMorgan (NYSE:JPM) raised their rating on the aluminum giant.
Is the market response to Alcoa (NYSE:AA) too positive? It may be.
Earnings were still down 21 percent, and that has largely been ignored as the financial press is gushingly focusing only on the results that suit a positive story.
All that happened was the quarter wasn't as bad as expected for Alcoa.
Aluminum prices in the third quarter were down and the dollar was up, cutting into earnings for them.
Alcoa's estimate for global aluminum demand for 2010 was increased from 12 percent to 123 percent, citing emerging markets as the driver of that, saying “more and more people are moving into the middle class, driving demand in building and construction, transportation and packaging.”
Some believe the discounted share price of Alcoa is justified though, as they have to prove they can get earnings up as the price of aluminum rises. The last several years they haven't been able to do that.
Is the market response to Alcoa (NYSE:AA) too positive? It may be.
Earnings were still down 21 percent, and that has largely been ignored as the financial press is gushingly focusing only on the results that suit a positive story.
All that happened was the quarter wasn't as bad as expected for Alcoa.
Aluminum prices in the third quarter were down and the dollar was up, cutting into earnings for them.
Alcoa's estimate for global aluminum demand for 2010 was increased from 12 percent to 123 percent, citing emerging markets as the driver of that, saying “more and more people are moving into the middle class, driving demand in building and construction, transportation and packaging.”
Some believe the discounted share price of Alcoa is justified though, as they have to prove they can get earnings up as the price of aluminum rises. The last several years they haven't been able to do that.
Alcoa's (NYSE:AA) Performance Going Forward
While some celebrated the fact that Alcoa (NYSE:AA) analysts' profit estimates in the third quarter, they were still down 21 percent from previous results.
So even though aluminum prices helped their performance some, higher costs still cut into margins, generating lower results than they could have had. And that was with sales rising 15 percent to $5.3 billion.
Where does all this leave the company as it relates to the future?
They've already cut expenses to the bone, and while they may be able to whittle away a little more, there isn't much more it would to do affect the bottom line.
That means management has pretty much positioned themselves the best they can, other than possibly expanding through acquisition.
But that has its weaknesses as well, as the industry via its smelters can easily ramp up production and increase global aluminum inventory quickly, making acquisitions less desirable than other miners, such as in the gold mining industry.
One positive thing Alcoa and other commodity producing companies have going for them is the misguided policies of central banks around the world, who are committed to inflating (call it quantitative easing if it makes you feel better), which will drive down the value of the dollar, making it cheaper for overseas customers to buy aluminum in the case of Alcoa.
Lower prices alone can't be counted on though, as continued weaknesses in the global economy, especially in the West, could quickly skew the supply and demand picture, and little could be done if that ends up going down.
Since aluminum demand is for the most part coming from the emerging markets, that may not be as big of a factor, although it could still slow things down for a time, and stunt the rally they're experiencing now.
In other words, Alcoa is going to remain volatile and unpredictable, as there are too many factors happening at the same time to know which one will predominate and affect their markets.
One that can be counted on is weakening U.S. dollar and possible increased sales from overseas markets. If other things continue on as they are, that could be good news as long as the global economy and emerging markets remain fairly healthy.
That can't be measured by the West, as if they're not still in a recession, they're just on the other side of it, with the likelihood of dropping down into another one.
Alcoa's near and mid-term future is tied into emerging market growth. How they go will be how Alcoa goes, along with the secondary factors mentioned beyond supply and demand.
So even though aluminum prices helped their performance some, higher costs still cut into margins, generating lower results than they could have had. And that was with sales rising 15 percent to $5.3 billion.
Where does all this leave the company as it relates to the future?
They've already cut expenses to the bone, and while they may be able to whittle away a little more, there isn't much more it would to do affect the bottom line.
That means management has pretty much positioned themselves the best they can, other than possibly expanding through acquisition.
But that has its weaknesses as well, as the industry via its smelters can easily ramp up production and increase global aluminum inventory quickly, making acquisitions less desirable than other miners, such as in the gold mining industry.
One positive thing Alcoa and other commodity producing companies have going for them is the misguided policies of central banks around the world, who are committed to inflating (call it quantitative easing if it makes you feel better), which will drive down the value of the dollar, making it cheaper for overseas customers to buy aluminum in the case of Alcoa.
Lower prices alone can't be counted on though, as continued weaknesses in the global economy, especially in the West, could quickly skew the supply and demand picture, and little could be done if that ends up going down.
Since aluminum demand is for the most part coming from the emerging markets, that may not be as big of a factor, although it could still slow things down for a time, and stunt the rally they're experiencing now.
In other words, Alcoa is going to remain volatile and unpredictable, as there are too many factors happening at the same time to know which one will predominate and affect their markets.
One that can be counted on is weakening U.S. dollar and possible increased sales from overseas markets. If other things continue on as they are, that could be good news as long as the global economy and emerging markets remain fairly healthy.
That can't be measured by the West, as if they're not still in a recession, they're just on the other side of it, with the likelihood of dropping down into another one.
Alcoa's near and mid-term future is tied into emerging market growth. How they go will be how Alcoa goes, along with the secondary factors mentioned beyond supply and demand.
Thursday, October 7, 2010
Aluminum Demand Pushes Alcoa (NYSE:AA) Profits Up
Alcoa (NYSE:AA) beat analysts’ estimates for profits in the third quarter as demand for aluminum grew.
Earnings came in at 9 cents a share after items, beating estimates of 5 cents a share. Net income dropped to $61 million, or 6 cents a share, down from $77 million, or 8 cents a share, last year in the same quarter.
Even though beating estimates, profits were still down by 21 percent, as expenses increased. During the quarter average realized aluminum prices rose 15 percent.
Sales for the quarter were also up by 15 percent, coming in at $5.3 billion.
A couple of factors helping Alcoa was the declining value of the U.S. dollar and the drop in aluminum inventories by 3.3 percent during the quarter.
Going forward, Alcoa sees increased demand for aluminum from the cutting back of production by Chinese aluminum smelters because of orders from the government to lower their energy usage.
CEO Klaus Kleinfeld said, "In countries such as China, Brazil, India, and Russia, more and more people are moving into the middle class, driving demand in building and construction, transportation, and packaging."
For the full-year outlook, Alcoa increased its aluminum consumption estimate from 12 percent to 13 percent.
In the third quarter aluminum prices averaged $2,110 a metric ton on the LME, up from $1,836 last year in the same period.
Earnings came in at 9 cents a share after items, beating estimates of 5 cents a share. Net income dropped to $61 million, or 6 cents a share, down from $77 million, or 8 cents a share, last year in the same quarter.
Even though beating estimates, profits were still down by 21 percent, as expenses increased. During the quarter average realized aluminum prices rose 15 percent.
Sales for the quarter were also up by 15 percent, coming in at $5.3 billion.
A couple of factors helping Alcoa was the declining value of the U.S. dollar and the drop in aluminum inventories by 3.3 percent during the quarter.
Going forward, Alcoa sees increased demand for aluminum from the cutting back of production by Chinese aluminum smelters because of orders from the government to lower their energy usage.
CEO Klaus Kleinfeld said, "In countries such as China, Brazil, India, and Russia, more and more people are moving into the middle class, driving demand in building and construction, transportation, and packaging."
For the full-year outlook, Alcoa increased its aluminum consumption estimate from 12 percent to 13 percent.
In the third quarter aluminum prices averaged $2,110 a metric ton on the LME, up from $1,836 last year in the same period.
Wednesday, October 6, 2010
Alcoa (NYSE:AA) Earnings Lowered by Dahlman Rose
Alcoa (NYSE:AA) had its earnings estimates lowered by Dahlman Rose for the third quarter of 2010, citing aluminum prices being lower than they were projected to be.
That has been one of the problems with Alcoa's past projections, which have been for aluminum price increases of about 10 percent, although that could be the case going forward.
Consequently, Dahlman lowered earnings per share estimate for Alcoa from $0.10 a share to $0.05 a share.
Price per pound for aluminum in the third quarter was expected to be at $0.95 a pound, but came in at $0.93 a pound instead.
Full year estimates for 2010 and 2011 remain on track according to Dahlman, with earnings in 2010 expected to be $2.8 billion, or $0.45 a share, while earnings in 2011 for the full year are estimated to be $4 billion, or $1.10 a share.
That has been one of the problems with Alcoa's past projections, which have been for aluminum price increases of about 10 percent, although that could be the case going forward.
Consequently, Dahlman lowered earnings per share estimate for Alcoa from $0.10 a share to $0.05 a share.
Price per pound for aluminum in the third quarter was expected to be at $0.95 a pound, but came in at $0.93 a pound instead.
Full year estimates for 2010 and 2011 remain on track according to Dahlman, with earnings in 2010 expected to be $2.8 billion, or $0.45 a share, while earnings in 2011 for the full year are estimated to be $4 billion, or $1.10 a share.
Citigroup (NYSE:C) Sees Alcoa's (NYSE:AA) Earnings Dropping
In a preview of Alcoa's (NYSE:AA) earnings report on Thursday, Citigroup (NYSE:C) said via its Citi Investment Research arm that they see earnings lower than they originally estimated.
Citi said in a note to clients, "Alcoa is scheduled to report 3Q earnings after the market close on Thursday, October 7th. After adjusting our model for lower average aluminum prices, we now expect the company to post 3Q EPS of $0.05, down from $0.12 previously, and compares to consensus $0.06. We believe investors are already expecting disappointing 3Q results based on lagging AA shares relative to the recent surge in aluminum prices."
Assuming aluminum prices are able to remain at the levels they are, Citi said this about the fourth quarter:
"Citi goes on to say, "With spot aluminum trading at $1.06/lb, AA could post earnings of $0.20/lb in 4Q if aluminum prices were to remain at the current level for the full quarter. Recent moves by China to eliminate preferential power rates and restrict power to inefficient smelters are having an impact on production. China's August daily aluminum production declined for the second straight month to 44.8k tons/day vs 45.7k tons in July and a record high of 47.5k tons in June."
Alcoa closed Tuesday at $12.14, gaining $0.22, or 1.85 percent. Citi has a price target of $16 on them.
Citi said in a note to clients, "Alcoa is scheduled to report 3Q earnings after the market close on Thursday, October 7th. After adjusting our model for lower average aluminum prices, we now expect the company to post 3Q EPS of $0.05, down from $0.12 previously, and compares to consensus $0.06. We believe investors are already expecting disappointing 3Q results based on lagging AA shares relative to the recent surge in aluminum prices."
Assuming aluminum prices are able to remain at the levels they are, Citi said this about the fourth quarter:
"Citi goes on to say, "With spot aluminum trading at $1.06/lb, AA could post earnings of $0.20/lb in 4Q if aluminum prices were to remain at the current level for the full quarter. Recent moves by China to eliminate preferential power rates and restrict power to inefficient smelters are having an impact on production. China's August daily aluminum production declined for the second straight month to 44.8k tons/day vs 45.7k tons in July and a record high of 47.5k tons in June."
Alcoa closed Tuesday at $12.14, gaining $0.22, or 1.85 percent. Citi has a price target of $16 on them.
Monday, October 4, 2010
Alcoa (NYSE:AA) Can't Do Much But Hope and Wait
Alcoa (NYSE:AA) has done the things it needed to do to keep the company healthy, especially cutting costs throughout the recession.
But with the recession continue to batter the U.S. economy, and manufacturing down, there's very little in the near term Alcoa management can do, except to wait and hope.
It's all about aluminum demand and pricing for Alcoa, and in the near term nothing stands that changes the reality that demand will continue to remain down, along with prices.
Alcoa is scheduled to announce third-quarter earnings on October 7, and analysts don't see anything happening there that will change the outlook.
Expectations are they will generate a small profit for the quarter. Possibly around 6 cents a share.
All Alcoa can do now is wait for aluminum prices to go up significantly. So will shareholders in the company.
But with the recession continue to batter the U.S. economy, and manufacturing down, there's very little in the near term Alcoa management can do, except to wait and hope.
It's all about aluminum demand and pricing for Alcoa, and in the near term nothing stands that changes the reality that demand will continue to remain down, along with prices.
Alcoa is scheduled to announce third-quarter earnings on October 7, and analysts don't see anything happening there that will change the outlook.
Expectations are they will generate a small profit for the quarter. Possibly around 6 cents a share.
All Alcoa can do now is wait for aluminum prices to go up significantly. So will shareholders in the company.
Monday, September 27, 2010
Alcoa (NYSE:AA) Hearing Over Yadkin River Begins Today
After contentious debate and legal maneuvers, hearings over whether or not Alcoa (NYSE:AA) will be able to renew a 50-year license to operate dams on the Yadkin river have begun today.
The issue is over a water permit issued to Alcoa by the state of North Carolina, which was opposed by some state officials and others.
Before the federal government would consider whether or not to renew the license of Alcoa, they must get approval from the North Carolina Division of Water Quality.
What is at issue concerning the water quality permit in relationship to the hearing is for the judge to decide to uphold it or not. If he does, they have a strong chance of having the license renewed for another 50-year period by the federal government.
Alcoa generates millions in revenue annually from selling hydropower from the dams. Over the 50-year period going forward, that would amount to well over a billion in profits, and possibly a lot higher depending on prices in the decades ahead.
This would be a blow to Alcoa who is mostly boxed in by the price of aluminum, if they lose the deal, as it's one of the few alternative sources of revenue outside the sector they serve.
The issue is over a water permit issued to Alcoa by the state of North Carolina, which was opposed by some state officials and others.
Before the federal government would consider whether or not to renew the license of Alcoa, they must get approval from the North Carolina Division of Water Quality.
What is at issue concerning the water quality permit in relationship to the hearing is for the judge to decide to uphold it or not. If he does, they have a strong chance of having the license renewed for another 50-year period by the federal government.
Alcoa generates millions in revenue annually from selling hydropower from the dams. Over the 50-year period going forward, that would amount to well over a billion in profits, and possibly a lot higher depending on prices in the decades ahead.
This would be a blow to Alcoa who is mostly boxed in by the price of aluminum, if they lose the deal, as it's one of the few alternative sources of revenue outside the sector they serve.
Thursday, September 23, 2010
Alcoa (NYSE:AA) Continues Upward Climb
Alcoa (NYSE:AA) has drawn a lot of interest over the last couple of days, after moving up close to 5 percent yesterday, and up another 2.5 percent today.
Volume has been strong, already surpassing its 3-month average at 1:40 PM EDT.
There is no known reason Alcoa is moving up, as aluminum prices have remained at about their six-week high.
Alcoa has done a good job of cutting costs, but that is already been factored into the price.
Even so, analysts like the stock over recent months, and it may be based on the probability it may have hit its low and has nowhere to go but up.
But with Alcoa going as aluminum demand and prices go, there's nothing on that end which explain this upswing.
Alcoa closed Wednesday at $11.70, gaining $0.53, or 4.7 percent. There were at $11.97, up $0.27, or 2.26 percent, at 1:44 PM EDT.
Volume has been strong, already surpassing its 3-month average at 1:40 PM EDT.
There is no known reason Alcoa is moving up, as aluminum prices have remained at about their six-week high.
Alcoa has done a good job of cutting costs, but that is already been factored into the price.
Even so, analysts like the stock over recent months, and it may be based on the probability it may have hit its low and has nowhere to go but up.
But with Alcoa going as aluminum demand and prices go, there's nothing on that end which explain this upswing.
Alcoa closed Wednesday at $11.70, gaining $0.53, or 4.7 percent. There were at $11.97, up $0.27, or 2.26 percent, at 1:44 PM EDT.
Friday, August 27, 2010
Freeport (NYSE:FCX) Ready to Take Off?
Some analysts have been getting very bullish on some metals company, with Freeport-McMoRan Copper & Gold (NYSE:FCX) being one of the top ones.
Their growth over the last 45 days or so is cited as a major factor, but I don't take that too seriously, as that seems to be a more arbitrary period picked, as you could start at the beginning of August and you would get a loss for the last month, while if you start at the July lows, you could say they gained about 15 percent.
No matter how one tries to spin it, in regard to the most important metals market as far as copper and aluminum, is China, and they've cut back on their consumption by 3 percent from last year, and even though they'll continue to grow, the rate is being cut down significantly from their concerns over the over-heated property market in urban areas.
So that will decrease demand for these metals in the short term, and there's nowhere else in the world that will make up for the slowdown in China.
With Freeport actually doing better than the underlying metals, even if prices increase in the second half, which is expected, they may have that already built into the price.
Commodities will continue to be strong, including metals, but it seems the companies like Freeport-McMoran which provide the commodities will continue to have a bumpy ride for the next couple of years at least, as economic data continue to confirm we're still in the midst of a lingering recession.
Their growth over the last 45 days or so is cited as a major factor, but I don't take that too seriously, as that seems to be a more arbitrary period picked, as you could start at the beginning of August and you would get a loss for the last month, while if you start at the July lows, you could say they gained about 15 percent.
No matter how one tries to spin it, in regard to the most important metals market as far as copper and aluminum, is China, and they've cut back on their consumption by 3 percent from last year, and even though they'll continue to grow, the rate is being cut down significantly from their concerns over the over-heated property market in urban areas.
So that will decrease demand for these metals in the short term, and there's nowhere else in the world that will make up for the slowdown in China.
With Freeport actually doing better than the underlying metals, even if prices increase in the second half, which is expected, they may have that already built into the price.
Commodities will continue to be strong, including metals, but it seems the companies like Freeport-McMoran which provide the commodities will continue to have a bumpy ride for the next couple of years at least, as economic data continue to confirm we're still in the midst of a lingering recession.
Friday, August 13, 2010
Will Alcoa (NYSE:AA) Survive Next Dow Change?
Inspecting the performance of Alcoa's (NYSE:AA) share price over the last 15 years or so, the figures show the price today, other than the period surrounding January, 2009, when it plummeted to as low as $7.34 a share on the 2nd, is about the same as it was 15 years ago.
Today its share price is at $10.71, down $0.02, or 18 percent, as of 1:06 PM EDT.
This made me start to think that Alcoa may be in danger of being removed from the DJIA.
Even though they did have a decent last quarter, and their CEO believes demand should grow by 10 percent in the next year, it's hard to see that happening in the light of the darkening economic conditions, which is being revealed as the stimulus money runs down.
It's not just the performance of the company though, as its market cap is just at $10.94 billion, while newer companies in the tech industry like Apple (Nasdaq:AAPL), which has a market cap of $228.64 billion, and Google (Nasdaq:GOOG), which has a market cap of $155.54 billion, are far more representative of the type of economy we have in the U.S.
Either way, Alcoa looks like it's going to struggle for some time to come, and as the economic story unfolds, it's looking more and more like that aluminum demand and prices aren't going to grow in the way thought just a short month or two ago.
Today its share price is at $10.71, down $0.02, or 18 percent, as of 1:06 PM EDT.
This made me start to think that Alcoa may be in danger of being removed from the DJIA.
Even though they did have a decent last quarter, and their CEO believes demand should grow by 10 percent in the next year, it's hard to see that happening in the light of the darkening economic conditions, which is being revealed as the stimulus money runs down.
It's not just the performance of the company though, as its market cap is just at $10.94 billion, while newer companies in the tech industry like Apple (Nasdaq:AAPL), which has a market cap of $228.64 billion, and Google (Nasdaq:GOOG), which has a market cap of $155.54 billion, are far more representative of the type of economy we have in the U.S.
Either way, Alcoa looks like it's going to struggle for some time to come, and as the economic story unfolds, it's looking more and more like that aluminum demand and prices aren't going to grow in the way thought just a short month or two ago.
Wednesday, August 11, 2010
Alumina (NYSE:AWC) Profits Soar on Sales Volume and Higher Prices
Alumina Ltd. (NYSE:AWC) had a huge six month, as it soared past the earnings last year in the same half by 11 times, increasing from $4 million to $44 million. Analysts had been expecting $37 million in earnings.
Driving the resurgence were a huge spike in sales volume and surging metal prices.
According to Alumina Chief Executive Officer John Bevan, “Global alumina demand is forecast to grow at 12 percent for 2010 and pricing has improved.”
Alumina is in a joint venture with aluminum giant Alcoa (NYSE:AA) named AWAC, which produces about 25 percent of the world's alumina supply.
In 2010, AWAC is projected to produce close to 15.6 million tons of alumina, a slight downward revision of 200,000 tons.
Going forward, Bevan expects alumina to decouple from the aluminum price and reflect more closely the market where alumina is sold by traders, which now accounts for 40 percent of the overall market.
Under normal and past conditions, alumina prices were set based at a fixed percentage of aluminum prices.
Over the next several years that's expected to change. Bevan says he supports that because the current pricing mechanism doesn't include the costs of production, and that needs to be changed.
Driving the resurgence were a huge spike in sales volume and surging metal prices.
According to Alumina Chief Executive Officer John Bevan, “Global alumina demand is forecast to grow at 12 percent for 2010 and pricing has improved.”
Alumina is in a joint venture with aluminum giant Alcoa (NYSE:AA) named AWAC, which produces about 25 percent of the world's alumina supply.
In 2010, AWAC is projected to produce close to 15.6 million tons of alumina, a slight downward revision of 200,000 tons.
Going forward, Bevan expects alumina to decouple from the aluminum price and reflect more closely the market where alumina is sold by traders, which now accounts for 40 percent of the overall market.
Under normal and past conditions, alumina prices were set based at a fixed percentage of aluminum prices.
Over the next several years that's expected to change. Bevan says he supports that because the current pricing mechanism doesn't include the costs of production, and that needs to be changed.
Friday, August 6, 2010
Rio Tinto (NYSE:RTP) Soars on China Iron Ore Demand
Rio Tinto's (NYSE:RTP) net profit surged in the first half, with earnings increasing by 125 percent to $5.77 billion, up from $2.56 billion in the same half last year. Analysts had expected earnings of $5.38 billion.
Underlying earnings were $1.62 billion last year, which was different from the net earnings because of an adjustment coming from $827 million in derivative gains.
Also helping the performance of Rio Tinto in the first half was the prices of the major commodities it produces, which were all up significantly.
Leading the way were copper and molybdenum prices, which were both up by 78 percent from the first half of 2009. Aluminum prices increased by 50 percent during the same period, while gold moved up 26 percent.
Rio slashed their debt load to $12 billion, down from the $18.9 billion they had on the books at the end of 2009.
Rio Tinto's CEO Tom Albanese said on commodity demand going forward, "Global growth of nearly four per cent is predicted by the IMF for both this and next year, with Chinese GDP expected to grow at approximately nine per cent. This would have positive implications for metals and minerals markets but it is clear that economic conditions on a global scale will be volatile. Our longer term view remains that industrialization and urbanization in China, followed by India, will drive robust commodity demand growth."
The company has committed about $6 billion in capital expenditures to expand their operations over the next 12 months.
Underlying earnings were $1.62 billion last year, which was different from the net earnings because of an adjustment coming from $827 million in derivative gains.
Also helping the performance of Rio Tinto in the first half was the prices of the major commodities it produces, which were all up significantly.
Leading the way were copper and molybdenum prices, which were both up by 78 percent from the first half of 2009. Aluminum prices increased by 50 percent during the same period, while gold moved up 26 percent.
Rio slashed their debt load to $12 billion, down from the $18.9 billion they had on the books at the end of 2009.
Rio Tinto's CEO Tom Albanese said on commodity demand going forward, "Global growth of nearly four per cent is predicted by the IMF for both this and next year, with Chinese GDP expected to grow at approximately nine per cent. This would have positive implications for metals and minerals markets but it is clear that economic conditions on a global scale will be volatile. Our longer term view remains that industrialization and urbanization in China, followed by India, will drive robust commodity demand growth."
The company has committed about $6 billion in capital expenditures to expand their operations over the next 12 months.
Friday, July 23, 2010
Teck (NYSE:TCK), Freeport (NYSE:FCX), Southern Copper (NYSE:SCCO) Soar on Higher Metals Prices
Teck resources (NYSE:TCK), Southern Copper (NYSE:SCCO) and Freeport-McMoRan Copper & Gold (NYSE:FCX) all performed strong on Thursday, as copper surged to its highest level in 10 weeks, and lead, aluminum, tin, nickel and zinc were all up on the LME.
On the Comex in New York, copper futures for September delivery increased by 7.15 cents to $3.1645 a pound, while on the London Metal Exchange, copper for three months delivery rose $150, to $7,010 a metric ton, or $3.18 a pound.
The U.S. dollar also plunged Thursday, helping metals prices increase.
Teck Resources ended the trading session Thursday at $35.07, gaining $1.56, or 4.66 percent. Volume was at 6,203,424, below the 3-month average.
Freeport finished the day at 68.78, gaining $2.72, or 4.12 percent. Trading volume came in at 18,854,144, a little above the 3-month average.
Southern Copper Corporation closed at $32.05 Thursday, increasing by $0.97, or 3.12 percent. volume was at 4,062,354, higher than the 3-month average of 3,219,460.
On the Comex in New York, copper futures for September delivery increased by 7.15 cents to $3.1645 a pound, while on the London Metal Exchange, copper for three months delivery rose $150, to $7,010 a metric ton, or $3.18 a pound.
The U.S. dollar also plunged Thursday, helping metals prices increase.
Teck Resources ended the trading session Thursday at $35.07, gaining $1.56, or 4.66 percent. Volume was at 6,203,424, below the 3-month average.
Freeport finished the day at 68.78, gaining $2.72, or 4.12 percent. Trading volume came in at 18,854,144, a little above the 3-month average.
Southern Copper Corporation closed at $32.05 Thursday, increasing by $0.97, or 3.12 percent. volume was at 4,062,354, higher than the 3-month average of 3,219,460.
Thursday, July 22, 2010
Will Floating Yuan Help Alcoa's (NYSE:AA) Performance?
Alcoa (NYSE:AA) has probably done about as much as they can in cutting costs and preparing for a turnaround when it comes.
Over the last couple of years, aluminum prices have plunged by about 60 percent, and the shares have dropped to just below $11 a share, from the $30 range.
For better cost controls to compete in that regard, Alcoa is developing a bauxite mine in Brazil. They're spending about $1.5 billion on that project. Some of Alcoa's smaller competitors have been nipping away at their business with better prices, contributing to the overall poor performance of the company, the reason for the bauxite strategy.
Other projects are a large aluminum mining project in Saudi Arabia, and a effort to modernize Russian plants to better serve the domestic market there.
Recently they acquired window and door manufacturer Traco, to diversify their product line.
What could help them the most, is the recent decision by China to allow the yuan or renminbi float more against the U.S. dollar. That could generate more demand from China, although they've been cutting back in some areas to battle rising property prices in urban areas and a possible bubble.
The other problem with the renminbi is it is a potential double-edge sword, which could perform reverse and cause more challenges for Alcoa if that is the case.
If it performs as expected, it could be a good boost for Alcoa in the short term.
The bottom line though is still demand and aluminum prices. Until those elements in the equation change, Alcoa is going to continue struggle, along with its shareholders.
Over the last couple of years, aluminum prices have plunged by about 60 percent, and the shares have dropped to just below $11 a share, from the $30 range.
For better cost controls to compete in that regard, Alcoa is developing a bauxite mine in Brazil. They're spending about $1.5 billion on that project. Some of Alcoa's smaller competitors have been nipping away at their business with better prices, contributing to the overall poor performance of the company, the reason for the bauxite strategy.
Other projects are a large aluminum mining project in Saudi Arabia, and a effort to modernize Russian plants to better serve the domestic market there.
Recently they acquired window and door manufacturer Traco, to diversify their product line.
What could help them the most, is the recent decision by China to allow the yuan or renminbi float more against the U.S. dollar. That could generate more demand from China, although they've been cutting back in some areas to battle rising property prices in urban areas and a possible bubble.
The other problem with the renminbi is it is a potential double-edge sword, which could perform reverse and cause more challenges for Alcoa if that is the case.
If it performs as expected, it could be a good boost for Alcoa in the short term.
The bottom line though is still demand and aluminum prices. Until those elements in the equation change, Alcoa is going to continue struggle, along with its shareholders.
Monday, July 19, 2010
Alcoa (NYSE:AA): Aluminum Supply and Demand
There have been a number of interesting things happening in the aluminum industry, but unfortunately for Alcoa (NYSE:AA) and other producers, when added together it pretty much brings things back to where they were, with growing demand, but an increasing supply to balance it.
This is even with the news the Chinese are cutting back on aluminum production, as high electrical costs are slashing the margins in the industry.
Alcoa's CEO and Chairman Klaus Kleinfeld said he expects aluminum consumption to increase from 10 percent to 12 percent for 2010, a 2 percent increase over his previous estimates (on the high side).
Possibly in the second half some of that aluminum supply may dwindle based on lower prices, and the self-fulfilling prophecy may result in higher prices in the second half.
Some new aluminum ETFs could be a factor going forward as well, but it remains to be seen if they can raise the needed capital to fund the acquisition of aluminum.
The bottom line with aluminum prices seems to be it's as unpredictable as it has been, even with the estimated increase in demand.
Prices will determine the supply as always, and there isn't a lot to generate confidence this will change anytime soon.
This is even with the news the Chinese are cutting back on aluminum production, as high electrical costs are slashing the margins in the industry.
Alcoa's CEO and Chairman Klaus Kleinfeld said he expects aluminum consumption to increase from 10 percent to 12 percent for 2010, a 2 percent increase over his previous estimates (on the high side).
Possibly in the second half some of that aluminum supply may dwindle based on lower prices, and the self-fulfilling prophecy may result in higher prices in the second half.
Some new aluminum ETFs could be a factor going forward as well, but it remains to be seen if they can raise the needed capital to fund the acquisition of aluminum.
The bottom line with aluminum prices seems to be it's as unpredictable as it has been, even with the estimated increase in demand.
Prices will determine the supply as always, and there isn't a lot to generate confidence this will change anytime soon.
Thursday, July 15, 2010
Goldman (NYSE:GS) Raises Base Metal Forecasts for All Except Zinc
Goldman Sachs (NYSE:GS) increased its 12-month estimates for all base metals except zinc.
Zinc was dropped to $2,225 a metric ton, a plunge of 18 percent, because of demand falling in China and Europe. China especially has a robust domestic zinc industry, and that will keep them supplied longer than originally expected by Goldman.
Goldman maintained their preference for copper, continuing to say it's their favorite metal for the long term, based on declining inventory and what they believe will be a lower supply deficit throughout the next couple of years. They see copper prices rising to $8,050 a ton, a gain of 1.4 percent.
Nickel looks really good to the financial giant, as they see it surging to about $20,00 a ton, an amazing 167 percent gain if it happens. Nickel is primarily used in stainless steel to stop corrosion, and demand largely comes from property construction, so that will be a challenge in my mind to even come close to the gains they're talking about.
Aluminum price estimates were modest, with expectations they could rise to $2,225 a ton, a 2.5 percent increase.
Silver estimates for the next twelve months were to grow by 1.3 percent, to $22.60 an ounce, mostly on their belief gold will continue to rise, looking at $1,355 an ounce there.
Zinc was dropped to $2,225 a metric ton, a plunge of 18 percent, because of demand falling in China and Europe. China especially has a robust domestic zinc industry, and that will keep them supplied longer than originally expected by Goldman.
Goldman maintained their preference for copper, continuing to say it's their favorite metal for the long term, based on declining inventory and what they believe will be a lower supply deficit throughout the next couple of years. They see copper prices rising to $8,050 a ton, a gain of 1.4 percent.
Nickel looks really good to the financial giant, as they see it surging to about $20,00 a ton, an amazing 167 percent gain if it happens. Nickel is primarily used in stainless steel to stop corrosion, and demand largely comes from property construction, so that will be a challenge in my mind to even come close to the gains they're talking about.
Aluminum price estimates were modest, with expectations they could rise to $2,225 a ton, a 2.5 percent increase.
Silver estimates for the next twelve months were to grow by 1.3 percent, to $22.60 an ounce, mostly on their belief gold will continue to rise, looking at $1,355 an ounce there.
Wednesday, July 14, 2010
Freeport (NYSE:FCX), Not Alcoa (NYSE:AA), Will Measure Economy Better
Many analysts and commentators have used the quarterly results of Alcoa (NYSE:AA) in attempts to paint the economy as rosy and recovering. Freeport-McMoRan Copper & Gold (NYSE:FCX), on the other hand, should give us a more accurate measure, as aluminum prices reveal something different, as they remain low, indicating demand remains down.
Copper is a better indicator, as it spreads across a number of industries in a much large way, and in that regard Freeport will offer a more accurate picture of how the economy is going.
But what has to be taken into consideration, as in Alcoa, is the cost-cutting measures associated with quarterly results.
While these are good steps for a company to take, and should be aggressively attacked even in the best of economic conditions, they can give a false economic indicator if you're simply measuring it by earnings per share, which while good for investors and the company, do nothing to reveal the true condition of an economy.
Demand is the bottom line, along with supply, and that will be revealed by the price of any raw material. It's as simple as that.
So when companies and economic commentators throw around all their analysis and numbers, just look at one: the price of the commodity being talked about.
If copper prices rise, that means there is increased demand which supply is having a hard time keeping up with. That is what determines the actual economic conditions, not earnings per share, which can be increased through cost-cutting measures and selling off of assets, without demand for the actual raw material increasing.
So with Alcoa, their numbers weren't related to the increase in price of aluminum, and that shows demand is still down or there's too much supply That will be the same with copper in relationship to Freeport.
If Freeport has solid earnings per share, it's because of good management in cutting costs, not because the economic conditions are improving. That assumes the price of copper remains down.
Copper is a better indicator, as it spreads across a number of industries in a much large way, and in that regard Freeport will offer a more accurate picture of how the economy is going.
But what has to be taken into consideration, as in Alcoa, is the cost-cutting measures associated with quarterly results.
While these are good steps for a company to take, and should be aggressively attacked even in the best of economic conditions, they can give a false economic indicator if you're simply measuring it by earnings per share, which while good for investors and the company, do nothing to reveal the true condition of an economy.
Demand is the bottom line, along with supply, and that will be revealed by the price of any raw material. It's as simple as that.
So when companies and economic commentators throw around all their analysis and numbers, just look at one: the price of the commodity being talked about.
If copper prices rise, that means there is increased demand which supply is having a hard time keeping up with. That is what determines the actual economic conditions, not earnings per share, which can be increased through cost-cutting measures and selling off of assets, without demand for the actual raw material increasing.
So with Alcoa, their numbers weren't related to the increase in price of aluminum, and that shows demand is still down or there's too much supply That will be the same with copper in relationship to Freeport.
If Freeport has solid earnings per share, it's because of good management in cutting costs, not because the economic conditions are improving. That assumes the price of copper remains down.
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