Alcoa (NYSE:AA) and Rosnano Corporation are reportedly close to launching several new projects, with several high-potential ventures already in the pipeline, according to Rosnano CEO Anatoly Chubais.
Although Chubais wouldn't elaborate on the projects, it is known the two companies are collaborating on studying the use of nanotechnologies in oil and gas, and new ways to transmit energy, as well as new lighting systems.
Alcoa hasn't commented much on it, but there have been several strategies they seem to be employing that are outside its core business, possibly to move out of the cyclical nature of their primary aluminum business.
EVA Dimensions upgraded Alcoa from "Underweight" to "Hold."
The aluminum producer closed Thursday at $12.78, losing $0.17, or 1.31 percent.
Showing posts with label Aluminum Supply. Show all posts
Showing posts with label Aluminum Supply. Show all posts
Friday, October 22, 2010
Thursday, October 21, 2010
Alcoa (NYSE:AA) Sees Aluminum Demand at 6 Percent over Next Decade
Alcoa (NYSE:AA) says they see demand for aluminum growing at a 6 percent clip over the next 10 years, and Rio Tinto (NYSE:RIO), via their Alcan unit, estimates aluminum growing at 5.3 percent over the next decade.
Rio said at the pace of their aluminum demand projections, aluminum production will have to grow by about 66 percent to meet the growing demand.
Alcan sees supply plunging by 27 million metric tons annually, as measured against demand, if new smelters aren't brought online by 2020.
For Alcoa, over the next year the believe aluminum consumption will increase by about 13 percent.
There have been mixed views on aluminum supply and demand, as some commentators and analysts have said they think aluminum supply will be ample going forward.
Much will depend, as with most things at this time, one whether or not the global economy comes out of the recession, especially the western world.
But even if the West doesn't, demand from Brazil, Russia, India and China will drive the demand side of the aluminum equation.
Another unknown is how much aluminum ETFs will factor in. As the first ones are being developed now, and a new aluminum market based on physical storage is emerging, which is unknown as to how much that will affect aluminum demand.
Rio said at the pace of their aluminum demand projections, aluminum production will have to grow by about 66 percent to meet the growing demand.
Alcan sees supply plunging by 27 million metric tons annually, as measured against demand, if new smelters aren't brought online by 2020.
For Alcoa, over the next year the believe aluminum consumption will increase by about 13 percent.
There have been mixed views on aluminum supply and demand, as some commentators and analysts have said they think aluminum supply will be ample going forward.
Much will depend, as with most things at this time, one whether or not the global economy comes out of the recession, especially the western world.
But even if the West doesn't, demand from Brazil, Russia, India and China will drive the demand side of the aluminum equation.
Another unknown is how much aluminum ETFs will factor in. As the first ones are being developed now, and a new aluminum market based on physical storage is emerging, which is unknown as to how much that will affect aluminum demand.
Monday, August 16, 2010
Alcoa (NYSE:AA) Increasing Prices of European Mill Products
In a note to customers a week ago, Alcoa (NYSE:AA) said it's going to increase the price of its European mill products it delivers in the fourth quarter, citing rising input costs as necessitating the move.
The Alcoa European Mill Products unit manufactures aluminum flat rolled products, which higher prices will have inflationary effects on the automotive and commercial vehicle sector, aerospace, industrial, building and consumer durables markets.
Higher costs are coming from energy, metal premiums and alloying elements.
Another factor, along with passing on higher inputs, is the tight supply of aluminum, according to the company's letter.
Alcoa said they sent the letter so their customers can prepare for the fourth quarter and 2011 when they begin negotiating contracts going forward.
The Alcoa European Mill Products unit manufactures aluminum flat rolled products, which higher prices will have inflationary effects on the automotive and commercial vehicle sector, aerospace, industrial, building and consumer durables markets.
Higher costs are coming from energy, metal premiums and alloying elements.
Another factor, along with passing on higher inputs, is the tight supply of aluminum, according to the company's letter.
Alcoa said they sent the letter so their customers can prepare for the fourth quarter and 2011 when they begin negotiating contracts going forward.
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.
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, June 24, 2010
Alcoa (NYSE:AA): What's not to Like? Short Term!
Alcoa (NYSE:AA) has been doing a lot of things right over the last several years, and no matter what they do it seems they aren't able to break through and return to the share price they've been accustomed to in the past.
That of course isn't something they have much control over for the most part, and the overall macroeconomic conditions have been prohibitive to them in the industries they serve. That isn't going to change any time soon, even with the attempt by CEO Klaus Kleinfeld's attempt to paint the near future as more rosy than it in reality will be.
Some of the good things Alcoa is doing which will ultimately pay off for them, is the $10.8 Saudi Maaden joint venture, which they've started construction on recently, the JSC Russing Shipbuilding partnership they just announced, and cutting back on can-sheet volumes, which weren't profitable for them.
In other words, they're expanding while cutting costs, and that will definitely pay dividends for them and their shareholders down the road, but there is little in the short term which is positive for the company. They are also increasing scale, which over the long haul should really position them strongly against their competitors.
Hopes of growing demand in China have been dampered some as the country attempts to control the property markets in its urban centers, which have been out of control in the inflationary sense.
That will result in lower aluminum demand, as other raw materials, which should fall below prior expectations. But even if that does materialize, and the demand for aluminum reaches the 10 percent Alcoa is looking for, that doesn't address the slowing U.S. and European markets, which will definitely cut into demand.
Another element that Alcoa has going for it over the long term is the emergence of aluminium ETFs, which will create an entirely new market for the lightweight metal.
While they are buying up aluminum now, their competitor Rusal is the major beneficiary at this time. Word is they are struggling to meet demand there, and that could help Alcoa going forward.
The only other short-term possibility of getting some traction for Alcoa is if the aluminum that is tied up by investors and contracts keeps the demand from being met, even though the supply is at a high level.
That seems unlikely to me, even though some think it's a real possibility.
Either way, Alcoa is doing a lot of good things to prepare for a rebound, and when that rebound comes, their share price should start to fly again.
Those with a long-term outlook could do very well with Alcoa, as it's not if they're going to surge in share price again, it's only a matter of when.
In the short term I think everyone needs to manage their expectations, and if they do fall even further in price, it should definitely be considered a buying opportunity for those looking to place some money in them.
That of course isn't something they have much control over for the most part, and the overall macroeconomic conditions have been prohibitive to them in the industries they serve. That isn't going to change any time soon, even with the attempt by CEO Klaus Kleinfeld's attempt to paint the near future as more rosy than it in reality will be.
Some of the good things Alcoa is doing which will ultimately pay off for them, is the $10.8 Saudi Maaden joint venture, which they've started construction on recently, the JSC Russing Shipbuilding partnership they just announced, and cutting back on can-sheet volumes, which weren't profitable for them.
In other words, they're expanding while cutting costs, and that will definitely pay dividends for them and their shareholders down the road, but there is little in the short term which is positive for the company. They are also increasing scale, which over the long haul should really position them strongly against their competitors.
Hopes of growing demand in China have been dampered some as the country attempts to control the property markets in its urban centers, which have been out of control in the inflationary sense.
That will result in lower aluminum demand, as other raw materials, which should fall below prior expectations. But even if that does materialize, and the demand for aluminum reaches the 10 percent Alcoa is looking for, that doesn't address the slowing U.S. and European markets, which will definitely cut into demand.
Another element that Alcoa has going for it over the long term is the emergence of aluminium ETFs, which will create an entirely new market for the lightweight metal.
While they are buying up aluminum now, their competitor Rusal is the major beneficiary at this time. Word is they are struggling to meet demand there, and that could help Alcoa going forward.
The only other short-term possibility of getting some traction for Alcoa is if the aluminum that is tied up by investors and contracts keeps the demand from being met, even though the supply is at a high level.
That seems unlikely to me, even though some think it's a real possibility.
Either way, Alcoa is doing a lot of good things to prepare for a rebound, and when that rebound comes, their share price should start to fly again.
Those with a long-term outlook could do very well with Alcoa, as it's not if they're going to surge in share price again, it's only a matter of when.
In the short term I think everyone needs to manage their expectations, and if they do fall even further in price, it should definitely be considered a buying opportunity for those looking to place some money in them.
Tuesday, June 22, 2010
Citigroup (NYSE:C), Morgan Stanley (NYSE:MS) See Higher Aluminum Prices
Contradicting a lot of other aluminum industry watchers, Citigroup (NYSE:C) and Morgan Stanley (NYSE:MS) analysts see aluminum prices pushing much higher based on tightening supplies.
Citigroup goes way out on the limb, saying aluminum prices will skyrocket to $2,500 a metric ton in 2011, while general consensus is aluminum prices will stay between $1,900 to $2,100 through that period of time.
Morgan Stanley isn't that optimistic, but still more optimistic than most others, as they see aluminum surging as high as $2,200 by the end of 2010, and reaching $2,295 in 2011.
The reason for the discrepancy in aluminum price outlook is based on how one interprets the impact of financial arrangements and how much of the high levels of supply will be released into the markets.
Those with lower price views believe there is too much aluminum stockpiled for the agreements in place to hinder the supply that much, which will keep prices lower, while those with the higher outlook believe those agreements and aluminum held by investors will limit the amount of aluminum to be released into the market, even with the near-record inventory.
There is also the aluminum ETFs which are creating an entirely new aluminum market to consider, but it's not clear at this time how that will impact prices short term, although they are sure to long term, as demand grows and battles over who acquires the aluminum supply emerge.
Higher aluminum prices don't guarantee increasing demand though, or necessarily more profits for aluminum suppliers, because if prices indeed go much higher than expected, and macro economic conditions remain the same, companies will cut back on buying aluminum, prices will fall again, and we'll be back to where we are now.
I would be surprised to see the aluminum price increase to the levels Citigroup and Morgan Stanley are projecting, as there seems to be more than enough aluminum supply available even with the physical aluminum that is tied up and not available to the market.
Citigroup goes way out on the limb, saying aluminum prices will skyrocket to $2,500 a metric ton in 2011, while general consensus is aluminum prices will stay between $1,900 to $2,100 through that period of time.
Morgan Stanley isn't that optimistic, but still more optimistic than most others, as they see aluminum surging as high as $2,200 by the end of 2010, and reaching $2,295 in 2011.
The reason for the discrepancy in aluminum price outlook is based on how one interprets the impact of financial arrangements and how much of the high levels of supply will be released into the markets.
Those with lower price views believe there is too much aluminum stockpiled for the agreements in place to hinder the supply that much, which will keep prices lower, while those with the higher outlook believe those agreements and aluminum held by investors will limit the amount of aluminum to be released into the market, even with the near-record inventory.
There is also the aluminum ETFs which are creating an entirely new aluminum market to consider, but it's not clear at this time how that will impact prices short term, although they are sure to long term, as demand grows and battles over who acquires the aluminum supply emerge.
Higher aluminum prices don't guarantee increasing demand though, or necessarily more profits for aluminum suppliers, because if prices indeed go much higher than expected, and macro economic conditions remain the same, companies will cut back on buying aluminum, prices will fall again, and we'll be back to where we are now.
I would be surprised to see the aluminum price increase to the levels Citigroup and Morgan Stanley are projecting, as there seems to be more than enough aluminum supply available even with the physical aluminum that is tied up and not available to the market.
Aluminum Prices Going Nowhere Through 2011
A growing consensus is emerging that aluminum prices over the next couple of years are going to remain largely level, and will fluctuate between $1,900 and $2,100 a ton during that time.
The global economic picture, along with the oversupply of aluminum are the major factors cited by economists and analysts as to the reasons for that outlook.
Within those general parameters, aluminum prices are expected to be volatile, mostly on the ongoing battle of China against inflation in their urban property markets, as well as the continuing European debt crisis.
Although demand has been looking good over the long term, the supply is high, and that is negating the increase in demand as far as aluminum prices go, and new aluminum smelters make supply an issue going forward, as it should increase even more as they go online.
Some erratic pricing behavior for aluminum will arise from the inventory deals which could limit supply during certain periods of time, which will be part of the fluctuation in prices mentioned above, but over time that won't have any significant impact on aluminum prices until demand reaches levels where it can't be supplied, which doesn't look to be any time soon.
One new element which isn't being talked about much yet, but which could dramatically change the aluminum demand picture is the news that new aluminum-backed ETFs are going to launch in the latter part of 2010, which could create the type of demand mentioned, changing the overall picture for aluminum.
In that regard, aluminum suppliers could have a harder time meeting demand in the future, increasing the price, but a lot of things have to fall into place for these ETFs to become major aluminum players; like getting the type of financing to take them through the challenges early stages, which is far from guaranteed at this time, but could end up happening over the next several years.
Aluminum looks good over the long term, along with aluminum producers, but in the short term there's very little to get excited about, other than the shares of aluminum companies going down, which will give investors good entry points to invest.
The global economic picture, along with the oversupply of aluminum are the major factors cited by economists and analysts as to the reasons for that outlook.
Within those general parameters, aluminum prices are expected to be volatile, mostly on the ongoing battle of China against inflation in their urban property markets, as well as the continuing European debt crisis.
Although demand has been looking good over the long term, the supply is high, and that is negating the increase in demand as far as aluminum prices go, and new aluminum smelters make supply an issue going forward, as it should increase even more as they go online.
Some erratic pricing behavior for aluminum will arise from the inventory deals which could limit supply during certain periods of time, which will be part of the fluctuation in prices mentioned above, but over time that won't have any significant impact on aluminum prices until demand reaches levels where it can't be supplied, which doesn't look to be any time soon.
One new element which isn't being talked about much yet, but which could dramatically change the aluminum demand picture is the news that new aluminum-backed ETFs are going to launch in the latter part of 2010, which could create the type of demand mentioned, changing the overall picture for aluminum.
In that regard, aluminum suppliers could have a harder time meeting demand in the future, increasing the price, but a lot of things have to fall into place for these ETFs to become major aluminum players; like getting the type of financing to take them through the challenges early stages, which is far from guaranteed at this time, but could end up happening over the next several years.
Aluminum looks good over the long term, along with aluminum producers, but in the short term there's very little to get excited about, other than the shares of aluminum companies going down, which will give investors good entry points to invest.
Friday, June 18, 2010
Alcoa (NYSE:AA) Signs Russian Shipbuilding Deal
Alcoa (NYSE:AA) signed a deal with the state-owned Russian shipbuilder JSC to supply aluminum for its ships.
JSC, or JSC United Shipbuilding Corp., is the largest holder of assets related to building or repairing ships in Russia, said Alcoa, who signed the deal with them in St. Petersburg at an economic forum.
Part of the deal will be to aid in building out the shipbuilding market in Russia, which could be a good long-term deal for Alcoa, which has struggled to open up new markets and generate new demand for aluminum, which has plunged in price as demand has largely dried up since the recession began.
Alcoa has been doing business in Russia since 1998, and has acquired two aluminum plants in the country, while spending $750 million to upgrade them.
JSC, or JSC United Shipbuilding Corp., is the largest holder of assets related to building or repairing ships in Russia, said Alcoa, who signed the deal with them in St. Petersburg at an economic forum.
Part of the deal will be to aid in building out the shipbuilding market in Russia, which could be a good long-term deal for Alcoa, which has struggled to open up new markets and generate new demand for aluminum, which has plunged in price as demand has largely dried up since the recession began.
Alcoa has been doing business in Russia since 1998, and has acquired two aluminum plants in the country, while spending $750 million to upgrade them.
Monday, June 14, 2010
Alcoa (NYSE:AA) Suspends Operations at Spanish Smelter
Floods hitting the region housing their aluminum smelter in Aviles, Spain has caused Alcoa (NYSE:AA) to temporarily suspend operations there.
The production capacity at the plant in Aviles stands at 93,000 metric tons a year.
Consequently, Alcoa also declared force majeure, implemented when forces beyond the control of a company occur which keep them from meeting obligations of their customers. This means deliveries and shipments will be delayed until conditions are improved and operations continue.
Alcoa stated they are working with entities in the region, and will release more details once they get a better overall picture of the overall damages and how that will impact the timetable for meeting their obligations to their customers.
The production capacity at the plant in Aviles stands at 93,000 metric tons a year.
Consequently, Alcoa also declared force majeure, implemented when forces beyond the control of a company occur which keep them from meeting obligations of their customers. This means deliveries and shipments will be delayed until conditions are improved and operations continue.
Alcoa stated they are working with entities in the region, and will release more details once they get a better overall picture of the overall damages and how that will impact the timetable for meeting their obligations to their customers.
Monday, June 7, 2010
Alcoa (NYSE:AA) Net Income Projected to Double by 2012
While the prices of aluminum remain depressed for now, and companies like Alcoa (NYSE:AA) have suffered with low-prices, the future is starting to look a lot brighter for those with heave aluminum exposure, as prices are expected to rebound significantly over the next five years, and Alcoa is positioned to be a major beneficiary of that.
Even in the relatively short term Alcoa's net income is projected to double by 2012 because of these emerging circumstances of increased demand.
One example in regard to increased demand is with Airbus SAS, the largest producer of commercial aircraft in the world. They said in February they are going to acquire approximately 8,000 planes valued at about $1.2 trillion over the next 20 years.
Rio Alcan's CEO Jacynthe Cote estimates aluminum demand will most likely double over the next 10 to 15 years as emerging nations increase their acquisition of the metal and products which aluminum is used in making them.
Another largely hidden factor at this time is the soon-to-be launched aluminum ETFs, which will create a new market for the metal, and could change aluminum demand dynamics significantly.
For those with a longer investment outlook, aluminum could be one of the better investments over the next five years or so, but that assumes a lot in the sense of the condition of the global economy, which is anything but sure and solid at this time.
But it's not a matter of if this is going to happen, it's a matter of when. If the global economy slows down even more because of China and Europe, the time-frames would be extended longer into the future, so that must be considered in managing expectations.
Alcoa and other aluminum producers will be strong beneficiaries of the rebound in aluminum prices when they happen, and their share price will ultimately reflect that.
Even in the relatively short term Alcoa's net income is projected to double by 2012 because of these emerging circumstances of increased demand.
One example in regard to increased demand is with Airbus SAS, the largest producer of commercial aircraft in the world. They said in February they are going to acquire approximately 8,000 planes valued at about $1.2 trillion over the next 20 years.
Rio Alcan's CEO Jacynthe Cote estimates aluminum demand will most likely double over the next 10 to 15 years as emerging nations increase their acquisition of the metal and products which aluminum is used in making them.
Another largely hidden factor at this time is the soon-to-be launched aluminum ETFs, which will create a new market for the metal, and could change aluminum demand dynamics significantly.
For those with a longer investment outlook, aluminum could be one of the better investments over the next five years or so, but that assumes a lot in the sense of the condition of the global economy, which is anything but sure and solid at this time.
But it's not a matter of if this is going to happen, it's a matter of when. If the global economy slows down even more because of China and Europe, the time-frames would be extended longer into the future, so that must be considered in managing expectations.
Alcoa and other aluminum producers will be strong beneficiaries of the rebound in aluminum prices when they happen, and their share price will ultimately reflect that.
Thursday, June 3, 2010
Novelis Gains from Alcoa (NYSE:AA) Abandoning Aluminum Cans
Alcoa (NYSE:AA) is dropping out of the aluminum can business, at least they're going to produce much less, as in April they announced they were letting a 10-year contract expire which had been losing money.
Novelis, the American division of India-based Hindalco Industries, said they will become the largest producer of metal beverage cans in America as a result.
This would be under the flat-rolled segment of the company, which reduced shipments in the first quarter by close to 75,000 tons.
On the other hand, Novelis said they'll increase North American flat-rolled product by around 1.75 billion pounds of sheet. That would give them approximately 45 percent of the aluminum business used to make beverage cans. That's an increase of about 3 percent for Novelis.
Novelis, the American division of India-based Hindalco Industries, said they will become the largest producer of metal beverage cans in America as a result.
This would be under the flat-rolled segment of the company, which reduced shipments in the first quarter by close to 75,000 tons.
On the other hand, Novelis said they'll increase North American flat-rolled product by around 1.75 billion pounds of sheet. That would give them approximately 45 percent of the aluminum business used to make beverage cans. That's an increase of about 3 percent for Novelis.
Friday, May 28, 2010
Alcoa (NYSE:AA) Not Expected to Rebound in 2010
Based largely on costs, Alcoa (NYSE:AA) is expected to continue to underperform their peers for the remainder of 2010.
A number of analysts agree with this, as those at JPMorgan (NYSE:JPM), Deutsche Bank (NYSE:DB) and UBS (NYSE:UBS) downgraded them in April.
Jim Cramer concurs with that as well, saying recently, "I've given up on Alcoa. I'd go with Dupont (NYSE:DD) or Dow Chemical (NYSE:DOW), where costs are also going down. I will not recommend Alcoa."
China imports are down while aluminum inventory levels at the Shanghai Futures Exchange have soared 64.4 percent, to 489,495 tons, up from 297,722 as of January 7.
With aluminum imports way down in China, with domestic production rising, and costs not under control at Alcoa, there's little in the near term to suggest they can do anything to change their current scenario.
Aluminum ETFs expected to launch later in 2010 are one glimmer of hope they have as far as demand goes, but Rusal is carrying the bulk of that load, and Alcoa would probably take up any slack Rusal can't provide, which I've heard they're having a hard time meeting expected demand from that new aluminum market.
A number of analysts agree with this, as those at JPMorgan (NYSE:JPM), Deutsche Bank (NYSE:DB) and UBS (NYSE:UBS) downgraded them in April.
Jim Cramer concurs with that as well, saying recently, "I've given up on Alcoa. I'd go with Dupont (NYSE:DD) or Dow Chemical (NYSE:DOW), where costs are also going down. I will not recommend Alcoa."
China imports are down while aluminum inventory levels at the Shanghai Futures Exchange have soared 64.4 percent, to 489,495 tons, up from 297,722 as of January 7.
With aluminum imports way down in China, with domestic production rising, and costs not under control at Alcoa, there's little in the near term to suggest they can do anything to change their current scenario.
Aluminum ETFs expected to launch later in 2010 are one glimmer of hope they have as far as demand goes, but Rusal is carrying the bulk of that load, and Alcoa would probably take up any slack Rusal can't provide, which I've heard they're having a hard time meeting expected demand from that new aluminum market.
Thursday, May 27, 2010
Aluminum Corp of China (NYSE:ACH), Alumina (NYSE:AWC), and Reliance Steel and Aluminum (NYSE:RS) Soaring Today
Alumina (NYSE:AWC), Reliance Steel Aluminum (NYSE:RS) Aluminum Corp of China (NYSE:ACH) and Alcoa (NYSE:AA) are all soaring today, especially the first three, as a durable goods report implying the industrial sector of the U.S. is continuing to recover, even with the economic concerns over the European sovereign debt crisis and possibility China may cut some imports in an effort to battle inflation.
The aluminum sector has been getting crushed recently, and all the right elements seem to have come together to at least give it a temporary reprieve.
Even without the guarded news, aluminum producers would probably have still did well, as they were due for a rebound, but the data points to at least a neutral situation, which means things could be level for demand, and possible grow a little in the near term.
The aluminum sector has been getting crushed recently, and all the right elements seem to have come together to at least give it a temporary reprieve.
Even without the guarded news, aluminum producers would probably have still did well, as they were due for a rebound, but the data points to at least a neutral situation, which means things could be level for demand, and possible grow a little in the near term.
Tuesday, May 25, 2010
Alcoa (NYSE:AA) Earnings Power Questionable
The growing fears over a global economic meltdown from the sovereign debt crisis in Europe, along with an expected slowdown in demand for raw materials in China has Alcoa (NYSE:AA) and other raw material producers under revenue and earnings pressure, as expected demand may not appear in the near-term, and that has the companies scrambling for answers that don't seem to be out there.
For Alcoa, the one positive is the proposed launch of several aluminum ETFs later in the year which could create a demand that didn't exist before.
Rusal is carrying the brunt of that supply though, but word is out that they are having trouble meeting the demand, and Alcoa seems to be next in line to meet that demand.
The problem is there aren't any figures out yet as to how much that will have an effect on Alcoa, and how much aluminum that will account for.
So based on existing conditions, Alcoa will be under earnings pressure for some time, and there doesn't seem to be anything ahead that will change that.
A growing number of those following the company believe they'll be lucky to reach even a $1 in earnings a share, with most thinking about 70 cents. That could even be questionable if an expected slowdown indeed happens.
For Alcoa, the one positive is the proposed launch of several aluminum ETFs later in the year which could create a demand that didn't exist before.
Rusal is carrying the brunt of that supply though, but word is out that they are having trouble meeting the demand, and Alcoa seems to be next in line to meet that demand.
The problem is there aren't any figures out yet as to how much that will have an effect on Alcoa, and how much aluminum that will account for.
So based on existing conditions, Alcoa will be under earnings pressure for some time, and there doesn't seem to be anything ahead that will change that.
A growing number of those following the company believe they'll be lucky to reach even a $1 in earnings a share, with most thinking about 70 cents. That could even be questionable if an expected slowdown indeed happens.
Monday, May 24, 2010
Fluor (NYSE:FLR) Awarded Alcoa (NYSE:AA) Contract
Fluor (NYSE:FLR) has won approximate $3 billion in business from Alcoa (NYSE:AA) and Saudi Arabian Mining Co. in the $10.8 billion project to build an aluminum facility in Saudi Arabia.
Chief Operating Officer of Fluor, David Seaton, said, "The mining and metals sector continues to be a bright spot for Fluor."
Alcoa originally had a 40 percent stake in the project, but slashed it to 25.1 percent in the early part of 2010.
There will also be a bauxite mine brought on, which will generate an estimated 4 million tons a year. A refinery with with capacity for 1.8 million tons-a-year will also be part of the final project.
Fluor's place in the development will include procurement, construction management and engineering.
Chief Operating Officer of Fluor, David Seaton, said, "The mining and metals sector continues to be a bright spot for Fluor."
Alcoa originally had a 40 percent stake in the project, but slashed it to 25.1 percent in the early part of 2010.
There will also be a bauxite mine brought on, which will generate an estimated 4 million tons a year. A refinery with with capacity for 1.8 million tons-a-year will also be part of the final project.
Fluor's place in the development will include procurement, construction management and engineering.
Saturday, May 22, 2010
Will Alcoa (NYSE:AA) Be Saved by Aluminum ETFs?
As the recession continues on, contrary to mainstream media reports to the contrary, Alcoa (NYSE:AA) continues to be challenged by the relatively low number of cars and planes being bought, and consequently, built.
That has of course caused aluminum demand to fall, and the price of aluminum with it, resulting in the inevitable fall in the share price of Alcoa as well.
One thing that could help them a lot in the near term, is the planned introduction of several aluminum ETFs in the latter part of the year, which they're expected to have a part in supplying the aluminum for, which is physically held by the ETFs, similar to gold being held by gold ETFs.
The question is how big of a role will Alcoa play in these new investment vehicles, as Rusal is already working on supplying aluminum for them, and they're the primary supplier. Alcoa's role at this time seems to be supplementary to what Rusal can't supply, so it's unclear at this time how much revenue and profits they'll generate as a result.
It is something everyone interested in Alcoa needs to carefully watch as the year goes on, as it may end up being a key factor in their short- and mid-term performance, as the conditions in Europe and China will probably result in aluminum demand being subdued for possibly a very long time, i.e. a couple of years or more.
That has of course caused aluminum demand to fall, and the price of aluminum with it, resulting in the inevitable fall in the share price of Alcoa as well.
One thing that could help them a lot in the near term, is the planned introduction of several aluminum ETFs in the latter part of the year, which they're expected to have a part in supplying the aluminum for, which is physically held by the ETFs, similar to gold being held by gold ETFs.
The question is how big of a role will Alcoa play in these new investment vehicles, as Rusal is already working on supplying aluminum for them, and they're the primary supplier. Alcoa's role at this time seems to be supplementary to what Rusal can't supply, so it's unclear at this time how much revenue and profits they'll generate as a result.
It is something everyone interested in Alcoa needs to carefully watch as the year goes on, as it may end up being a key factor in their short- and mid-term performance, as the conditions in Europe and China will probably result in aluminum demand being subdued for possibly a very long time, i.e. a couple of years or more.
Friday, May 21, 2010
Time to Buy Alcoa (NYSE:AA)?
Since the early part of 2009, Alcoa (NYSE:AA) has dropped from almost $18 a share to between $11 a share and $12 a share today. Most of this has come from a decrease in demand for aluminum, which has cause aluminum prices to plunge.
There can be no doubt that aluminum prices will rebound, as demand will ultimately return for the lightweight metal, and the prices will rise along with Alcoa's share price.
Add to that there will be an increase in aluminum demand from the aluminum ETFs, which are expected to launch later this year, and it creates another market for the metal that hadn't existed before, as they will hold physical aluminum to back up the funds.
Rusal already has problems providing what is needed, and it is expected that Alcoa will make up a lot of what they aren't able to provide.
Alcoa is cheap now, and while we don't know how far it may drop, as economic news has been somewhat grim, those looking for a sure long-term play could do very well with Alcoa, and buying them at this price, at this time, won't harm anyone with a long-term commitment.
There can be no doubt that aluminum prices will rebound, as demand will ultimately return for the lightweight metal, and the prices will rise along with Alcoa's share price.
Add to that there will be an increase in aluminum demand from the aluminum ETFs, which are expected to launch later this year, and it creates another market for the metal that hadn't existed before, as they will hold physical aluminum to back up the funds.
Rusal already has problems providing what is needed, and it is expected that Alcoa will make up a lot of what they aren't able to provide.
Alcoa is cheap now, and while we don't know how far it may drop, as economic news has been somewhat grim, those looking for a sure long-term play could do very well with Alcoa, and buying them at this price, at this time, won't harm anyone with a long-term commitment.
Thursday, May 20, 2010
Alcoa (NYSE:AA), Century Aluminum (Nasdaq:CENX), Aluminum Corporation of China (NYSE:ACH) Fall as Global Production Surges
Alcoa (NYSE:AA), Century Aluminum (Nasdaq:CENX), Aluminum Corporation of China (NYSE:ACH) are all down today as the International Aluminium Institute announced aluminum production surged to a record last month to 112,500 metric tons a day.
This implies that there is a cutback in buying or demand, as there doesn't seem to be any news that would make that part of the aluminum business change.
It's possible the increase could also be in preparation of the introduction of the first aluminum ETFs, which are scheduled to launch sometime later in the year, or possibly in the early part of 2011.
Aluminum ETFs will store physical aluminum to back up their funds, creating a new market for the lightweight metal.
This implies that there is a cutback in buying or demand, as there doesn't seem to be any news that would make that part of the aluminum business change.
It's possible the increase could also be in preparation of the introduction of the first aluminum ETFs, which are scheduled to launch sometime later in the year, or possibly in the early part of 2011.
Aluminum ETFs will store physical aluminum to back up their funds, creating a new market for the lightweight metal.
Wednesday, May 19, 2010
Alcoa (NYSE:AA) Seeking Lower Energy Costs
To combat their many rivals, Alcoa (NYSE:AA) is implementing a new strategy to cut the cost of energy, which accounts for about 30 percent of aluminum production costs.
High energy costs in Brazil could be their first target, as they're already looking at investing about $3 billion into a new smelter in the country, while closing others where the energy costs are prohibitive for doing business.
Alcoa will probably close their plant in Maranhao first, which has the highest plant costs in the world for them.
They are thinking about building a hydroelectric dam in Para state to lower production cost to become more competitive. The plant in that area is estimated to be able to produce at least 300,000 metric tons of aluminum on an annual basis.
Alcoa has been under pressure lately, and this is a response to competitors who have lower operational costs and higher margins. They're going over their entire company structure to see where they can make production changes like this.
Brazil aluminum production accounts for about 25 percent of the assets of Alcoa.
High energy costs in Brazil could be their first target, as they're already looking at investing about $3 billion into a new smelter in the country, while closing others where the energy costs are prohibitive for doing business.
Alcoa will probably close their plant in Maranhao first, which has the highest plant costs in the world for them.
They are thinking about building a hydroelectric dam in Para state to lower production cost to become more competitive. The plant in that area is estimated to be able to produce at least 300,000 metric tons of aluminum on an annual basis.
Alcoa has been under pressure lately, and this is a response to competitors who have lower operational costs and higher margins. They're going over their entire company structure to see where they can make production changes like this.
Brazil aluminum production accounts for about 25 percent of the assets of Alcoa.
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