WEDNESDAY: Alcoa, which is the largest USA aluminum producer, has predicted a global oversupply of metal for this year, which in return will project a slower growth rate in global consumption among rising Chinese output.
Furthermore, reports of 1Qearnings have revealed demand to be increasing approx. 6.5%, as compares to 9% last year. As per the company itself, worldwide output is likely to expand in consumption by 326,000 metric tons this year, in contrast with January projections for 38,000 ton deficit.
The company traded at 12.355 euros in Frankfurt, as per news on Thursday at 9:23 AM, which is equal to US$ 13.29, a 2.8% decline, at closing on Wednesday in the USA. However, the company has trailed analysts’ estimates by posting better than expected earnings.
Also, China’s (the largest supplier and user of the metal, keeps increasing output)production rose 9.1% last year.
According to an interview by Lloyd O’Carroll, a Richmond, Virginia-based analyst at NorthCoast research:
“When you’re deliberately exiting businesses and shutting down high-cost businesses, you’re going to have revenue go down”
Also, 1Q net income was 14 cents/ share, compared with a 16-cent loss a year earlier. Excluding the cost of curtailing smelters in Brazil and other one-time items, 1Q profit was 28 cents/share, exceeding the 26-cent average of 17 estimates.The company, the first in the Standard & Poor’s 500 Index to report earnings for the period, is moving up the value chain to capitalize on rising demand for specialized aluminum from the aerospace and auto industries.
Sales rose from US$5.45 billion to US$5.82 billion, missing the US$5.94 billion average estimate.
Alcoa has permanently closed about 1.4 million tons of smelting capacity since 2007 and has idled a further 740,000 tons. The company said in March it’s reviewing 14% of its remaining capacity, as well as some of its capability for refining alumina, a raw material.
