Can Alcoa Continue Its Good Run in 4Q17?
Alcoa (AA), the leading US-based aluminum producer, closed at $45.38 on September 22. The stock has been riding high this year. It’s trading with YTD (year-to-date) gains of 61.6% based on the closing price on September 22, 2017. In contrast, Arconic (ARNC) has risen 41.3% so far in 2017. We should note that while Alcoa is a pure play commodity producer, Arconic produces fabricated products for a wide range of industries including the aerospace sector.
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Alcoa’s 2017 price action has been supported by rising metal prices (XME). Among other aluminum producers, Century Aluminum (CENX) and Norsk Hydro (NHYDY) are also trading with YTD gains of 111% and 56.5%, respectively. While Century Aluminum has outperformed Alcoa, the former’s valuation could be getting a bit overstretched. Read Alcoa and Century Aluminum: Comparative Analysis for a detailed analysis of aluminum producers’ valuation.
So far, 2017 is turning out to be another strong year for commodities. Zinc, copper, and steel are also trading with yearly gains. In this series, we’ll look at recent aluminum industry indicators. We’ll see how aluminum’s demand-supply equation is shaping up this year. While sentimental factors can have a short-term impact, the underlying demand-supply tends to drive commodity prices in the long term—aluminum isn’t an exception.
We’ll also look at alumina prices and physical aluminum premiums. These trends could help us understand how aluminum producers like Alcoa could play out in the near term.
In the next part, we’ll see what analysts project for Alcoa.