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Why Alcoa’s key growth drivers are important
In the commodity business, Alcoa is either closing or selling the plants that have high unit costs. The cost savings will be a key driver for Alcoa.
Alcoa contributed ~95% of its growth capital towards the value-add business. Most of this capital went into the Firth Rixson acquisition.
AA opened the world’s largest aluminum-lithium facility in Indiana. The facility will produce components for the aerospace industry.
Alcoa’s Engineered Products segment had revenues of ~5.7 billion in 2013. The power and propulsion business is the largest segment. It contributes ~$1.8 billion.
Alcoa developed an aluminum foil that’s around a third of the thickness of human hair. It’s called aseptic foil. It’s used by the milk packaging industry in Brazil.
Alcoa is working to expand its capacity in Tennessee. It’s a $275 million investment. Alcoa expects that the facility will be operational by mid-2015.
Alcoa’s GRP segment converts the primary aluminum into sheets. The sheets are used in the packaging, automotive, and aerospace industries.
Along with closing plants with high unit production costs, Alcoa is in the process of exiting its plants in Jamaica and Suriname. These plants represent Alcoa’s high-cost operations.
Alcoa is an integrated player in the aluminum value chain. This means its operations extend from bauxite refining to aluminum fabrication.
Alcoa idled several smelting plants since 2007. Its aluminum smelting capacity has come down by 28% over the period. Most of these smelters had high unit production costs.
Alcoa is transforming itself into a multi-material company. It’s focused on developing innovative products to help its customers. Historically, Alcoa led the aluminum industry with innovations.
Primary aluminum and alumina are commodity products. Producers don’t have much control over their pricing. The prices are decided by market dynamics.
Alcoa (AA) is the largest aluminum company in the US. It’s among the top three aluminum producers globally. The company was founded in 1888.
BHP’s position on the cost curve for iron ore and coal will help it mitigate the impact of the down cycle. As a result, BHP can outperform the broader market.
BHP is a major worldwide producer of aluminum, manganese alloy, and nickel. Its portfolio includes aluminum operations in southern Africa, Australia, and South America.
BHP is the world’s largest supplier of seaborne metallurgical coal. Its main customers are in China, India, Japan, and Europe. Its contracts are based on annual or longer-term volumes.
Copper production decreased by 3% to 389,000 tons in the September quarter in 2014—compared to the same period last year. This was due to a 3% decline in production at Escondida.
BHP announced the capacity expansion for iron ore from the current 250 million tons to 290 million tons by 2017. Capacity will increase only by making its existing operations more efficient.
Iron ore production increased by 17% in the September 2014 quarter. It had a record 57 million tons. Total iron ore production is forecast to increase by 11% in FY15.
BHP continues to prioritize value over volume. This dictates a focus on US onshore liquid development and investment in high-return Brownfield projects across the conventional business.