Largest aluminum company in the U.S.
Alcoa is the largest aluminum company in the U.S. It’s among the top three aluminum producers worldwide. It has been the pioneer of the electrolytic process. The electrolytic process is used for aluminum extraction.
In this series, we’ll analyze Alcoa’s key drivers. These drivers are expected to guide Alcoa’s future earnings. The drivers will also drive other aluminum companies’ earnings. Some of the major aluminum companies are Rio Tinto (RIO), Century Aluminum (CENX), and Constellium (CSTM). We’ll start by analyzing Alcoa.
Alcoa’s integrated business model
Alcoa (AA) has a presence across the aluminum industry’s value chain. It has an integrated business model. The chart above shows Alcoa’s business model. Alcoa has its upstream operations under global primary products. Upstream operations cover all aspects of aluminum production. This involves mining, refining, smelting, and energy production.
The primary aluminum is then turned into aluminum sheets and plates. This occurs in the midstream operations. The key end users for this segment are the packaging, aerospace, and transportation industries. Alcoa is the global leader in the aerospace business. We’ll discuss this in more detail throughout the series.
Alcoa’s downstream operations
Alcoa’s engineered products segment fabricates aluminum into custom shapes and sizes for the end users. It’s divided into five groups:
- Power and propulsion – it manufactures parts for jet engines and industrial gas turbines
- Fastening systems – it manufactures fasteners for aerospace and automotive
- Buildings and construction systems – it manufactures commercial architectural systems
- Wheel and transportation products – it manufactures commercial vehicle wheels
- Forgings and extrusions – it manufactures large and complex fabricated parts for use in various end industries
Before we look at Alcoa’s outlook and key drivers, we’ll discuss how Alcoa has performed on the share markets. It’s important to note that Alcoa is among the top ten holdings for the SPDR S&P metals and mining ETF (XME).
For more information about Alcoa, click here.