Key Investor Takeaways: Is Alcoa Finally Out of the Woods?



Is Alcoa finally out of the woods?

Alcoa (AA) closed at $9.07 on September 25—down more than 1% from its previous day’s closing. Alcoa’s share price has been under pressure for the last few trading sessions. The stock flirted with the $10 level a few days ago but eventually closed below the psychologically crucial level.

The year has not treated metal share well. Most companies in the metals and mining space are trading near their 2009 lows. Copper giant Freeport-McMoRan (FCX) is trading at the lowest levels since 2003. Mining companies have underperformed broader markets (SPY) by a big margin this year.

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Series overview

Meanwhile, Alcoa has recovered somewhat from its multiyear lows, which it hit in late August. Its stock is up ~14% from its 2015 low, as can be seen in the graph above. Nonetheless, it’s still down more than 38% year-to-date. Currently, Alcoa forms 1.47% of the SPDR S&P Global Natural Resources ETF (GNR). GNR has lost ~16% year-to-date until September 25.

Century Aluminum’s performance has been even worse and the stock has fallen ~80% this year. The company had to idle one of its smelters in response to lower aluminum prices.

What factors drive Alcoa?

Despite its foray into the value-added space, Alcoa remains exposed to the volatility in aluminum prices. Moreover, being a metal company, the stock is bound to witness volatility on weak global macros.

In this series, we’ll look at the recent trend in aluminum prices as well as physical premiums. We’ll also look at how the Chinese aluminum industry is playing out. Rising Chinese aluminum exports have been a big challenge for aluminum producers such as Alcoa and Century Aluminum (CENX).

These indicators should help you understand how Alcoa is placed under the current market conditions.


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