Alcoa escapes 52-week lows, but still down 30% YTD
On January 22, Alcoa closed at $6.87, losing 3.1% from its previous day’s closing. Although Alcoa has recovered almost 12% from its 52-week lows, which it hit earlier this month, the stock is still down 30% YTD (year-to-date). The January performance has only added to Alcoa’s (AA) woes after a disappointing 2015 performance. To be sure, Alcoa lost 35% of its market capitalization last year as aluminum prices reached levels unseen since the global financial crisis of 2008–2009.
A terrible January—so far
Other commodity companies (DBC) are having a terrible January as well. Century Aluminum Company (CENX) has lost 20% YTD while Norsk Hydro (NHYDY) has seen downward price action of 13% over the same period. Notably, the SPDR S&P Global Natural Resources ETF (GNR), which seeks to build a diversified portfolio of international natural resources companies, has already lost 10% in 2016. Currently, Rio Tinto (RIO) forms 1.7% of GNR’s portfolio.
Series overview: the state of aluminum
Although Alcoa has recovered from its 52-week lows, it might not be totally out of the woods yet. In this series, we’ll look at some of the recent aluminum industry indicators. We’ll also look at specific aluminum prices and physical premiums as well as at the current trend in aluminum inventories.
As you may know, there have been some interesting developments in the aluminum industry over the last few days. Alcoa is now keeping its Intalco smelter running until the end of 2Q16, as opposed to the company’s previously announced closure by the end of 1Q16. Meanwhile, it appears that China has been and will continue to be stockpiling a “strategic reserve” of aluminum. Later in this series, we’ll explore how these developments would impact aluminum industry dynamics in 2016.
Let’s begin by looking at the recent movement in aluminum prices in the next part of our series.