Aluminum industry outlook
For commodity companies like Rio Tinto (RIO), industry outlook is as important—if not more important—than the company’s position in the industry. Let’s see what senior aluminum executives have had to say about the aluminum industry’s outlook during their companies’ 3Q16 earnings calls.
Century Aluminum (CENX) expects two million metric tons of new aluminum smelting capacity to come online in China this year. Notably, we’ve started to see a rise in Chinese aluminum exports over the past couple of months. Century Aluminum CEO (Chief Executive Officer) Mike Bless said that economic factors don’t support the start of new capacity. Bless pointed to rising alumina (aluminium oxide) prices as well as to higher coal and energy prices to substantiate his argument. He also stated that China’s aluminum demand growth isn’t sustainable.
According to RUSAL, there has been a net increase of only 0.9 million metric tons in China’s smelting capacity between July 2015 and August 2016. The company sees limited additional restarts as aluminum’s cost of production has risen due to higher alumina and coal prices.
Norsk Hydro expects a balanced market
Norsk Hydro (NHYDY) maintained its forecast of a nearly balanced aluminum market this year, with an expectation of a small deficit. (Deficit can be defined, simply, as demand in excess of production.) Norsk CEO Svein Richard Brandtzaeg has stated that the aluminum industry’s cost curve is changing due to the steep increase in coal prices and higher transportation costs in China.
Alcoa lowered deficit projection
During its 3Q16 earnings call, Alcoa (AA) lowered its 2016 aluminum deficit projection to 615,000 metric tons from the previous guidance of 775,000 metric tons. While the company maintained its global demand growth projection at 5%, it lowered its deficit projection due to higher supply. Notably, Alcoa also lowered its deficit projection during its 2Q16 earnings call.
Meanwhile, Alcoa cut the business target for Arconic’s (ARNC) business segments during the company’s 3Q16 earnings call. You can check out Market Realist’s “Alcoa’s 2016 Guidance Adds Gloom to 3Q16 Earnings Disappointment” for more.
In the meantime, keep checking in with Market Realist’s Aluminum page for ongoing updates on the industry.