Trump, China, and Commodity Prices: It’s All Happening for Alcoa

The United States is now gearing up for Donald Trump to become its 45th president. Although Trump’s victory sparked an initial selling spree on Wall Street, the market recovered handsomely.

Commodity prices also rallied after the presidential election results came out, and we’ve seen a broader rally in metals and mining shares (NHYDY) (CENX).

On November 1, 2016, Alcoa split into two new entities: Alcoa (AA) and Arconic (ARNC). The split completed a process that was initiated by the company in September 2015. The actual seeds of the split, however, were planted almost a decade ago, when Alcoa started to expand its value-added portfolio.

The basic goal behind Alcoa’s split was to separate the company’s fast-growing value-added business from its legacy commodity business (XME). The graph above shows the timeline of Alcoa’s split. You can read Alcoa’s Split Timeline: Past, Present, and Future to find out more about the timeline.

While Arconic has been on a losing spree since its listing, Alcoa has seen some upward price action. Several factors have aided this price action, including positive news flows from China, rising commodity prices, and the likelihood of trade action against Chinese aluminum imports.

In this series, we’ll look at what the above-mentioned factors could mean for Alcoa. We’ll also explore some other medium-term fundamental drivers that could drive Alcoa once the post-election euphoria dies down.

Let’s begin by analyzing how Trump’s proposed infrastructure investments could give the company a boost.