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Analyzing Alcoa’s Journey in 2017

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Alcoa’s journey in 2017

Metals and mining companies and industrial metals started 2017 on a positive note due to their 2016 gains. Notably, metals saw reversed fortunes in 2016 after prices threatened to fall below their 2009 lows in 1Q16.

Alcoa (AA) made a closing high of $38.54 on February 14, 2017. However, the stock saw selling pressure. The fall in Alcoa stock coincided with Arconic’s (ARNC) stake sale in the company. We should remember that after the split, Arconic held ~20% stake in Alcoa which it intended to monetize later. Alcoa traded below its 2017 highs until July. In August, Alcoa and aluminum broke free from their narrow price channels.

Aluminum prices topped $2,000 per metric ton on the London Metals Exchange in August. Aluminum flirted with the $2,220 per metric ton level a few times in 2H17. Alcoa also made its fresh 52-week high in October as aluminum moved to higher price levels. Other aluminum producers (CENX) including South 32 (S32) and Norsk Hydro (NHY) also followed aluminum higher.

November

However, aluminum came under selling pressure in November. In 2017, aluminum’s story has essentially been about capacity curtailments in China. The country plans to curtail its polluting industrial units during the winter months, especially in the steel, coal, and aluminum sectors, to address rising pollution levels. Although we saw some moderation in Chinese aluminum production in the last few months, the country’s aluminum exports are still running strong. China’s aluminum exports have been blamed for the global aluminum industry’s woes.

Higher Chinese aluminum exports despite the much-publicized production curtailments dented the aluminum market’s sentiments in November and December.

We saw some divergence in aluminum markets in 2017.

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