Alcoa (AA), the leading US-based aluminum producer (DIA), is having a terrible year. The company has lost 33.8% year-to-date. The sell-off has intensified in October. The stock has lost 11.7% of its market capitalization this month based on the closing prices on October 11. Century Aluminum (CENX) and Norsk Hydro (NHYDY) have also been on a losing spree this year. Rio Tinto (RIO) has done better since iron ore prices have been surprisingly strong.
So far in 2018, aluminum has been volatile. Although aluminum prices are near the $2,000 per metric ton level, they briefly topped $2,500 per metric ton in April after President Trump imposed sanctions on RUSAL—the leading Russian aluminum producer. Alumina has faced several supply-side issues in 2018.
Along with the sanctions on RUSAL, disruptions at Norsk Hydro’s Alunorte refinery have impacted the alumina supply in 2018. The refinery announced a total shutdown earlier in October. However, the refinery will resume operations at 50% capacity. Alcoa has also faced labor issues at its Australia refinery.
Considering that Alcoa stock has underperformed, the recent sell-off raises an important question. Should you be bottom fishing in the stock or is there more downside ahead for the company? In this series, we’ll discuss Alcoa’s bearish and bullish drivers. We’ll see if the stock offers value at the current prices.
Next, we’ll discuss Alcoa’s bearish drivers.