Norsk Hydro ADR

In 2018, analysts expected disruptions in the copper supply. However, the copper supply has been resilient in 2018.

Norsk Hydro (NHYDY) has announced a production halt at its Alunorte alumina refinery in Brazil.

Alcoa’s (AA) 2018 earnings have been supported by higher alumina prices.

Aluminum producers like Alcoa (AA), Century Aluminum (CENX), and Norsk Hydro (NHYDY) see Chinese aluminum overcapacity as a major challenge.

Alcoa (AA) posted record EBITDA (earnings before interest, tax, depreciation, and amortization) in the second quarter.

In this article, we’ll look at key updates the markets might be watching for in Alcoa’s second-quarter earnings call.

In this series, we’ll see how the US aluminum markets have changed since the Trump administration’s implementation of its Section 232 tariffs.

US physical aluminum premiums have been steady after rising sharply earlier in the year.

Alcoa (AA) and Century Aluminum (CENX) are trading with double-digit year-to-date losses despite the Section 232 tariffs President Trump imposed.

Previously in this series, we looked at recent trends in aluminum prices. In this article, we’ll see how markets are valuing US aluminum producers after last week’s sell-off.

As we noted previously in this series, aluminum prices have seen downward pressure this year. Lower aluminum prices are negative for aluminum producers like Rio Tinto (RIO) and Norsk Hydro (NHYDY).

Last week, President Trump temporarily exempted some countries from the Section 232 tariffs. According to the Commerce Department, the United States imported ~6 million metric tons of aluminum in 2016.

As we noted previously in this serieds, both Alcoa (AA) and Century Aluminum (CENX) have now turned negative for the year.

We saw a sharp sell-off in the equity markets last week. The key driver has been the risk of a trade war.

The Section 232 findings were released on February 16. Between February 19 and March 16, LME aluminum has fallen ~$200 per metric ton.

President Trump has imposed a tariff of 10% on aluminum imports—based on the Department of Commerce’s Section 232 investigation.

In this article, we’ll take a look at how analysts are rating different aluminum producers.

China exported 370,000 metric tons of unwrought aluminum in September, compared to 410,000 metric tons in August.

According to consensus estimates compiled by Thomson Reuters, Alcoa is expected to post revenues of $2.97 billion in 3Q17.

Alcoa carries a mean one-year target price of $50.92—7.7% potential upside compared to its closing price on October 13.

When forward prices are lower than spot markets, it’s described as “backwardation.” When future prices are higher than the current spot prices, it’s referred to as “contango.”

For aluminum producers, the all-in aluminum price consists of the price of aluminum plus physical aluminum premiums. These premiums are regional in nature.

Since China is the largest aluminum consumer, it’s important for investors to keep track of the country’s aluminum demand (ACH) (FXI).

Based on consensus estimates, Alcoa carries a mean one-year target price of $47.25—4.1% upside compared to its closing price on September 22.

Although we don’t have historical valuation multiples for Alcoa because the stock was split late last year, its valuation multiples look reasonable.

Analysts seem to be factoring lower-than-current aluminum prices next year when it comes to aluminum producers’ 2018 revenue estimates.

In the first eight months of 2017, Chinese aluminum exports were 3.26 million metric tons—5.8% higher than the same period the previous year.

According to estimates compiled by Thomson Reuters, Alcoa is expected to post an adjusted EBITDA of $2.08 billion in 2017 and $2.0 billion in 2018.

Aluminum prices have been strong in 2017 and have built on last year’s gains. The entire industrial metals space has come a long way since 1Q16.

Alcoa (AA) is an integrated aluminum producer like Rio Tinto (RIO) and Norsk Hydro (NHYDY) and produces alumina and aluminum (DBB).

While aluminum prices are global and are decided by trading mechanisms, physical premiums are negotiated between the end buyers and sellers.

As we noted previously, aluminum prices have been strong this year. Strength has been driven by positive supply and demand dynamics.

Century Aluminum (CENX) released its 2Q17 financial results on August 2 after the markets closed. The company reported revenues of $2.86 billion in 2Q17.

Previously in this series, we’ve looked at China’s July steel exports. In this article, we’ll look at the country’s aluminum exports.

In 2Q17, Arconic generated adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $444 million, up 3% as compared to the corresponding period last year.

Previously in this series, we’ve looked at Alcoa’s (AA) 2Q17 earnings estimates. In this article, we’ll see how leading brokerages are rating Alcoa stock ahead of its 2Q17 earnings release.

Previously in this series, we’ve seen how commodity prices could impact Alcoa’s 2Q17 revenues. Along with revenues, investors should also keep track of profitability metrics.

Alcoa (AA) is expected to release its 2Q17 earnings on July 19 after markets close. Here’s what you need to know.

Aluminum has been among the better-performing base metals this year. With gains of 13.0% in the first half of 2017, aluminum has outperformed copper and zinc.

As we noted previously, Alcoa is now a pure-play aluminum producer. The company is an integrated aluminum producer with bauxite mining, alumina refining, and aluminum smelting operations.

Century Aluminum (CENX) stock has received a “hold” rating from three of the four analysts polled by Thomson Reuters.

The decline in alumina prices is a concern for Alcoa. The profitability of its alumina operations would be hit due to lower alumina prices.

If implemented, President Trump’s policies could help US-based aluminum producers like Alcoa (AA) and Century Aluminum (CENX).

Developments in the Chinese aluminum industry tend to impact the global aluminum industry. Chinese aluminum exports interest companies like Alcoa (AA).

Alcoa (AA) is trading well below its 2017 highs. Commodity market sentiments have been dented over the last few months.

Previously, we’ve seen how analysts are rating different copper producers. In this article, we’ll see which aluminum stock analysts are bullish on.

Although lower alumina prices might not immediately lead to a decline in aluminum prices, they certainly could limit aluminum’s upside.

China’s aluminum demand is expected to be strong this year. Alcoa raised its 2017 global aluminum demand forecast to 4.5%–5.0% from its previous guidance.

Aluminum prices are the key driver of aluminum producers’ earnings.

Weak sentiment in physical aluminum markets could be a reason behind the divergence between Alcoa (AA) and aluminum prices.

During its 1Q17 earnings call, Alcoa (AA) raised its 2017 global aluminum demand forecast to 4.5%–5.0% from its previous guidance of 4.0%.

Alcoa and Century Aluminum (CENX) survives the commodity price slump by closing their high-cost capacities and negotiating better power deals for several operating plants.

According to consensus estimates compiled by Thomson Reuters, Alcoa (AA) has a mean one-year price target of $42.44, representing a 25.8% upside over its closing price on April 28, 2017.

Century Aluminum (CENX) was among the best-performing aluminum stocks (NHYDY) (ACH) (SOUHY) last year with gains of 94%.

Alcoa (AA) expects to generate adjusted EBITDA between $2.1 billion and $2.3 billion in fiscal 2017. Alcoa assumed aluminum prices at $1,900 per metric ton.

Alcoa (AA) released its 1Q17 earnings on April 24 after the markets (MDY) (MID-INDEX) closed. It held the conference call the same day.

In 1Q17, there were rumors that Rio Tinto (RIO) could acquire Alcoa.

Three out of four analysts polled by Thomson Reuters rated Century Aluminum as a “hold,” while one analyst rated the stock as a “sell.”

Of the 13 analysts surveyed by Thomson Reuters, ten analysts rated Alcoa stock as a “buy,” three rated it as a “hold,” and no analysts rated it as a “sell.”

Aluminum prices have shown strength in 2017 and have built on 2016 gains. So far, aluminum has risen 14.7% in 2017—compared to a 13.4% rise in 2016.

For commodity companies such as Rio Tinto (RIO) and Century Aluminum (CENX), the industry outlook is as important, if not more important, than their positions in the industry.

Aluminum premiums are key indicators that investors in primary producers such as Century Aluminum (CENX), Norsk Hydro (NHYDY), and Rio Tinto (RIO) should track.

Century Aluminum (CENX) was among the best-performing aluminum stocks in 2016, with gains of 94%.

Due to Alcoa’s (AA) strong cash flow generation in November and December 2016, its net debt fell below $600 million on December 31, 2016.

Alcoa (AA) has been proactive in controlling its costs to stay competitive in the subdued commodity pricing environment.

For commodity companies like Alcoa and Rio Tinto, the industry outlook is as important—if not more important—than the company’s position in the industry.

Alcoa (AA) has a mean one-year price target of $41.10, which represents a 17.8% upside over its closing price on March 21, 2017.

For commodity companies like Rio Tinto (RIO), the industry outlook is as important, if not more important, than the company’s position in the industry.

Century Aluminum (CENX) has a net debt-to-EBITDA multiple of 4.3x. Its leverage ratios are higher compared to Alcoa based on the net debt-to-EBITDA metric.

Looking at the yearly performance, Alcoa generated free cash flows of -$715 million in 2016. We don’t have comparable free cash flows for previous periods.

With aluminum prices showing strength in 2016, aluminum producers should post incrementally higher profitability in 2017.

Alcoa expects to ship 47.5 million bone dry metric tons–48.5 million bone dry metric tons of bauxite in 2017—compared to 2016.

Alcoa produced 2.42 million metric tons of aluminum in 2016—compared to 2015. Century Aluminum’s 2016 aluminum shipments fell steeply.

Most aluminum companies have reported their earnings for the quarter. Alcoa (AA) reported its 4Q16 financial results on January 24.

Physical premiums For aluminum producers, the all-in aluminum price consists of the aluminum price plus regional aluminum premiums. The premium is a surcharge that consumers must pay on top of prevailing prices in order to take immediate delivery of the metal from warehouses. Aluminum premiums are a key indicator that investors in primary producers such […]

Alumina markets Before we analyze alumina markets, let’s look at aluminum’s value chain. It starts with mining bauxite—one of the most abundant metals in the Earth’s crust. Due to bauxite’s many impurities, it must be refined to produce alumina. This alumina is then processed to produce raw aluminum (SOUHY). Rio Tinto (RIO), Norsk Hydro (NHYDY), and […]

Aluminum prices Aluminum has gained ~11% year-to-date. This was preceded by a 13.4% rise in 2016. The market sentiment for aluminum improved considerably in 2016, though at the start of the year, prices looked set to breach their 2009 lows. Earnings sensitivity Commodity producers’ (XME) earnings, including those of Century Aluminum (CENX), Norsk Hydro (NHYDY), […]

Alcoa (AA) closed at $34.48 on February 24, gaining 0.47% from the previous day’s close, and having now gained 22.8% YTD.

In this article, we’ll analyze how analysts are rating Century Aluminum leading up to its 4Q16 earnings.

According to data compiled by Thomson Reuters, analysts expect Century Aluminum (CENX) to post revenue of $346 million in 4Q16 and $371 million in 1Q17.

Century Aluminum (CENX) is expected to release its 4Q16 earnings after the market closes on February 23, 2017.

Alcoa (AA) expects to generate adjusted EBITDA between $2.1 billion–$2.3 billion in fiscal 2017.

Alcoa (AA) has debt liability of ~$1.5 billion, which is composed mostly of notes that were issued in September 2016.

After the split, Arconic (ARNC) held an ~20% stake in Alcoa (AA), which Arconic plans to monetize in 18 months. However, ARNC retained the option to hold Alcoa’s stake for up to five years.

Thanks to Alcoa’s (AA) strong cash flow generation in November and December 2016, its net debt has fallen below $600 million.

In its 2017 EBITDA guidance, Alcoa (AA) assumed aluminum prices of $1,795 per metric ton and an alumina price index of $355 per metric ton.

Alcoa (AA) expects to generate adjusted EBITDA between $2.1 billion–$2.3 billion in fiscal 2017.

Alcoa (AA) expects its alumina shipments to range from 13.8 million–13.9 million metric tons in fiscal 2017 compared to 13.2 million metric tons in fiscal 2016.

In fiscal 2016, Alcoa (AA) produced 45.0 million bone dry metric tons of bauxite, 13.2 million metric tons of alumina, and 2.42 million metric tons of aluminum.

Of the 12 surveyed analysts, five recommended Alcoa stock as a “buy,” while only one recommended a “sell” on the stock. Of these analysts, 50% recommended a “hold” on the stock.

The question of restarting US plants cropped up during Alcoa’s 4Q16 earnings call. However, Alcoa’s management sounded wary.

Alcoa expects global aluminum markets to be in a surplus in 2017. It expects to generate an adjusted EBITDA between $2.1 billion and $2.3 billion.

Alcoa reported an adjusted EBITDA of $355 million in 4Q16—compared to $284 million in 3Q16. The bauxite and alumina segments contributed the most.

Alcoa reported revenues of $2.54 billion in 4Q16. It’s the first quarter that Alcoa reported its upstream results on a standalone basis after the split.

Alcoa reported its 4Q16 financial results on January 24. Alcoa reported a net loss of $125 million in 4Q16. It translates into a loss per share of $0.68.

Except for China, global aluminum markets have been in a deficit, mainly due to capacity curtailments that producers have undertaken over the last few years.

Currently, Alcoa is trading at 8.6x its forward EBITDA. This valuation multiple looks somewhat aggressive for a pure-play commodity producer.

Except for China, global aluminum markets have been in a deficit, mainly due to capacity curtailments that producers such as Alcoa have undertaken over the last few years.

While the packaging sector’s demand is more or less stable, the construction and automotive sectors’ demands tend to influence global aluminum demand.

Integrated producers such as Alcoa stand to gain from rising alumina prices. Alcoa also sells bauxite and alumina along with primary aluminum.