Alcoa profit tops analyst estimates as aircraft demand rises

Low Prices

Aluminum for immediate delivery on the London Metal Exchange fell 9.2% this year to close at $1,853 a metric ton yesterday. The average LME price fell 8.2% from a year earlier to $2,002 a metric ton in the quarter.

“The aluminum price is basically the issue,” David Gagliano, a New York-based analyst at Barclays Plc, said yesterday in a telephone interview. “Downstream was really strong, but it’s being offset by the low metal prices recently.”

Alcoa reiterated its forecast that global aluminum demand will increase 7% this year.

The company estimates surplus production will fall to 155,000 tons in 2013 from an earlier projection of 535,000 tons as Chinese smelters cut output, Chief Financial Officer William Oplinger said yesterday on a conference call to discuss results.

Alcoa is seen to be losing its accuracy as a bellwether for the U.S. stock market.

Alcoa’s Results

The Standard & Poor’s 500 Index has usually followed Alcoa’s lead since 2002, rising 2.5% in quarters when the aluminum producer beat the market after earnings, less when it didn’t. That relationship has broken down since 2011, when the S&P 500 posted even bigger gains, about 3%, when Alcoa’s results hurt its stock, according to data compiled by Bloomberg.

Overtaken in size and market clout by diversified commodities companies such as BHP Billiton Ltd. and Glencore International Plc, Alcoa has struggled to make a profit with aluminum prices sagging as production outpaces the metal’s use. Investors are looking beyond the producer to companies such as International Business Machines Corp., according to Bespoke Investment Group.

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