Alcoa starts 2017 with uncertainty over Portland smelter and Suralco shut down

Alcoa started 2016 on a 52-week low like any other mining companies and the stock continued with rise and fall throughout the year with the volatile commodity market. During November 2016, after the split into Alcoa Corporation and Arconic and Donald Trump’s election Alcoa saw some upward price movement.

In 2017, commodity prices are expected to become a key performance driver for Alcoa, as the company becomes an exclusive commodity producer. Aluminium and alumina are the two commodities that would decide Alcoa’s performance in 2017.


In December, a power outage caused molten aluminium in more than 200 smelting pots of Alcoa’s Portland smelter to cool and solidify. The outage followed the expiry of Alcoa's 30-year government-subsidised power contract with power prices set to rise after the closure of the Hazelwood power station. Right now the future of Victoria's biggest exporter and employer hangs in the balance with the employees going on an unscheduled leave. The outage crippled the 30-year-old smelter, leaving it operating at about one-third capacity, and costing the company an estimated $1 million a day. To continue operations and repair the damage, Alcoa would require a generous new contract with electricity supplier AGL, and billion dollar government support.

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On the other hand, on December 4 Alcoa Corp. announced that it will permanently close the alumina refinery and bauxite mines in Suriname which halted operations in November 2015. According to Alcoa as a result of the closure, the company would record $90 million in restructuring charges in the fourth quarter of 2016 and that the total closure cost would amount to an estimated $151 million over five years.

Alcoa has not directly announced anything on the smelter’s future yet. But, as it announced the closure of bauxite mines and an alumina refinery in Suriname, the company made a general statement that the smelter outage “is not expected to have a significant unfavourable impact” on its fourth quarter results.

Yesterday Alcoa Corporation traded 1.29% higher at $30.26. The company’s 50-day moving average is $30.26 and its 200-day moving average is $27.93. Alcoa had its target price raised to $31.56 by Vetr Inc. in a report released Thursday January 05, 2017.