Alcoa expects its 2017 EBITDA to increase $226 mln for every $100/t rise in aluminium price

What drives aluminium producers' earnings up? There are many factors such as optimized cost of production, shipment cost control initiatives, raw material procurement and logistics, inventory management; but of all factors it is the price of the metal that has the biggest impact. The higher the aluminium prices, the better are the earnings. And based on this simple correlation, Alcoa expects that its EBITDA (earnings before interest, tax, depreciation, and amortization) for 2017 will rise US$226 million for every increase in aluminium prices by US$100 per tonne.

Aluminium prices have built on 2016 gains and have risen 14.7 per cent in 2017, vis-a-vis a 13.4 per cent rise in 2016. Over the last one week the lightmetal has lost some ground and declined below US$1,900 per tonne. However, analysts believe the metal will find support at around US$1,890 per tonne and rebound shortly as the demand for the metal remains reasonably strong globally.

Other aluminium producers who are likely to benefit from the improved aluminium prices include Century Aluminum, Norsk Hydro, and Rio Tinto.

{googleAdsense}

Alcoa is expected to release its first quarter 2017 financial results on April 24. The aluminium major mainly saw sideways movement in the last few weeks, reported Market Realist. Although the stock is trading with decent year-to-date gains, it has lost 12.7 per cent of its market capitalization since February 14, 2017. The slide in Alcoa stock coincides with Arconic’s stake sale in the company.