Alumina drives Alcoa’s revenue for Q4; strong demand growth for alumina projected in China

Alcoa Corporation reported its fourth quarter 2016 results on January 24 and despite net loss, the results reflect profit growth at the combined segment level.  Alcoa reported 9% sequential growth in its Q4 revenue of $2.5 billion. The revenue growth was driven by higher alumina pricing to a considerable extent and it could close the quarter with a decent cash balance of $853 million supported by that.

Alcoa continued to successfully build its third-party bauxite business and to further streamline its alumina and aluminium portfolio over the fourth quarter.

AofA secured its first major bauxite export contract out of Western Australia (WA), and was granted approval to export up to 2.5 million metric tons per annum of bauxite for five years to third-party customers.

As a strategic move, Alcoa recently announced the permanent closure of the Suralco alumina refinery and bauxite mines in Suriname, which has been non-operational since November 2015. The company determined that the completed exploration activities do not support the current carrying value.

Alcoa of Australia Limited (AofA) and Suralco are part of the Alcoa World Alumina and Chemicals group that is owned 60% by Alcoa and 40% by Alumina Limited.

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“Alcoa’s first reporting period as a new, standalone, publicly-traded company points to our ability to deliver shareholder value,” said Alcoa’s Chief Executive Officer Roy Harvey. “Rising alumina and aluminum prices improved the bottom line, our alumina segment had exceptional profit growth in a stronger market environment and doubled margins, while our bauxite business also increased profits and reported robust margins. In addition, we continued to streamline our portfolio and generated cash to strengthen the balance sheet.”

Alcoa forecasted a balanced global market for bauxite and alumina and a global aluminium surplus of 400,000 thousand to 800,000 tons. The company projected a 4% growth in aluminium demand over last year’s levels.

In the conference call, the company talked about a strong demand growth for alumina and aluminium particularly in China. The company also forecasted 3% demand growth in North American market for alumina. The surplus in aluminium inventories in 2017 would largely be driven by increased Chinese production. According to Alcoa, demand for aluminium would remain strong with Chinese demand growth at 6% driven by end-use markets in packaging, electrical, transportation sectors.