Aluminum Prices Will Weigh On Alcoa's Q4 Earning Results

Alcoa will kick off this quarter’s earnings season when it announces its Q4 results after the market closes on Tuesday, January 8. Alcoa’s results are closely eyed as it usually is the first Dow company to post earnings. We expect the company to record soft earnings, but most investors will watch for any cues on its outlook. Aluminum prices and demand remain sluggish due to global economic conditions. Also, aluminum inventory continues to remain high relative to demand, keeping a further lid on London Metal Exchange prices for aluminum.

In December, the rating agency Moody’s put Alcoa’s debt rating on review for a possible downgrade citing a challenging operating environment and a fall in aluminum prices this year. According to Moody’s, aluminum prices are not expected to show significant recovery over the next several quarters.

Aluminum prices on the London Metal Exchange, which are used as a benchmark by the company to determine its own prices, have averaged $2,051 this year. This is 15% lower than last year. Prices touched a 34-month low in August as global supply exceeded demand.

Alcoa’s management has taken certain steps to meet challenges. It is making efforts to reduce its debt from present levels of $8.3 billion, shifting its focus to value added products used in the aerospace industry and cutting capacity in smelters to streamline operations.