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Alcoa May Report Third Straight Loss on Lower Aluminum Prices

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[Al] CBI Daily Review - 2009/7/8 Aluminum Market

NEW YORK, July 9&nbsp;-- Alcoa Inc., the largest U.S. aluminum producer, may report its third consecutive quarterly loss today as lower demand from automakers and the construction industry keeps the metal at about half of last year's prices.
&nbsp;&nbsp;&nbsp; Alcoa, the first company in the Dow Jones Industrial Average to announce results for the three months through June, is expected to report a loss excluding some items of 38 cents a share, the average estimate of 17 analysts in a Bloomberg survey. The New York-based company had profit of about 71 cents a share a year earlier.
&nbsp;&nbsp;&nbsp; Chief Executive Officer Klaus Kleinfeld has cut output by about 20 percent, slashed 13,500 jobs and sold a unit as the global recession depresses demand and prices for aluminum. The metal used in cars, planes and beverage cans fell 51 percent in the past year as stockpiles monitored by the London Metal Exchange rose more than fourfold to 4.4 million metric tons.
&nbsp;&nbsp;&nbsp; &quot;Aluminum is structurally oversupplied,&quot; Luther Lu, an analyst at Friedman, Billings, Ramsey &amp; Co. in Arlington, Virginia, said in a telephone interview. &quot;What matters is whether Alcoa can continue its cost-cutting effort.&quot;
&nbsp;&nbsp;&nbsp; Aluminum prices will remain low, and global suppliers that have begun to increase production again already are &quot;overshooting demand,&quot; Lu said.
&nbsp;&nbsp;&nbsp; In an interview with Bloomberg Television yesterday, Kleinfeld said the supply imbalance is beginning to ease and that he's &quot;very optimistic&quot; about sales as the Chinese economy and U.S. automotive industry start to recover.
&nbsp;&nbsp;&nbsp; 'Bottoming Out' 
&nbsp;&nbsp;&nbsp; &quot;Things are bottoming out, and they are even coming back in some sectors,&quot; Kleinfeld said.
&nbsp;&nbsp;&nbsp; The company posted a loss of 61 cents a share in the first quarter and $1.49 in the fourth quarter. Alcoa last reported three straight quarterly losses in 1992.
&nbsp;&nbsp;&nbsp; Alcoa rose 15 cents, or 1.6 percent, to $9.41 yesterday in New York Stock Exchange composite trading. The shares have dropped 16 percent this year.
&nbsp;&nbsp;&nbsp; Alcoa agreed on April 30 to sell its wire harness and electrical distribution unit to private equity firm Platinum Equity LLC. The business operates in 13 countries and employs 17,500 workers, Alcoa said, without disclosing terms of the sale.
&nbsp;&nbsp;&nbsp; &quot;Alcoa's cost reductions to date are positive, but much hard work remains,&quot; Fraser Phillips, an analyst at RBC Capital Markets in Toronto, wrote in a July 5 report. &quot;Aluminum continues to labor under the weight of significant excess inventory and capacity, and we expect prices to continue to suffer as a result.&quot;
&nbsp;&nbsp;&nbsp; Century Aluminum Co., the second-largest U.S. producer of the lightweight metal, is expected to post an 83-cent loss for the second quarter. The loss excluding items was 44 cents a share a year earlier.
&nbsp;&nbsp;&nbsp; Construction Demand 
&nbsp;&nbsp;&nbsp; Commercial real estate construction, accounting for about 22 percent of aluminum demand, will slow when current projects are completed, keeping prices low, Lu said.
&nbsp;&nbsp;&nbsp; The slump in construction and auto demand also may lead to losses at steelmakers including U.S. Steel Corp. and Nucor Corp., the two largest U.S. makers of the metal.
&nbsp;&nbsp;&nbsp; Nucor, based in Charlotte, North Carolina, is expected to post a loss excluding certain items of 59 cents a share, the average estimate of 14 analysts. Pittsburgh-based U.S. Steel may have a loss of $3.45 a share, the average of 12 analysts' estimates.
&nbsp;&nbsp;&nbsp; &quot;Alcoa is a bellwether,&quot; James O'Mealia, chief investment officer and portfolio manager at Sunnymeath Asset Management, said in a telephone interview. &quot;Because its product is used in so many industries in so many parts of the world, it is one of the best broad-brush indicators of demand for metals.&quot;
&nbsp;&nbsp;&nbsp; Steel Prices 
&nbsp;&nbsp;&nbsp; The average price of hot-rolled steel sheet, the benchmark product used in cars and appliances, fell 3.1 percent in June to $380 a ton from $392 in May, Purchasing Magazine said last week. Hot-rolled steel prices have plunged 64 percent from a record $1,068 a ton in July 2008.
&nbsp;&nbsp;&nbsp; An increase in orders by distributors in recent weeks doesn't signal a recovery in demand for steel, Nucor Chief Executive Officer Dan DiMicco said in a June 24 interview.
&nbsp;&nbsp;&nbsp; &quot;As inventories were worked off, apparent demand started to move up to meet real demand, which hasn't changed a lot since October-November,&quot; he said.
&nbsp;&nbsp;&nbsp; Nucor reports results on July 23, and U.S. Steel is scheduled to announce on July 29.
&nbsp;&nbsp;&nbsp; (Source: Bloomberg)
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Alcoa Loss Is Smaller Than Forecast on Output Cuts

Alcoa May Report Third Straight Loss on Lower Aluminum Prices | Shanghai Non ferrous Metals

Alcoa May Report Third Straight Loss on Lower Aluminum Prices

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