| Commodity Prices to Affect Alcoa’s Upstream Performance in 2016 | |
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Alcoa’s 2016 Outlook: What’s Driving the Recent Downfall? (Continued from Prior Part) Alcoa’s upstream performance
As we previously discussed, Alcoa (AA) will be split into two companies later this year. So, it’s prudent that we look at the two companies separately while analyzing Alcoa’s outlook. In this part of the series, we’ll be looking at the different factors that could drive Alcoa’s upstream business in 2016.
Key drivers
There are three key factors that appear likely to drive the 2016 performance of Alcoa’s upstream business. First, we have commodity prices. Movement in commodity prices (COMT) would be a key driver of Alcoa’s 2016 performance. Aluminum and alumina are the two commodities that Alcoa sells. Commodity prices would depend on a host of factors as we’ll explore in the coming parts of the series.
Second, there are physical premiums. Aluminum producers including Alcoa, Century Aluminum (CENX), Rio Tinto (RIO), and Norsk Hydro (NHYDY) also get a physical premium along with the prevailing aluminum prices. Movement in physical premiums would be a key driver of Alcoa’s 2016 performance. It’s important to note that aluminum premiums fell steeply last year and negatively affected aluminum producers’ performance.
Finally, Alcoa’s cost-cutting initiatives will play a role as Alcoa is looking to further streamline its operations to improve its cost positioning on the global cost curve. Improving cost positioning has become imperative for aluminum producers as metal prices are trading at depressed levels. You can read more about different aluminum producers’ cost positioning in our series How to Play the Aluminum Industry: A Comparative Analysis
Meanwhile, the biggest driver of Alcoa’s 2016 performance could be the movement in aluminum prices. In the next part of this series, we’ll be looking at the different factors that could drive aluminum prices in 2016.
Continue to Next Part Browse this series on Market Realist:
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Companhia Vale Do Rio Doce
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PRODUCER |
CODE : RIO |
ISIN : US7672041008 |
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ProfileMarket IndicatorsVALUE : Projects & res.Press releasesAnnual reportRISK : Asset profileContact Cpy |
Vale do Rio is a copper producing company based in . Vale do Rio produces copper, aluminum, bauxite, iron, manganese, nickel and silica in Brazil, develops coal and copper in Australia and in Brazil, and holds various exploration projects in Brazil and in Peru. Its main assets in production are ALUNORTE, URUCUM MINE, MILTONIA 3, MORRO DA MINA, TAQUARI - VASSOURAS, SOSSEGO MINE, CAPAO XAVIER, CARAJAS, ANDRADE, SAMARCO, CONCEIÇÃO, MINAS DO MIEO, AGUA LIMPIA / CURURU, GONGO SOCO, BRUCUTU, BAU, FABRICA NOVA, FAZENDAO, TIMBOPEDA, CORREGO DO FEIJAO, SEGREDO/JOAO PEREIRA, PICO/SAPECADO/GALINHEIRO, VARGEM GRANDE COMPLEX TAMANDUA, CAPITAO DO MATO, ABOBORAS, PARAOPEBA COMPLEX JANGADA, SERRA NORTE - N4W, SERRA NORTE - N4E, SERRA NORTE - N5-W, SERRA NORTE - N5E, SERRA NORTE - N5E-N, SERRA NORTE - N5S, SERRA LESTE, MILTONIA 5 and MRN (BAUXITE MINING) in Brazil, its main assets in development are BELVEDERE in Australia and SALOBO PROJECT in Brazil and its main exploration properties are SALOBO, MAR AZUL MINE, ONÇA PUMA, PROJECT 118 and VERMELHO in Brazil and CORDILLERA DE LAS MINAS in Peru. |