Alcoa Shifts Global Aluminium Demand Forecast From 7% To 6% For 2012

Aluminium Company of America (Alcoa), the world’s largest producer of aluminium, has announced its third quarter results. Despite the weak market and fall in aluminium prices, the company has posted a decent result which is better than market expectations with revenue of USD 5.8 billion, down by 9 per cent on a YoY basis. This has been despite a 5 per cent decline in the realised aluminium prices sequentially and 17 per cent year-on-year. A stronger demand for aluminium products from airplane and automobile producers helped Alcoa post better than expected topline.

The aluminium prices ended the third quarter at USD 2,112 per metric tonne, about 14 per cent lower than in the third quarter of 2011. The prices have fallen further since the end of the third quarter and on Wednesday the metal was selling on the spot market on LME for USD 2,030 per tonne.

The company posted a net loss of USD 143 million as compared to the profit of USD 172 million in the same quarter last year. The decline in the net profit was on the back of the one-time charges paid by the company during the quarter. Meanwhile, excluding the one-time charges of USD 175 million for settlements with the Environmental Protection Agency and a joint venture partner in Bahrain, the company reported a profit of USD 32 million

The company continued with its strong productivity growth across the upstream and downstream segments this quarter, driven by higher utilisation rates, process innovations, lower scrap rates, and usage reductions. Its global rolled products continued to deliver strong profitability despite the European weakness. However, according to the company’s management, it faces huge challenges in its core businesses of mining bauxite and producing aluminium.

As regards the outlook, it has moderated the global primary aluminium consumption from its earlier projection of 7 per cent to 6 per cent on the back of the slowdown in China which will slightly impact the second half outlook. In the first half of the year the Chinese demand for aluminium grew by 11 per cent but Alcoa believes this will come down to 7 per cent in the second half of the year.

In 2011 Alcoa had projected that the growth would remain muted for China, which is the largest consumer of aluminium (43-45 per cent) and may see a consumption growth of 11 per cent versus that of 15 per cent in 2011. India’s consumption growth in 2012 will remain the same at 10 per cent as reported in 2011. The consumption growth has been lowered down for all the other major countries on the back of a weakening global economy. However, the company has reaffirmed its long-term outlook that the aluminium demand will double from 2010 to 2020