Alcoa Inc Case Study

Alcoa Inc
Shares of the aluminum giant, Alcoa (NYSE: AA) have risen approximately 39%, after bottoming to its lowest level of $6.74 a share in the second-half of January 2016, due to rise in aluminum prices. The aluminum prices jumped nearly 11% over a seven-week stretch through early March to a little over $0.73/ lb from $0.66 lb in the first-week of January, 2016. However, the prices have then deteriorated and settled at little more than $0.67 lb at present, yet reflecting a 2% growth since year-to-date.
This upward momentum in the aluminum prices is mainly driven by the increase in the energy prices and the cut in aluminum production in China. According to the data released by the International Aluminum Institute, China reported a total of 4,852 thousand metric tonnes of

In fact, the organizations such as the World Bank and IMF in their forecast report for commodity prices published in January this year, expect aluminum prices to rise significantly in the long-run. For instance, Word Bank projects the aluminum prices to rise nearly 23% from its lows of $1440 per metric tons in 2016 to $1764 metric tonnes in 2025, while IMF anticipates the aluminum prices to grow to the tune of $1694 per metric tonnes in 2020 from the current level of $1477 per metric tonnes, as shown in the charts below. In the midst of this, Alcoa expects the overall demand for aluminum to climb approximately 6% year-over-year basis in 2016 that includes an 8% year-on-year increase in Chinese aluminum demand. Thus, the aluminum market remains pretty balanced this year that should allow Alcoa to improve its financial performance going forward. Moreover, Alcoa in order to boost its result, have lately taken various steps such as entering into various supply contracts, divestitures and plans to split itself into two separate entities. Let us find out more about these initiatives.
Well positioned to tap demand in the end