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Released January 14, 2016 | SUGAR LAND
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Researched by Industrial Info Resources (Sugar Land, Texas)--Having slashed its own production capacity, Alcoa (NYSE:AA) (New York City, New York) is banking on the global aluminum market to swing into a supply deficit by the end of the year. The industry giant plans to split itself into two separate companies this year--one focused on upstream markets, and the other on value-added products. Industrial Info is tracking 51 Alcoa projects worth $6.07 billion.
The global producer of aluminum reported a net loss of $500 million in fourth-quarter 2015, compared with net income of $159 million in fourth-quarter 2014. The fourth-quarter 2015 results included $565 million in special items related mainly to closures and curtailments in the Upstream business, and tax charges. Excluding special items, fourth-quarter 2015 income was $75 million.
Fourth-quarter 2015 net revenue was $5.2 billion, down 18% from $6.4 billion in fourth-quarter 2014.
Chief Executive Officer Klaus Kleinfeld said the Upstream business faced "harsh headwinds with prices for alumina down 43% and aluminum down 28%."
Alcoa has announced numerous production curtailments and closures in an effort to balance supply with demand. Earlier this month, it said it would permanently close the 269,000 metric-tonne Warrick Operations in Evansville, Indiana, and reduce additional alumina production by 1 million metric tonnes across its refining system, including curtailing the remaining 810,000 metric tonnes of refining capacity at its Point Comfort refinery in Texas. In September, Alcoa said it would curtail remaining capacity at the operations in Suriname. Chief Financial Officer William Oplinger said during this week's earnings conference call that the Point Comfort and Suriname operations were "the biggest drags on profitability."
Kleinfeld said during the company earnings conference call that once all the announced refinery and smelting curtailments or closures are completed, 25% of Alcoa's refining capacity and 42% of the smelting capacity "will either be closed or curtailed or sold."
Alcoa will have 2.1 million metric tonnes of remaining operating capacity and 12.3 million metric tonnes of operating capacity by mid-2016.
On a global market scale, Alcoa said it expects curtailments to result in an aluminum deficit of 1.2 million metric tonnes (compared with an estimated global surplus of more than 550,000 metric tonnes in 2015), and an alumina deficit of 2.8 million metric tonnes. At the same time, global aluminum demand is expected to increase 6% to 60.5 million metric tonnes this year over 2015.
China, a big driver of aluminum market dynamics, has announced 6.7 million metric tonnes in alumina production curtailments, but more action is still required, according to Alcoa.
Alcoa plans to separate into two publicly traded companies in the second half of 2016. For related information, see September 29, 2015, article - Alcoa CEO: Company Split to Create Separate 'Value Engines'.
For full-year 2015, Alcoa reported a net loss of $121 million, compared with net income of $268 million in 2014. Excluding special items, the company reported net income of $787 million for 2015. Revenue in 2015 was $22.5 billion, down 6% from $23.9 billion in 2014. For the Value-Add portfolio, Kleinfeld said the company strengthened its aerospace business and was awarded $9 billion in aerospace contracts. The automotive business also experienced gains, he said. The company expects 2016 global aerospace sales to increase 8% to 9% this year. Alcoa also expects to see 1 to 5% growth in North America automotive production; the heavy truck and trailer market, however, is expected to fall 19% to 23% in North America.
Alcoa plans to earmark $1.4 billion for capital expenditures (capex) in 2016. This includes $700 million for "sustaining" capex and $700 million for "return seeking" capex. In 2015, capex was roughly $1.2 billion.
Working with Danieli & Compagnia Officine Meccaniche SpA (Buttrio, Italy), Alcoa is performing equipment studies for a $750 million aluminum micromill plant expansion in Elmendorf, Texas near San Antonio. Alcoa intends to build a full-scale micromill plant, adding technology to manufacture advanced aluminum sheet product for automotive, industrial and packaging applications. Completion is expected by the end of 2017.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
The global producer of aluminum reported a net loss of $500 million in fourth-quarter 2015, compared with net income of $159 million in fourth-quarter 2014. The fourth-quarter 2015 results included $565 million in special items related mainly to closures and curtailments in the Upstream business, and tax charges. Excluding special items, fourth-quarter 2015 income was $75 million.
Fourth-quarter 2015 net revenue was $5.2 billion, down 18% from $6.4 billion in fourth-quarter 2014.
Chief Executive Officer Klaus Kleinfeld said the Upstream business faced "harsh headwinds with prices for alumina down 43% and aluminum down 28%."
Alcoa has announced numerous production curtailments and closures in an effort to balance supply with demand. Earlier this month, it said it would permanently close the 269,000 metric-tonne Warrick Operations in Evansville, Indiana, and reduce additional alumina production by 1 million metric tonnes across its refining system, including curtailing the remaining 810,000 metric tonnes of refining capacity at its Point Comfort refinery in Texas. In September, Alcoa said it would curtail remaining capacity at the operations in Suriname. Chief Financial Officer William Oplinger said during this week's earnings conference call that the Point Comfort and Suriname operations were "the biggest drags on profitability."
Kleinfeld said during the company earnings conference call that once all the announced refinery and smelting curtailments or closures are completed, 25% of Alcoa's refining capacity and 42% of the smelting capacity "will either be closed or curtailed or sold."
Alcoa will have 2.1 million metric tonnes of remaining operating capacity and 12.3 million metric tonnes of operating capacity by mid-2016.
On a global market scale, Alcoa said it expects curtailments to result in an aluminum deficit of 1.2 million metric tonnes (compared with an estimated global surplus of more than 550,000 metric tonnes in 2015), and an alumina deficit of 2.8 million metric tonnes. At the same time, global aluminum demand is expected to increase 6% to 60.5 million metric tonnes this year over 2015.
China, a big driver of aluminum market dynamics, has announced 6.7 million metric tonnes in alumina production curtailments, but more action is still required, according to Alcoa.
Alcoa plans to separate into two publicly traded companies in the second half of 2016. For related information, see September 29, 2015, article - Alcoa CEO: Company Split to Create Separate 'Value Engines'.
For full-year 2015, Alcoa reported a net loss of $121 million, compared with net income of $268 million in 2014. Excluding special items, the company reported net income of $787 million for 2015. Revenue in 2015 was $22.5 billion, down 6% from $23.9 billion in 2014. For the Value-Add portfolio, Kleinfeld said the company strengthened its aerospace business and was awarded $9 billion in aerospace contracts. The automotive business also experienced gains, he said. The company expects 2016 global aerospace sales to increase 8% to 9% this year. Alcoa also expects to see 1 to 5% growth in North America automotive production; the heavy truck and trailer market, however, is expected to fall 19% to 23% in North America.
Alcoa plans to earmark $1.4 billion for capital expenditures (capex) in 2016. This includes $700 million for "sustaining" capex and $700 million for "return seeking" capex. In 2015, capex was roughly $1.2 billion.
Working with Danieli & Compagnia Officine Meccaniche SpA (Buttrio, Italy), Alcoa is performing equipment studies for a $750 million aluminum micromill plant expansion in Elmendorf, Texas near San Antonio. Alcoa intends to build a full-scale micromill plant, adding technology to manufacture advanced aluminum sheet product for automotive, industrial and packaging applications. Completion is expected by the end of 2017.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.
