ADVFN - Advanced Financial Network.
HOME» NYSE » A » AA Stock Price » AA Stock News

Alcoa Share News

 Alcoa, Inc. Stock Price
AA Stock Price
 Alcoa, Inc. Stock Chart
AA Stock Chart
 Alcoa, Inc. Stock News
AA Stock News
 Alcoa, Inc. Company Information
AA Company Information
 Alcoa, Inc. Stock Trades
AA Stock Trades

Aluminum Makers Turn to Middle East to Cut Costs

-- Aluminum companies seek cheaper production in Middle East -- Global oversupply of aluminum makes cheap production essential -- Smelters in Europe and North America would be most affected By Nicole Friedman Aluminum production is tilting toward the Persian Gulf--and industry giants Rio Tinto (RIO), Alcoa Inc. (AA) and Norsk Hydro ASA (NHY.OS) are betting heavily that the region can produce aluminum more cheaply and can grab global market share. The rush to lower production costs is intense. The aluminum market currently is so oversupplied that market participants say half of the world's production is unprofitable at current prices. Producers and state-owned companies hope Persian Gulf production can take advantage of low energy costs locally and lower shipping rates globally. Such a shift comes at the cost of more costly aluminum smelters in Europe and America. Mideast output is expected to grow from 3.6 million metric tons in 2011 to 5 million metric tons by 2015 once new projects in Abu Dhabi and Saudi Arabia are completed, said Mahmood Daylami, general secretary of the Gulf Aluminum Council, a trade group. "We see the central gravity shifting towards the Gulf," Mr. Daylami added. He sees the region's share of world production rising to 10% from 8%. Since 2007, global production has exceeded demand by 9.31 million tons, according to Morgan Stanley. Benchmark aluminum on the London Metal Exchange closed at $1,942 a metric ton Wednesday, after hitting a two-year low last week. Due to the low prices, only about 50% of aluminum smelters are making a profit, said Jean Simon, president and CEO of primary metal for Rio Tinto Alcan. Rio Tinto, Alcoa and Norsk Hydro have all closed smelters this year as prices fell below the cost of production. Gulf nations, hoping to diversify energy-dominated economies, are positioning themselves as a solution. Not surprisingly energy costs, which account for one-third of aluminum production expenses, are lower in the region. National electricity costs average $22 per kilowatt hour in the Middle East, compared to $25 per kilowatt hour in North America and $34 in Europe, according to a January 2011 Alcoa presentation. Such rates don't always apply to aluminum smelters, as producers seek to negotiate energy contracts directly with utilities rather than paying market rates. Others produce their own electricity on-site. "Given how high energy costs have gotten, it makes a lot of sense for aluminum companies--especially Alcoa and Rio Tinto--to build new plants in areas where they can access low-cost electricity," said Bridget Freas, senior analyst for Morningstar. Meanwhile, rapid ship-building in China in recent years has pushed shipping costs lower, said Ryan Derouin, an executive for General Electric Co. (GE), which builds turbines that produce about 80% of the power used by smelters in the Middle East. The Baltic Dry Index, which tracks shipping rates for dry commodities, has dropped 37% so far this year. Aluminum makers used to be compelled to set up shop close to their customers to ease transportation costs, but "that's not necessarily the case anymore," Mr. Derouin said. Construction is underway on a $10.8 billion joint venture between Saudi Arabian Mining Company (1211.SA) and Alcoa. The project intends to integrate the entire aluminum production chain, from mining to recycling. Production is slated to begin in 2013 and produce 740,000 metric tons per year by 2014. A joint venture between Norsk Hydro and Qatar Petroleum reached full capacity of 585,000 metric tons per year last year. Rio Tinto was the first to open a joint-venture project in the region. Sohar Aluminum, which Rio Tinto owns with Oman Oil and Abu Dhabi National Energy Company (TAQA), reached full capacity of 360,000 metric tons per year in 2009. The Abu Dhabi government, meanwhile, is seeking industry partners to set up shop in the $7.2-billion Khalifa Industrial Zone Abu Dhabi. The zone is leasing land around the state-owned Emirates Aluminum smelter to manufacturers. The smelter is currently producing 750,000 metric tons per year of aluminum, with plans to increase output to 800,000 metric tons per year by the end of 2012. The smelter will eventually achieve capacity of 1.3 million metric tons a year, according to the Emirates Aluminum website. Expanded output in the Middle East isn't expected to sway global prices. Increased aluminum supply from the region should be offset by the shuttering of less-efficient smelters in North America and Europe, Ms. Freas said. Other producers may be holding back from investing in the Mideast due to current low aluminum prices, Ms. Freas said. "Whether others will follow suit really just kind of depends on what market conditions look like a few years from now," she said. Write to Nicole Friedman at

Stock News for Alcoa (AA)
05/22/201508:00:00Alcoa Named Platts Metals Company of the Year
05/20/201512:15:10What Is the S&P 500 Index?
05/13/201517:16:15Current Report Filing (8-k)
05/11/201519:00:00Alcoa to Close the Anglesea Power Station
05/05/201517:18:27Amended Current Report Filing (8-k/a)
05/05/201517:16:44Current Report Filing (8-k)
05/05/201516:05:00Alcoa Executive Vice President & Chief Financial Officer William...
05/01/201511:40:10Alcoa Appoints Patricia Russo Lead Director
05/01/201510:38:00Alcoa Announces Changes to its Board of Directors
05/01/201506:38:54Alcoa Rating Increased to Buy at Standpoint Research (AA)
04/30/201517:16:00Alcoa Board Approves Quarterly Dividends
04/25/201511:00:0310 Most Profitable Companies in Commodities
04/24/201508:30:00Alcoa to Host Webcast of 2015 Annual Meeting of Shareholders
04/23/201515:14:20Quarterly Report (10-q)
04/22/201505:39:48Alcoa Coverage Initiated by Analysts at Cleveland Research (AA)
04/14/201506:31:30Alcoa - Triples Q1 Operating Earnings, Strong Momentum Likely...
04/14/201506:05:15Current Report Filing (8-k)
04/14/201502:14:40Thinking Out Of The Box
04/13/201510:20:072 More Continued Catalysts For Alcoa
04/13/201510:01:33Statement of Changes in Beneficial Ownership (4)

Alcoa and other New York Stock Exchange stock quotes are delayed by at least 20 minutes.
All other stock price data is delayed by at least 15 minutes unless otherwise stated.
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
Contact Us | Copyright 1999-2007 ADVFN PLC. | Privacy Policy | Investment Warning | Data accreditations | Investor Relations