Alcoa Inc. (AA), the largest U.S. aluminum producer, cut its forecast for global consumption of the metal by 1 percentage point as the Chinese economy slows.
Demand will increase by 6 percent this year, the New York- based company said today in its third-quarter earnings statement. Alcoa said in July that usage would rise 7 percent, following increases of 10 percent in 2011 and 13 percent in 2010.
The International Monetary Fund today cut its global growth forecast and lowered its projected expansion for China, the world’s biggest aluminum user, by 0.2 percentage point annually, to 7.8 percent this year and 8.2 percent in 2013. Aluminum prices on the London Metal Exchange have already declined in the past year, touching a 34-month low in August, as global supply exceeds demand.
“The global economy is clearly slowing,” Lloyd O’Carroll, a Richmond, Virginia-based analyst for Davenport & Co., said today in an interview. “That’s what the IMF said today and so I think what Alcoa is doing is consistent with that.”
Alcoa had a third-quarter net loss of $143 million, or 13 cents a share, compared with net income of $172 million, or 15 cents, a year earlier.
Excluding costs related to environmental remediation and the settlement of a lawsuit brought by Aluminium Bahrain BSC (ALBH), Alcoa had per-share profit of 3 cents. The average of 18 estimates compiled by Bloomberg was for break-even earnings per share. Alcoa said it had improved productivity across all four business units.
Sales fell to $5.83 billion from $6.42 billion, beating the $5.56 billion average of 10 estimates.
The shares rose 0.5 percent to $9.18 at 4:40 p.m. after the close of regular trading in New York.
Aluminum for delivery in three months on the LME averaged $1,950 a metric ton in the third quarter, 20 percent less than a year earlier. The metal traded at $2,054 a metric ton at 9 p.m. today in London.
Prices below $2,000 may drive more production cuts, Ken Hoffman, a Bloomberg Industries analyst, said last week.
Aluminum will average $2,212 a ton next year, according to the median of 22 analysts’ estimates compiled by Bloomberg. The metal traded at over $3,300 in 2008 before the financial crash, and reached a 2011 intraday high of $2,803 a ton.
Alcoa, London-based Rio Tinto Group, Norway’s Norsk Hydro and closely held Zeeland Aluminum have cut 1.21 million tons of production since mid-2011, according data compiled by Bloomberg.
Alcoa is organized into four segments: alumina, which mines bauxite and processes it into the precursor to aluminum; primary metals, which smelts aluminum; flat-rolled products, which makes sheets used in beverage cans as well as airplane wings and car parts; and engineered products and solutions, which makes aerospace fasteners, turbine blades and truck wheels.
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