Alcoa (AA) to Restart Aluminum Smelting Capacity in Brazil
Alcoa Corporation AA yesterday announced its plan of restarting the Alumar smelter, which has remained idle since 2015 at São Luís, Brazil. The smelter, jointly owned by Alcoa and South32, is anticipated to start producing molten metal in the second quarter of 2022.
The company’s share price decreased 0.8% yesterday, eventually closing the trading session at $48.46.
Inside the Headlines
As communicated, the process of restarting the 268,000 metric tons per year (mtpy) of aluminum smelting capacity will commence immediately. Alcoa expects the entire capacity of its 268,000 mtpy to get operational in the fourth quarter of 2022. Considering the shortage of hydroelectric supply, the Alumar smelter is planned to be powered with 100% renewable energy by 2024.
The restart will likely facilitate the company in aluminum production going forward, thus enabling it to capitalize on the rising aluminum prices in the world market. The smelter will leverage the site’s co-located alumina refinery, along with the availability of the required workforce and renewable power energy.
As noted, the restart of the Alumar smelter will involve an investment of about $75 million (including $10 million in capital expenses) and create more than 750 jobs. The company expects to incur restart expenses of $15-$20 million (pre-tax) in the fourth quarter of 2021.
Zacks Rank, Price Performance and Estimate Trend
Alcoa, with a $9.1-billion market capitalization, currently sports a Zacks Rank #1 (Strong Buy). The company is poised to benefit from growth in demand for aluminum and value-add products, a rise in shipment volume for smelter grade alumina and aluminium and higher prices in the quarters ahead. Also, the company’s focus on improving bauxite shipments with higher production is likely to be beneficial.
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In the past three months, its share price has increased 46.4% compared with the industry’s growth of 8.6%.
In the past 30 days, the Zacks Consensus Estimate for the company’s earnings has increased 12.3% to $5.49 for 2021 on two upward estimate revisions against none downward. Over the same timeframe, the consensus estimate for 2022 earnings has improved 18.9% to $5.17 on two upward estimate revisions against none downward.
Other Key Picks
Some other top-ranked stocks from the Zacks Industrial Products sector are EnPro Industries, Inc. NPO, Reliance Steel & Aluminum Co. RS, and Lincoln Electric Holdings, Inc. LECO. While EnPro currently sports a Zacks Rank #1, Reliance Steel and Lincoln Electric carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
EnPro pulled off an earnings surprise of 80.64%, on average, in the trailing four quarters.
Reliance Steel pulled off an earnings surprise of 9.07%, on average, in the trailing four quarters.
Lincoln Electric pulled off an earnings surprise of 21.40%, on average, in the trailing four quarters.
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