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Why Is Alcoa (AA) Stock Down 10% Today?

·2 min read

It’s not a good day for the stock market, for copper and aluminum futures, or for Alcoa (NYSE:AA). Regarding the last item on that list, AA stock is down almost 10% so far on Tuesday. Shares are now down three days in a row and are about 15% off Friday’s high.

Energy costs are out of control. While Americans felt that gas prices were far too explosive coming into the summer, most seem to have no idea just how bad the situation in Europe is.

Whether it’s energy prices that are sinking small- and medium-sized businesses or shutting down smelters, the problem is ballooning at a rapid and alarming rate. That’s exactly what’s happening with Alcoa right now.

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Alcoa recently announced it will cut one-third of its production at its plant in Lista, Norway. This is to help with the company’s high energy costs, which pays spot energy prices at its Lista location. Specifically, its Lista site has gone up to more than $600 per megawatt hour.

Alcoa isn’t the only company to lower its production primarily due to skyrocketing energy prices. Norsk Hydro (OTCMKTS:NHYDY) plans to close its Slovakia facility by the end of September.

Not an Easy Time for AA Stock

If Alcoa and Norway sound familiar, it’s likely because the company has had a tough time lately. Alcoa faced a strike at its Mosjoen, Norway, aluminum smelter. Further, after citing “operational challenges,” the company cut production at one of its Indiana plants.

As for AA stock, the share price was performing better over the summer. However, the latest stock market correction has not been treating the stock all that well. Just a few days after hitting its 2022 low in July, Alcoa delivered a top- and bottom-line earnings beat. It also announced a $500 million buyback. For a company with a sub-$10 billion market capitalization, that’s no small sum.

At one point, AA stock rallied in 11 straight daily sessions earlier this quarter. In all, the stock rallied almost 50% from its July low to the summer high, but it appears all of that good fortune is at risk.

Smelting production is coming offline, there are worries about global growth, and energy prices continue to soar. Will that doom Alcoa? It’s too early to say, but clearly there are some roadblocks popping up.

On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.

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