US- Alcoa and the aluminum survival handbook

Alcoa is something of a corporate bellwether for the global aluminum industry. The US company's operations span the full gamut of the light metal's value-added chain from mining the bauxite needed to produce the stuff all the way through to specialist engineered products tailored to meet the requirements of aerospace and automotive customers. Its Q2 results, therefore, provide a telling snapshot of the strains on the entire aluminum sector resulting from the current price weakness. On the London Metal Exchange (LME) benchmark three-month aluminum hit a one-year low of $1,832 per ton in June. As with the other base metals traded on the LME an early-July rally has quickly run out of steam and aluminum is once again foundering around the $ 1,900 level. So no particular surprise as to the prime cause of the slide in Alcoa's headline earnings from net income of $ 94 million in the first quarter of the year to a net loss of $ 2 million in the second. While downstream divisions performed well, and with rolled products even generating record operating income in the first half of the year, Alcoa's primary metals business took a $ 58-million sequential hit from the lower aluminum pricing environment. There was some clawback from currency effects, $ 19 million, and from higher physical market premiums, $ 15 million. But not enough to stop the division sliding into the red in Q2 to the tune of a net $ 3 million. All of which palpably frustrates Klaus Kleinfeld, Alcoa president and chief executive officer. After all, Alcoa is still projecting global demand growth of 7 percent this year, split between 11-percent growth in China and 3 percent in the rest of the world. If even close to the mark, this would be a remarkable outcome given the combination of engineered slowdown in China and far-from-engineered slowdown just about everywhere else. But then aluminum is leveraged to key growth sectors such as automotive, where it is gradually winning a long-term materials battle with steel, and aerospace, characterized by an order backlog stretching to years and an ageing commercial airline fleet. Stocks of aluminum, according to Alcoa, may still be high but at 76 days' global usage they are down on the 102-day peak seen in 2009 at the height of the Great Contraction. The price of aluminum, argued Kleinfeld on the Q2 analysts call, has decoupled from this fundamental demand strength, becoming subsumed within the general macro risk-on-risk-off trade that has dominated all asset classes ever since. That is at least partly true. Many base metals have become more closely correlated with other asset classes over the last four years. But there is the thorny question of whether the world is still producing too much aluminum, which could of course be one fundamental reason why the price is where it is. Alcoa thinks not, forecasting a global 515,000-ton production deficit this year. It's a nigh unprovable proposition given the opacity of the aluminum sector, not least in China, both the world's largest consumer and producer. In short, you're going to have take Alcoa's word on it. And Alcoa, in Kleinfeld's words, is going to have to "let the market do what the market is going to do." Since the market is stubbornly declining to reflect Kleinfeld's optimistic analysis of aluminum's "sound fundamentals," Alcoa's ongoing response is something of a survival handbook for every other margin-compressed producer. Alcoa is "targeting every single lever that we have" to improve group productivity from stream-lining purchasing to more efficient scrap usage to maximizing products capability to reducing days' working capital. But at the core of the strategy is the company's five-year plan to move 10 percentage points down the global aluminum cost curve from 51st percentile in 2010 to 41st in 2015. And here smelter portfolio management is key. If smelters have been idled for several years with diminishing chances of ever reopening, dismantle them. Alcoa has permanently closed 291,000 tons of capacity, comprising all of the Tennessee smelter and one-third of its Rockdale smelter in Texas. If smelters are not competitive at lower prices, idle them. Alcoa is in the process of mothballing some 14 percent of its global metal capacity, mainly in Spain and Italy. Such action can, of course, be presented to the wider world as taking global leadership in response to difficult market conditions. And if you curtail primary smelter capacity, you may as well curtail alumina capacity, as Alcoa has done with 390,000 tons of its intermediate product capability. If government levers can be used to preserve struggling smelters, use them. Alcoa has been reviewing the future of both its Point Henry smelter in Australia and its Brazilian smelter operations. Point Henry has just been given a stay of execution until at least mid-2014. An assistance package worth more than A$40 million from the Australian government may have helped. In Brazil Alcoa "has raised the issue of competitiveness, or lack of it, on energy prices," the single more important input variable in any smelter's profitability profile. Kleinfeld told analysts that "I believe there are going to be actions taken sooner rather than later" by the Brazilian government. And finally, if you can't beat new lower-cost entrants to the global aluminum sector, join them. Alcoa is building an ultra-low cost integrated alumina-aluminum-products facility in Saudi Arabia. The 740,000-ton per year smelter component of the Maaden project is on schedule to start production next year. This is the law of the jungle. Remember the old joke. You don't need to outrun the lion, just the guys running with you. The only problem is the cost curve itself. The most obvious point is that it is never static, largely because everyone is simultaneously trying to move down it, redefining it as they do. This is what is happening in China with smelter capacity migrating from east, where power availability is restricted and prices accordingly high, to west, where stranded coal deposits afford much lower power prices. And it's happening elsewhere. Alcoa is not the only producer migrating capacity to the Middle East to tap into the region's abundance of energy. Rio Tinto and Hydro have already done so with new smelters in Oman and Qatar respectively. A more fundamental issue with cost-curve economics in the aluminum market, though, is the gap between theory and reality. If governments are prepared to subsidize power prices, as is the case with an estimated 25 percent of Chinese aluminum capacity right now, then evidently the cost curve is not what it should be on paper. This isn't just about China, witness the Australian government's helping hand to Alcoa's Point Henry smelter and the Brazilian government's consideration of the "competitiveness, or lack of it" in local energy prices. The resulting problem is, to quote researchers at Barclays Capital, that such "interventions disrupt efficient market mechanisms resulting in distortions and dislocations with bearish implications for fundamentals and prices." Government assistance negates the cost curve at precisely the point it should be effective in matching supply to demand. As a consequence, as BarCap points out, the market will remain prey to over-production resulting from the build-out of excess capacity. You may well believe Alcoa's contention that enough capacity has been cut to generate a market deficit this year. If you don't, however, the implication is that prices must go lower to compensate for non-market intervention. And what will the cost curve look like by 2015? Will Alcoa have achieved its goal of being in the 41st percentile? Or will it need a new five-year plan to replace the current one? This chase down the aluminum cost curve is one without obvious end. Alcoa must keep running. So too must every other producer. - Andy Home is a Reuters columnist. The opinions expressed are his own. http://www.menafn.com/menafn/1093534034/US-Alcoa-and-aluminum-survival-handbook

Ugprades for aluminum electrolytic capacitors boost frequency, lower impedance

Companies are also developing units with a longer service life, broader temperature range and compact designs.
High-frequency, low-impedance models are defining R&D trends in mainland China’s aluminum electrolytic capacitors industry. Makers are developing units exceeding 100kHz, at least 10 times what current variants support. They are pushing down the impedance to below 1.8 from 3mohm. Many companies are gearing up to close the gap with Taiwan and Hong Kong counterparts that have introduced 0.1mohm and even 50μohm types.
Businesses are likewise extending the life span and operating temperature range, especially for versions targeted at car audio systems and power supplies for electric and hybrid vehicles. Wuxi Antang Technology Electronics Co. Ltd is manufacturing such components specifically for automotive audio equipment. It ships all output to the US, Europe and South America.
Makers are extending the service life to 8,000 or more than 10,000hr as opposed to the current 1,000 to 5,000hr supported by most releases. As for the operating temperature, companies are setting their sights on 125 C, an improvement from the -40 to 85, 25 to 85 and -25 to 105 C of existing units.
Compact capacitors are rising in number as well. Buyers can look forward to V-chip types measuring 4 to 18mm in diameter. Axial models 4 to 10mm in diameter are also in the pipeline.
Many suppliers are hoping to expand production capacity, and toward this end are adopting advanced manufacturing and testing equipment. A growing number of them are gearing up to meet ISO, RoHS and other international quality requirements.
Still others are seeking to hire new employees to address delays in fulfilling orders.
Haimen Sancon Jetwell Electronics Co. Ltd can churn out 80 million units monthly but will invest $800,000 to increase output of bolt-type capacitors. The enterprise uses capacity, voltage, drain current and loss testers, and X-ray and RoHS analyzers in its 45 lead, 12 welding pin and three bolt capacitor lines. The main export destinations are India, Hong Kong, Taiwan, Russia and Turkey.
Makers see strong prospects for the line, especially amid the growing automotive industry. China’s car electronics market is forecast to expand further in the next 10 years. The government’s 12th Five-Year Plan supports the sector via credit financing and discounted export credit insurance rates, particularly for manufacturers of “new energy” vehicle technologies and other automotive systems.
Aluminum electrolytic capacitors, in particular, are poised for an uptick in demand. The product accounts for 34 percent of the country’s total capacitor output. China represented one -third of global sales last year, which reached $5.5 billion. This is forecast to hit $5.8 billion by end-2012.

http://www.globalsources.com/gsol/I/Aluminum-electrolytic/a/9000000123394.htm

Bodine Aluminum Donates $10,000 To P-L Tech Rebuild

Bodine Aluminum in Troy, recently presented a $10,000 check to Pike-Lincoln Technical Center for use in the rebuilding of the facility.
The main building of Pike-Lincoln Technical Center was destroyed in a fire on Dec. 2, 2011.  These funds may be used as local match for grant funding through the State of Missouri to purchase equipment or building materials.
Pike-Lincoln Technical Center has served the Pike, Lincoln and surrounding communities since 1973 through the offering of career and technical education programs to high school and adult students.  Current daytime programs include Administrative Business Technology, Auto Collision, Auto Services, Computer and Networking Technology, Diesel Technology, Digital Design, Health Sciences, Paramedic, Practical Nursing and Welding.  Students who attend Pike-Lincoln Technical Center receive skilled education leading directly to employment or further education after high school through apprenticeships, technical, community or four-year colleges.
Numerous tech center graduates have gone to work for Bodine Aluminum over the years. Pike-Lincoln Technical Center graduates often stay in the local community.
“We are excited to have the donation and commitment from Bodine Aluminum to help us continue our tradition of preparing residents to be productive employees and community residents,” said Krista Flowers, director of the school.
Bodine Aluminum has long been a supporter of the local community.  Many of Bodine’s philanthropic efforts focus on programs that enhance education and help foster technical skills of local students.  The recent donation to Pike-Lincoln Technical Center was presented by Terry Henderson, General Manager of Bodine Aluminum and Kathryn Ragsdale, Specialist for Corporate Affairs, Toyota, Bodine Aluminum.
For more information or to provide input on the rebuilding of Pike-Lincoln Technical Center programs, please visit www.pltc.k12.mo.us, call 573-485-2900 or e-mail, info@pltc.k12.mo.us

Birmingham Aluminum expands after funding is secured

An aluminium and multi-metals components manufacturer has expanded its West Midlands headquarters after getting financial backing.
Birmingham Aluminium has invested £300,000 in the purchase of the unit next door to its base on Farrow Road in Great Barr, along with additional machinery, after securing the funding through Yorkshire Bank’s Investing For Growth initiative.
The company, which employs a total of 24 people, and has increased turnover by 20 per cent to £3.06 million over the last 12 months, now has around 22,500 sq ft of space after buying the 7,500 sq ft unit.
Joint-managing director, Steve Kane, said the investment represented one of the biggest expansions in the company’s 16 year history and was made possible following a surge in demand for its products on the continent.
“Our overseas market has probably doubled over the last 18 months, and now represents around 15 per cent of our turnover, which is up by a fifth in the last year,” he said.
“One of the major reasons behind this growth has been due to the success of our website after we translated it into seven languages with help from the Birmingham Chamber of Commerce.
“Orders and enquiries from countries such as France, Germany, eastern Europe, China, the Benelux countries, Scandinavia, Australia and USA have really taken off over the last 18 months and have led to us being able to make this investment.”
Birmingham Aluminium produces around 7,000 products for the electronics, transport, drives and controls, leisure, security and furniture components sectors with its products found in anything from electrical goods to train engines.

Read More http://www.birminghampost.net/birmingham-business/birmingham-business-news/manufacturing-and-skills-business/2012/04/27/birmingham-aluminum-expands-after-funding-is-secured-65233-30854537/#ixzz1tJ7wvoqB

Noranda Aluminum Holding Beats Estimates but Has a Big Earnings Drop

Noranda Aluminum Holding reported earnings on April 25. Here are the numbers you need to know.

The 10-second takeaway For the quarter ended March 31 (Q1), Noranda Aluminum Holding met expectations on revenues and beat expectations on earnings per share.
Compared to the prior-year quarter, revenue dropped and GAAP earnings per share dropped significantly.
Gross margins contracted, operating margins grew, net margins dropped.
Revenue details Noranda Aluminum Holding booked revenue of $353.5 million. The five analysts polled by S&P Capital IQ anticipated revenue of $352.0 million on the same basis. GAAP reported sales were 10% lower than the prior-year quarter's $394.6 million.
Source: S&P Capital IQ. Quarterly periods. Dollar amounts in millions. Non-GAAP figures may vary to maintain comparability with estimates.
EPS details Non-GAAP EPS came in at $0.18. The six earnings estimates compiled by S&P Capital IQ anticipated $0.06 per share on the same basis. GAAP EPS of $0.24 for Q1 were 57% lower than the prior-year quarter's $0.56 per share.

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Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.
Margin details For the quarter, gross margin was 13.9%, 290 basis points worse than the prior-year quarter. Operating margin was 10.8%, 30 basis points better than the prior-year quarter. Net margin was 4.6%, 510 basis points worse than the prior-year quarter.
Looking ahead Next quarter's average estimate for revenue is $373.8 million. On the bottom line, the average EPS estimate is $0.21.
Next year's average estimate for revenue is $1.49 billion. The average EPS estimate is $0.92.
Investor sentiment The stock has a three-star rating (out of five) at Motley Fool CAPS, with 33 members out of 36 rating the stock outperform, and three members rating it underperform. Among 10 CAPS All-Star picks (recommendations by the highest-ranked CAPS members), 10 give Noranda Aluminum Holding a green thumbs-up, and none give it a red thumbs-down.
Of Wall Street recommendations tracked by S&P Capital IQ, the average opinion on Noranda Aluminum Holding is outperform, with an average price target of $13.31.
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Indian aluminum majors expecting LME prices to show uptrend

BL reported that Indian aluminum majors are hopeful that the price of the metal on the London Metal Exchange may rise in the coming weeks as Euro zone leaders gear up to align their positions on centralized control of the euro zone budgets to fire fight the debt crisis.

After being on a steady decline for around the previous 6 months, aluminum prices gained USD 120 per tonne in the last 3 days in the wake of some positive signals from the euro zone.

Mr BL Bagra CMD of NALCO said that “The price of the metal tumbled from USD 2,700 per tonne in mid April to below USD 2,000 in the October to November period. If there is no fresh crisis we see the metal price on the LME being on a recovery phase.”

Mr Bagra however said that globally margins of aluminum producers will remain under pressure, due to the persisting spiral in energy costs. Today, one third of the existing capacity worldwide is operating on losses. On this count, India is better placed as cost of alumina is comparatively lower.

Mr D Bhattacharya MD of Hindalco indicated that the price of the metal on the LME will look better in the coming weeks.

Mr Bhattacharya said that the 3 major Indian aluminum producers Hindalco, Nalco and the London listed Vedanta have lined up ambitious expansion plans, expecting India, together with China, to lead in aluminum production in the next decade. The aluminum growth rate in India is expected to be 11% up to 2016 higher than that of China at 10%.

While Hindalco is doubling its existing capacity with an investment of about USD 10 billion by 2016, Vedanta is executing INR 60,000 crore expansion plan to add about 1.6 million tonne of fresh capacity to its existing 775,000 tonnes. Nalco is setting up a Greenfield unit of 0.5 million tonne capacity at a cost of INR 16,000 crore apart from another INR 6,000 crore to add 1 million tonne of alumina capacity.

Mr SK Roongta MD of Vedanta said that “We have already spent 75% of the CAPEX of INR 60,000 crore. We expect our new smelters to start production next fiscal and reach full capacity in less than 2 years. All the three producers are heavily banking on the Government's nod to allocate coal blocks, which could make aluminum production profitable at the desired level. We will be looking at coal assets once the policy initiative is in place.”
 http://www.steelguru.com/metals_news/Indian_aluminum_majors_expecting_LME_prices_to_show_uptrend/239664.html

Chinese aluminum manufacturers challenge Australian dumping duties

The sensitive issue of Australian manufacturers being put under pressure from dumped Chinese imports is set to be heard in the Federal Court, as two Chinese aluminum manufacturers challenge the Australian government's decision to impose dumping duties.

The case stretches to government relations, given submissions by the Chinese government against the dumping conclusions reached by the Australian Customs and Border Protection Service. The Chinese government has argued that it considers state-owned enterprises to be commercial bodies and should not be defined as public bodies under the anti dumping laws.

Customs however has found that regardless of ownership, the level of control and regulation by the Chinese government in the aluminum industry in China is so significant that primary aluminum producers and suppliers are in fact responding to the Chinese government's industrial development policy.

PanAsia Aluminum (China) Limited and Tai Shan City Kam Kiu Aluminum Extrusion Company Limited have lodged documents in the Federal Court, seeking to quash a decision of Attorney General Robert McClelland, who recently reaffirmed the dumping finding. PanAsia has had a countervailing duty of up to 13.6% imposed on its imports into Australia and Tai Shan of up to 7.4%.

In court documents, PanAsia said that the dumping duty notice and the countervailing duties, adversely affect its commercial position in the Australian market. The decision involved errors of law, and was an improper exercise of power, it claims. In the Kam Kiu case, the government has been asked to provide all documents on which customs based its dumping determination.

The aluminum saga began in May 2009 when ASX listed company Capral which had about half the Australian market for aluminum extruded product such as bars, tubes, pipes, doors and window frames notified the Australian Customs and Border Protection Service of alleged dumping.

During its investigation customs identified more than 300 importers of Chinese aluminum products. PanAsia and Kam Kui were identified in a group of seven importers which accounted for more than half the goods imported. The Australian market involves about 195,000 tonnes of goods sold a year.

Customs found that the subsidization and dumping of the Chinese aluminum had caused 'material damage'' to the local industry. Customs had determined that a range of Chinese imported aluminum products were priced at below normal value, and had used as a guide prices on the London Metal Exchange.

It found the Chinese products had been dumped with margins ranging from 2.7% to 25.7% and subsidized with margins from 3.8% to 18.4%. Capral had suffered a notable fall in sales and had been forced to lower its price to try to match the Chinese prices.

As a result of this investigation, the Australian government published a dumping notice and imposed countervailing duties on the Chinese companies in October 2010. In April, the Attorney General asked customs to reinvestigate some of its findings. Those findings were delivered, and in August Mr McClelland reaffirmed the dumping notice and duties.

http://www.steelguru.com/metals_news/Chinese_aluminum_manufacturers_challenge_Australian_dumping_duties/234409.html