The Wall Street Journal has been digging deeper into the metals warehouse logjam issue, and discovered that both Alcoa and Rusal may be beneficiaries of the situation due to the physical premiums they collect when end-users are forced to go direct to producers for metal so as to avoid queues.
According to the WSJ the aluminium makers have reaped as much as $1.4bn in revenues from higher fees due to the logjam.
The story then suggests this strips the credibility from their objections to proposed LME rules to ease the bottleneck. Read more
Alcoa, one of the world’s largest aluminium producers, has come out against the LME’s proposed new rules for dealing with warehouse queues.
In a letter to the LME, Alcoa’s president for materials management Tim Reyes states the plans are “counter productive” and designed to address what the company feels is a “red herring”. Read more
Alcoa, one of the world’s largest aluminium companies, has highlighted the impact of the European debt crisis on corporate profits, reporting its first quarterly loss on an underlying basis since 2009 and announcing plant closures and cutbacks in Italy and Spain, reports the FT. It also warned that the outlook for Europe “remains soft”. Opening the earnings season for US companies, Alcoa reported a $239m pre-tax loss for the fourth quarter, compared with a $348m profit for the equivalent period of 2010, as revenues were squeezed by falling aluminium prices. The loss included a $159m restructuring charge for the cost of shutting down 12 per cent of worldwide smelting capacity either permanently or temporarily, a move announced last week as part of the company’s drive to cut costs.
A leading London-based businessman accused of bribery in Bahrain linked to contracts with Alcoa, the US aluminium group, has been arrested by the UK’s Serious Fraud Office, the FT reports. Victor Dahdaleh, who has British and Canadian nationality, was charged with corruption, conspiracy to corrupt, and acquiring and transferring criminal property in connection with alleged payments of bribes to officials of state-controlled Aluminium Bahrain during 2001-05. The SFO said some of the alleged payments “were in connection with contracts with a US company, Alcoa”, for supplies of alumina, from which aluminium is extracted. On his website, Mr Dahdaleh published a statement from his law firm Allen & Overy, saying he “believes the investigation into his affairs was flawed and that he has done absolutely nothing wrong”.
The highly anticipated third-quarter earnings season got under way with a whimper when Alcoa ’s shares sank in the wake of its disappointing results, the FT reports. The aluminium company fell 2.4 per cent to $10.05 after reporting earnings per share of 15 cents after the market closed on Tuesday, well below the average forecast of 22 cents from analysts surveyed by Bloomberg. But the stock still remains slightly up for the week, with analysts blaming the results on foreign currency transactions rather than operating losses. “Translation adjustments accounted for a good portion of the miss,” Fraser Phillips, an analyst at RBC Capital Markets wrote to clients. “A weak result but not as bad as it looks,” he added. Analysts were also cheered that the company maintained its aluminium demand forecast for the year, with higher demand from China expected to offset weaker demand from Europe.
Alcoa’s revenues have dropped 3 per cent from the previous quarter, with weakening aluminium demand suggesting the economic slowdown has reached the biggest US aluminium producer, reports Reuters. Revenues increased 21 per cent to $6.4bn from a year earlier. But Alcoa’s quarterly income from continuing operations fell harder than analyst expectations in the third quarter, to 15 cents per share, down from 28 cents and below a forecast of 22 cents, WSJ Marketbeat says. European aluminium users had “dramatically” cut orders, the company said, according to Bloomberg.
Aluminium company Alcoa opened the US corporate earnings season with disappointing results for the third quarter, reporting profits below consensus expectations, the FT reports. Earnings per share were 15 cents for the third quarter, up from 6 cents in the equivalent period of 2010, but down 28 cents from the second quarter, and well below the average forecast of 22 cents from analysts surveyed by Bloomberg. Chief executive Klaus Kleinfield said confidence appeared to be more of a problem than actual demand, and insisted that “the world is not the same” as when it plunged into the downturn of 2008-09, with strong physical aluminium markets and total global demand still growing. However, he said that growth was slowing sharply in the second half of the year, and regional demand was falling outright compared with the first half in North America, Europe and Brazil. The results helped push Asian shares lower, says Reuters.
Alcoa, the integrated aluminium producer, reported that its second-quarter earnings more than doubled and expressed confidence in its outlook despite recent weakness in metal prices, the FT reports. Kicking off the North American second-quarter reporting season, Klaus Kleinfeld, Alcoa’s chief executive, described the economic recovery as “uneven”, but said the outlook for the company and for the aluminium industry as a whole remained positive. Net income for the second quarter totalled $322m, or 28 cents a share, up from $136m, or 13 cents, a year earlier. Income from continuing operations, excluding special charges, totalled $364m, or 32 cents a share. Revenues grew by 27 per cent from a year earlier to $6.6bn.
Shares in Alcoa rose 3% on Tuesday on market talk that Rio Tinto was preparing a bid for the US aluminium company, but sources said two banks rumoured to be financing the deal were not involved, reports Reuters. A senior banker at Santander denied the Spanish bank had secured a loan to finance a potential acquisition, which would combine the global No. 2 and 3 aluminium producers. A source close to the situation said JPMorgan Chase was not involved in a rumoured deal. Market rumours that the two banks had secured a $25bn syndication loan for Rio to buy Alcoa for $25.5 per share lifted Alcoa’s stock price more than 4% earlier in the day. The shares slipped in New York after the Santander denial and were trading at $17.79, up 3.3% in the afternoon.
Buyers were returning to risk assets as the confidence wobble seen at the start of the week quickly faded on Wednesday, the FT’s global market overview reports. The FTSE All-World equity index was up 0.3 per cent, many commodities were enjoying bids and safety plays, such as core government bonds, and haven currencies were falling back. US stock futures suggested Wall Street, which lost 1.1 per cent in the previous two sessions, would open up by 0.3 per cent. A burst of insecurity on Monday and Tuesday had caused a flight out of erstwhile market darlings, such as oil, precious metals, agricultural products, stocks and high-yielding forex units. This coincided with a mixed reception afforded by the IMF’s latest world economic bulletin and a poorly received earnings report from Alcoa, the aluminium producer, as it kicked off the US reporting season.
Analysts expect companies to report slower growth in profits for the first quarter as rising commodity prices dent profit margins and risk hitting consumer spending, the FT reports. Earnings per share for companies in the S&P 500 index grew 41 per cent in 2010 following a sharp slowdown in 2009, according to Thomson Reuters, but are forecast to grow just 13.6 per cent in the first quarter compared with the same period a year ago. However, many strategists believe that results may be better than anticipated. Forecasts have been raised for materials groups – such as Alcoa, which on Monday will become the first S&P company to report earnings for the quarter. Materials groups’ earnings per share are now expected to grow by 44 per cent versus the first quarter of last year, thanks to rising prices for metals, oil and grains. Energy groups’ earnings are expected to grow by 23 per cent. However, rising input prices could hurt other sectors.
US hedge fund manager John Paulson has pared his stakes in Citigroup and Bank of America, both among Paulson & Co’s biggest stock holdings by market value, reports DealJournal, citing the group’s quarterly snapshot of investment holdings as of Dec 31. Paulson reported buying bonds of Alcoa, and shares of BlackRock, Seagate and J. Crew since the end of the 2010 third quarter. Paulson reporting owning 424m shares of Citi at the end of September. On Monday, he disclosed owning nearly 414m shares. In the same period, Paulson’s holding of 138m BofA shares was cut to about 124m; he also holds BofA warrants. Dow Jones adds that Paulson also trimmed back his holdings in Wells Fargo in the period.
Alcoa has signed financing deals worth $1.9bn with Maaden, Saudi Arabia’s mining giant, for the first phase of a joint $10.8m aluminium project in Saudia Arabia Reuters reports. Maaden said that 16 institutions provided the funds for the project, believed to include BNP Paribas, Export Development Canada and Standard Chartered, according to sources. Maaden and Alcoa plan to sign further financing deals, bringing the total to $4.5bn, to finance the project which they say will be the world’s largest fully integrated aluminium complex.
The sheen provided by a positive start to the US second-quarter earnings season has been tarnished after worries about China’s property market returned to spook investors, according to the FT’s global market overview. The S&P 500 futures contract has given up an overnight 0.5 per cent advance that had come in the wake of well-received earnings from Alcoa. However, the aluminum giant’s higher demand forecasts suggest growing confidence in the global economic recovery, Bloomberg says.
Breaking pre-market news on Tuesday,
- BP installs new spill cap, warns success “cannot be assured” — statement. Read more
Alcoa, the US aluminum producer, kicked off the US earnings season and promptly beat analysts’ projections as higher metal prices boosted sales, Bloomberg reports. Earnings from continuing operations were 13 cents a share, compared with expectations of 11 cents. Net income was $136m against a net loss of $454 million a year earlier, while sales rose 22 per cent to $5.19bn.
Markit’s Gavan Nolan wrote this CDS report
A sense of foreboding enveloped the credit markets last week. A plethora of economic indicators – leading and lagging – gave investors cause to question the V-shaped recovery being priced into credit spreads. The Markit PMI reports, particularly the UK Manufacturing PMI, suggested that the nascent recovery was already losing momentum. In the US, the ISM Manufacturing Survey – a similar report to the PMI – also disappointed. Investors feared the worst ahead of September’s US non-farm payrolls report. But the 263,000 jobs lost and 9.8% unemployment rate surpassed even the worst expectations. “Jobless recovery” became the latest entrant to the economic lexicon.
Sections of the commentariat became more vocal in declaring that the “V” was illusory; “W” was the letter future students would see in their GDP charts. But they moved on to the back foot quicker than they could have imagined after another set of leading indicators pointed towards an exit from recession. The Markit UK PMI for the services sector painted a different picture than its manufacturing counterpart, showing the strongest rise in activity since September 2007. The performance of the US ISM services index was not quite as impressive, but the 50.9 reading was again better than expected and the first month of expansion in nearly a year. Unsurprisingly, spreads tightened on the news. Read more
Markit’s Gavan Nolan wrote this CDS report
European credit indices resumed their rally after yesterday’s brief hiatus. But the spread tightening was modest compared to movements earlier this week, and the rally in both credit and equity markets lost momentum in the afternoon. The Markit iTraxx Europe index was trading around 92bp, marginally tighter than yesterday’s close. The Markit iTraxx HiVol index was stronger at 155bp, around 2.5bp tighter, while the Markit iTraxx Crossover was 2.5bp tighter at 568bp.
US aluminium company Alcoa provided the impetus for the rally, which was more pronounced among single names. The firm announced a surprise profit after the close yesterday, giving investors hope that the third-quarter earnings season will support current valuations. Unsurprisingly, mining credits led the market tighter, with Xstrata and Anglo American among the best performers. Other cyclical credits, such as autos and retail, also enjoyed strong sessions. Read more
Alcoa, the biggest US aluminium producer, surprised investors on Wednesday by reporting a Q3 return to profitability after three consecutive quarters of losses, thanks to rising metal prices and cost-cuts. The results gave a positive start to the US corporate earnings season from a manufacturer that is seen as an early indicator of industrial earnings. Alcoa, which reported after markets had closed in New York, was the first company in the Dow Jones Industrial Average to announce Q3 results.
Asian markets moved sharply lower on Wednesday, falling for a second consecutive session as traders digested losses at Alcoa and Daiwa Securities. Alcoa, the world’s largest aluminum producer, posted a larger-than-expected quarterly loss of $497m while Daiwa warned it would report an annual loss after booking a Y17.4bn ($173m) decline in the value of its securities holdings. The MSCI Asia Pacific Index was trading more than 2 per cent lower by lunchtime in Tokyo, as all markets expect the Philippines declined.
Asian markets (Wed)
Nikkei down 174.22 (-1.97%) at 8,658.63
Topix down 19.01 (0.02%) at 813.59
Hang Seng down 555.51 (-3.74%) at 14,370.46 Read more
Alcoa, the largest US aluminum maker, plans to sell stock and convertible notes, slash its dividend and cut costs to conserve cash as the company braces for its second straight quarterly loss, reports Bloomberg. The quarterly dividend will be reduced to 3 cents a share from 17 cents, while capital spending in 2010 will roughly halve from this year to $850m, the company said.
Alcoa, the largest US aluminium maker, highlighted the difficulties facing global manufacturing and construction by reporting a Q4 $1.19bn loss, exceeding estimates by even the most bearish analysts. The company seemed blindsided by the pace of decline in aluminium prices, which have fallen more than 50% in six months. As a result, Alcoa’s revenue dropped to $5.7bn from $7bn. Its loss of $1.19bn, or $1.49 per share, in the quarter, compared with a profit of $632m, or 75 cents per share, a year earlier. Alcoa last week said it would cut 13,500 jobs, or 13% of its workforce, halve capex to $1.8bn, reduce output and sell four non-core businesses valued at up to $100m.
This CDS report was written by Markit’s Gavan Nolan
European credit indices gave back some of their gains this afternoon following disturbing news from the US. This morning saw a continuation of the recent rally, with the Markit iTraxx Europe index more than 12bp tighter at one point. But the strong performance could not be sustained after US stock markets opened down and European stock indices followed suit. The ADP employment survey showed that the US private sector shed 693,000 jobs in December, far higher than expected. However, the methodology of the report was changed this month and it is difficult to tell whether this has had a meaningful effect on its reliability. Technical issues aside, the size of the figure bodes ill for the crucial non-farm payrolls report this Friday. Read more
Alcoa, the largest US aluminium group, said Tuesday it would cut 13,500 jobs, or 13% of its worldwide workforce by the end of 2009, halve capital expenditures and curb production amid the economic downturn. An extra 1,700 contract employees will be laid off and the company has introduced a salary and hiring freeze. Alcoa also announced its third production cut in as many months, reducing smelting output by 750,000 tonnes, or 18% of its annual output. Alcoa also suspended its share repurchase programme and said it would look to sell four non-core businesses valued at up to $100m.
Chinese aluminium giant Chinalco, which last month led a $14bn stake investment in global miner Rio Tinto, has not increased its holding in Rio despite an agreement with its partner that allows them to buy more, reports Reuters. The wait-and-see stance of state-run Chinalco, which joined with US counterpart Alcoa to buy 12% of Rio’s London-listed shares, indicates it is not rushing to enter a bidding war with BHP Billiton, which has made an all-share offer for Rio that is now worth $121bn .
The president of Chinalco, which paid $14bn for a 9% stake in bid target Rio Tinto last week, insisted on Monday the company had no plans to increase its stake but would consider selling the stock at the right price. The surprise acquisition of 12% of Rio’s UK-listed shares by the Chinese state-run mining group was seen as an attempt by Beijing to block a $119bn takeover of Rio by BHP Billiton, the rival miner, in a deal that would create a virtual monopoly in iron ore supplies to Asia. But the comments from Xiao Yaqing, who was in Sydney as part of the company’s efforts to convince Australia of the strategic merit of the investment, indicated that Chinalco and Alcoa of the US, its consortium partner, would consider negotiating with BHP. Under a UK Takeover Panel deadline, BHP must decide by Wednesday whether to table a formal offer for Rio or walk away for six months. People close to BHP insisted that Chinalco’s intervention would not necessarily derail BHP’s plans, fuelling expectations it will persist with its offer of three BHP shares for each Rio share.
BHP Billiton is still deciding whether to walk away from its $119bn (£60.5bn) bid for rival Rio Tinto after Chinalco, China’s state-owned mining group, bought 12% of Rio’s UK-listed shares in partnership with Alcoa of the US in a “dawn raid” on Friday, reports the FT . The Daily Telegraph reports that BHP intends to press on with its bid, and adds that fund manager Blackrock was among the Rio investors who sold shares to Chinalco and Alcoa. The FT says Marius Kloppers, BHP’s chief executive, spent the weekend with advisors including Goldman Sachs, Citigroup and UBS. Chinalco’s move was seen as an effort to stop BHP buying Rio and monopolising the Australian iron ore industry, which supplies Chinese steel mills. A banker close to the situation said Chinalco had $120bn of funding from the Chinese Development Bank if it chose to mount a bid. Chinalco’s president, Xiao Yaqing, is understood to have met Paul Skinner, Rio chairman, on Friday. The UK Takeover Panel has given BHP until Wednesday to make a formal offer for Rio. On Monday, reports Bloomberg , Rio shares rose nearly 5% to a one-month high in Sydney on speculation that BHP may raise its takeover offer. In an editorial comment, the FT says China’s move is “savvy” in many ways. But if it is to avoid a backlash, Chinalco must be “transparent about itself and how it will manage its stake”.
On Friday the battle for control of Rio Tinto turned geopolitical. Spectacularly so.
Chinalco, a Beijing-based mining group which counts as China’s largest aluminum producer, has hooked up with the world’s largest aluminum firm, Alcoa, and taken a 12 per cent stake in Rio. Read more
The world’s largest miner BHP Billiton has confirmed an approach for Rio Tinto – right on the back of the completion of Rio’s takeover of US aluminium miner Alcoa. If successful a merged Rio Billiton could be worth upwards of £80bn
BHP Billiton’s is understood to have approached Rio with merger terms over the weekend, through Goldman Sachs. The terms proposed are as yet unclear, but Rio appear to have rejected the offer. FT Alphaville understands that some sources suggested a 30 per cent premium was offered.
Shares in Rio Tinto are currently trading up 23 per cent at 1,006p as of 11:20BST. Read more