In response to the bearish aluminum market, perhaps the most drastic action to date has been taken wby Alcoa Inc., reporting it will split in 2 in an effort to isolate the company’s profitable aspects from its aluminum smelting operations.
Aluminum prices have been hit hard by the economic crisis in China, a major consumer of the metal. Add to that China’s own manufacturing of aluminum leading to a surplus, which needs to be traded off, causing a further depressed market and you have a perfect storm that is causing companies like Alcoa to take such drastic measures.
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Alcoa isn’t the only company to break up into smaller units, and it is doing so with the expectation that narrowing its focus will lead to a better end result. This will not be without its own set of challenges, however, as Alcoa’s smelters will have to pass on raw aluminum price changes to its customers and will continue to suffer as prices do.
“That’s still their biggest problem,” Bill Selesky of Argus Research told The Wall Street Journal. “If prices continue to suffer, they’ll just have to keep closing smelters.”
Automotive MMI Impacted by Low Prices
We recently reported on the far-reaching effects the bearish aluminum market has had on the automotive market. The automotive MMI continues to fall despite surging supply and demand in the US. Low steel and aluminum prices, compounded by weakening supply and demand overseas, have made their mark on the automotive industry.
You can find a more in-depth aluminum price forecast and outlook in our brand new Monthly Metal Buying Outlook report. For a short- and long-term buying strategy with specific price thresholds: