CHARTS: The coming critical minerals trade war is BRICS short of a load
"While a large number of countries around the world continue to talk about securing raw material supply, China is actually doing something about it."
A recovery in metal prices boosted shares of Alcoa Corp. and other aluminum and steel producers amid a broader equities rally, outweighing concern about slower demand for metal from the world’s heavy industries.
Shares of the largest US aluminum producer rose as much as 9.5% in New York Thursday, after dropping 5.9% in early trading. A surprise jump in orders to withdraw inventories from London Metal Exchange warehouses sent prices up 2.7%. Nucor Corp., the country’s biggest steelmaker, gained 3.4% as the S&P 500 index climbed 1.1%.
Shares recovered despite Alcoa posting a surprising quarterly loss, signaling a worsening environment for a company that just last month warned investors it was being squeezed by higher costs and falling prices for the lightweight metal. Alcoa’s numbers couldn’t even attain Wall Street’s meager profit forecast.
Alcoa is the first of the world’s aluminum giants to report third-quarter results in a challenging year that’s seen a torrent of issues undermining profitability. Prices for the metal have suffered as rising global inflation, surging energy costs and weakening economic outlook batter the metal used from toasters and skyscrapers to automobiles. Adding to the market uncertainty is a potential ban of the metal from Russia, the world’s second-largest producer, either by the London Metal Exchange or the US.
The Pittsburgh-based company is a dependable barometer of US economic health across industries including construction, automotive, aerospace and consumer packaging due to their intense aluminum consumption. Nucor also posted earnings results Thursday that missed estimates, warning that economic uncertainty and inflation are putting pressure across “a myriad” of sectors in the US.
These results come five weeks after three of the most iconic names in American heavy industry forewarned investors that shipments are waning across all sectors. Since then, inflation deepened to further eat into average Americans’ paychecks and the US Federal Reserve continued to raise benchmark borrowing costs, crushing the housing market.
Nucor forecast “increasingly” challenging market conditions spawned by economic uncertainty heading into the end of the year. The Charlotte-based company told investors to expect “significantly” lower earnings from its steel mills due to lower volumes and metal prices.
Alcoa said its loss was due to decline in alumina and aluminum prices, higher energy and raw material costs and restructuring charges, including $626 million tied to pension settlements, while its executives during Wednesday’s earnings call provided analysts with further details.
“When the CEO said 35% of global capacity was loss-making in September it was an eye opener that this is a cruel operating environment,” Timna Tanners, an analyst at Wolfe Research, said in an email. The results “reflected market conditions that seem completely unsustainable.”
(By Joe Deaux and Yvonne Yue Li)
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