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July 18, 2019, 7:28 a.m. EDT

China, trade wars dent Alcoa’s demand hopes

Global aluminum inventories expected to shrink to ‘levels not seen in more than a decade’

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By Claudia Assis, MarketWatch


Bloomberg News/Landov
A storage tank at an Alcoa Corp. alumina refinery in Australia.

Alcoa Corp. expects lower demand growth worldwide for aluminium even amid dwindling inventories of the metal, thanks to a double whammy of trade tensions and macroeconomic headwinds, it said late Wednesday.

Shares of Alcoa /zigman2/quotes/200686102/composite AA +0.44%  fell in the extended session after the aluminium and alumina producer posted a narrower-than-expected second quarter loss but raised the concerns about demand — and the implications for the global economy. The stock was down 2.4% premarket Thursday.

Related: The CEO of railroad giant CSX says he’s baffled by the U.S. economy

Alcoa said it estimates global aluminum demand growth for 2019 between 1.25% and 2.25% this year, down from a previous estimate of growth between 2% and 3%.

That’s thanks to “lower demand in both China and the world ex-China due to trade tensions and macroeconomic headwinds,” it said in a statement.

Aluminum inventories as measured by days of consumption continue to decline and are expected “to reach levels not seen in more than a decade, since before the global financial crisis in 2008” this year, the company said.

See also: Netflix stock drops more than 10% as earnings show huge decline in new subscribers

Alcoa continues to expect an aluminium deficit and an alumina surplus for 2019. For bauxite, it upped its expectations of a global surplus, to between 13 million and 17 million metric tons, an increase from the previous quarter’s full-year estimate of 8 million to 12 million metric tons.

That increase is due to higher production in Guinea and Southeast Asia, only partially offset by higher demand in China, Alcoa said.

Alcoa said it lost $402 million, or $2.17 a share, in the quarter, versus earnings of $10 million, or 5 cents a share, in the year-ago period.

Read: Tesla is getting China right, Morgan Stanley says

Adjusted for one-time items, the company lost $2 million, or a penny a share, versus earnings of $1.17 a share a year ago. Revenue fell to $2.7 billion from $3.6 billion a year ago.

Analysts polled by FactSet had expected an adjusted loss of 19 cents a share on sales of $2.7 billion.

Alcoa shares ended the regular trading day down 0.7%. The stock is down 13% this year, contrasting with gains of 19% and 17% for the S&P 500 index /zigman2/quotes/210599714/realtime SPX -0.79%  and the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.66%  .

/zigman2/quotes/200686102/composite
US : U.S.: NYSE
$ 18.31
+0.08 +0.44%
Volume: 2.95M
Aug. 20, 2019 6:30p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$3.40 billion
Rev. per Employee
$965,500
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
2,900.51
-23.14 -0.79%
Volume: 1.68B
Aug. 20, 2019 4:59p
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
25,962.44
-173.35 -0.66%
Volume: 238.10M
Aug. 20, 2019 4:59p
loading...

Claudia Assis is a San Francisco-based reporter for MarketWatch. Follow her on Twitter @ClaudiaAssisMW.

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