Buying Aluminum Call Options to Profit from a Rise in Aluminum Prices

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect Choice For Beginners!
    Free Demo Account!
    Free Trading Education!
    Get Your Sing-Up Bonus Now!

  • Binomo
    Binomo

    Only For Experienced Traders!

Alcan profit rises with aluminum prices

Padraic Cassidy

  • Email icon
  • Facebook icon
  • Twitter icon
  • Linkedin icon
  • Flipboard icon
    Print icon Resize icon

Referenced Symbols

NEW YORK (MarketWatch) – Alcan Inc. said Monday higher prices for aluminum overcame the impact of a weaker U.S. dollar and an increase in energy and raw material costs to lift first-quarter profit 56%.

Net income rose to $218 million, or 58 cents a share, from $106 million, or 29 cents a share, a year earlier.

Income from continuing operations grew to $208 million, or 56 cents a share, from $133 million, or 36 cents a share. Alcan said sales fell to $5.17 billion from about $6 billion in the first quarter of 2004.

The average analysts’ estimate from Thomson First Call was for income of 56 cents a share and revenue of $5.15 billion.

Shares of the Montreal-based Alcan AL, +3.01% fell by 36 cents Monday, or 1.1%, to $33.

Travis Engen, Alcan’s president and chief executive, said industry fundamental s are solid, despite a recent drop-off in aluminum prices. “Earnings are significantly higher both year-over-year and sequentially, which is especially noteworthy given ongoing cost pressures and the spinoff of our rolled products business,” said Engen.

“Overall, Alcan has reported a solid” quarter, said Canaccord Capital analyst Greg Barnes in a note to clients. “The company’s limited guidance for Q2/05 is relatively tepid,” Barnes added. Bauxite and alumina business will be flat, he said, while the primary metals business will be firm; the engineered products will be in line; and the packaging business will be higher as it benefits from higher volumes.

Merrill Lynch analyst Daniel Roling expects higher earnings in the second quarter, depending upon the level of aluminum prices, which have “materially weakened over the past few weeks” from more than 90 cents a pound to a low of 79 cents a pound.

CDC eases guidelines for essential workers who’ve been exposed to coronavirus

The Centers for Disease Control and Prevention has new guidance for essential workers as it takes a small step toward reopening the country.

Bloomberg

We’ve detected unusual activity from your computer network

To continue, please click the box below to let us know you’re not a robot.

Why did this happen?

Please make sure your browser supports JavaScript and cookies and that you are not blocking them from loading. For more information you can review our Terms of Service and Cookie Policy.

Need Help?

For inquiries related to this message please contact our support team and provide the reference ID below.

Rising aluminum costs cut into Ford’s profit

Other automakers

    Share
  • 0 Comments

When Ford reports fourth-quarter results on Wednesday afternoon, it is expected to fret that rising metals costs have cut into profits, even as rivals say they have the problem under control. Aluminum prices have risen 20 percent in the last year and nearly 11 percent since Dec. 11. Steel prices have risen just over 9 percent in the last year. Ford uses more aluminum in its vehicles than its rivals.

Aluminum is lighter but far more expensive than steel, closing at $2,229 per tonne on Tuesday. U.S. steel futures closed at $677 per ton (0.91 metric tonnes). Republican U.S. President Donald Trump’s administration is weighing whether to impose tariffs on imported steel and aluminum, which could push prices even higher.

Ford gave a disappointing earnings estimate for 2020 and 2020 last week, saying the higher costs for steel, aluminum and other metals, as well as currency volatility, could cost the company $1.6 billion in 2020. Ford shares took a dive after the announcement. Ford Chief Financial Officer Bob Shanks told analysts at a conference in Detroit last week that while the company benefited from low commodity prices in 2020, rising steel prices were now the main cause of higher costs, followed by aluminum.

Shanks said the automaker at times relies on foreign currencies as a “natural hedge” for some commodities but those are now going in the opposite direction, so they are not working. A Ford spokesman added that the automaker also uses a mix of contracts, hedges and indexed buying.

Industry analysts point to the spike in aluminum versus steel prices as a plausible reason for Ford’s problems, especially since it uses far more of the expensive metal than other major automakers.

“When you look at Ford in the context of the other automakers, aluminum drives a lot of their volume and I think that is the cause” of their rising costs, said Jeff Schuster, senior vice president of forecasting at auto consultancy LMC Automotive.

Other major automakers say rising commodity costs are not much of a problem. At last week’s Detroit auto show, Fiat Chrysler Automobiles NV’s Chief Executive Officer Sergio Marchionne reiterated its earnings guidance for 2020 and held forth on a number of topics, but did not mention metals prices.

General Motors Co gave a well-received profit outlook last week and did not mention the subject.

“We view changes in raw material costs as something that is manageable,” a GM spokesman said in an email.

A spokesman for Volkswagen said while the German automaker had announced it expected higher raw material prices in 2020, it would cut other costs to more than compensate for the increases.

When asked about rising costs, a Jaguar Land Rover spokeswoman said Britain’s biggest carmaker deals with fluctuations in raw material prices by “working closely with our suppliers . and by being well-hedged where necessary.”

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect Choice For Beginners!
    Free Demo Account!
    Free Trading Education!
    Get Your Sing-Up Bonus Now!

  • Binomo
    Binomo

    Only For Experienced Traders!

Ford jolted the auto industry in December 2020 when it launched the current-generation F-150 pickup truck with an all-aluminum body, shaving 700 pounds (318 kg) off its weight and boosting fuel economy. Ford’s F-series trucks represented the largest-scale use of aluminum in a high-volume vehicle in the auto industry, and required a level of technological risk-taking that had rarely been seen among the Detroit automakers.

GM and FCA have both stuck mostly with steel in recently unveiled revamped pickup truck models.

Ford also uses a large amount of aluminum in some lower-volume SUV models. But the F-Series pickup trucks, for decades America’s best-selling vehicle line, alone sold almost 900,000 units in the United States in 2020. That was close to 35 percent of Ford’s total U.S. sales.

“These are very profitable vehicles. But a spike in aluminum prices will eat into those profits,” said Sam Fiorani, vice president of AutoForecast Solutions.

But Michael Robinet, managing director of automotive advisory services at IHS Markit said, “I don’t think Ford is an outlier here.”

“The entire industry is facing rising commodity costs and I think Ford has just chosen to highlight it,” Robinet said. (Reporting by Nick Carey; Editing by Jeffrey Benkoe)

Alcoa’s Profit More Than Doubled in Quarter, Following Aluminum Prices Up

By Bloomberg News

    July 11, 2020

Alcoa, the nation’s largest aluminum producer, said on Monday that second-quarter profit more than doubled after prices for the metal rose.

Net income was $322 million, or 28 cents a share, compared with $136 million, or 13 cents, a year earlier, Alcoa reported after the markets closed. Sales gained 27 percent to $6.59 billion, exceeding the $6.31 billion average estimate of seven analysts in the Bloomberg survey.

Earnings, excluding $38 million in restructuring and debt tender offer costs and other one-time items, were $364 million, or 32 cents a share, missing the 33-cent average estimate of 14 analysts surveyed by Bloomberg.

“The market should be pleased that Alcoa is showing these strong year-over-year trends,” Jorge Beristain, an analyst at Deutsche Bank, said on Bloomberg TV. “They are managing to hold the line on costs.”

Alcoa’s chief executive, Klaus Kleinfeld, reiterated his forecast for global demand to increase by 12 percent in 2020 and double by the end of the decade as Asian countries build more offices and buy more aircraft, cars and trains.

“Although the economic recovery is uneven, the overall outlook for Alcoa — and for aluminum — remains positive,” Mr. Kleinfeld said in a statement. “Demand for aluminum continues to rise and so does growth in our major markets.”

Alcoa, traditionally the first company in the Dow Jones industrial average to report earnings, was little changed in after-hours trading.

Aluminum prices have advanced in the last year in London as demand soared from Chinese and American automotive and aerospace sectors. Aluminum spot prices on the London Metal Exchange averaged $2,600 a metric ton in the second quarter, 24 percent more than a year earlier.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect Choice For Beginners!
    Free Demo Account!
    Free Trading Education!
    Get Your Sing-Up Bonus Now!

  • Binomo
    Binomo

    Only For Experienced Traders!

Like this post? Please share to your friends:
Binary Options Trading For Beginners
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!: