Alcoa Raises Product Prices

Alcoa Inc. (AA - Analyst Report) raised the prices for several of its industrial heat-treated plate products in North America on March 15. Now, 6061 GE Plate and 6013 PowerPlate, including Mold Plate will be available at 10 cents higher per lb.

Alcoa also raised prices for its 2X/7X heat-treated plate products. However, the company removed the two 5% discounts on 2xxx and 7xxx plate, equaling the increases of just over 10% for the aerospace and defense products. Alcoa intends to honor all existing orders confirmed prior to March 15.

Alcoa also restarted its East Plant in Massena, NY, on March 1 and hired 120 employees. The East Massena Plant has a capacity to produce 125,000 metric tons of aluminum annually and was forced to close down due to the recession.

In January, Alcoa posted better-than-expected year-over-year results for the fourth quarter of 2010 with net earnings and revenues exceeding the Zacks Consensus Estimate. The company continues to benefit from its cost saving efforts. We believe the cost cuts will make Alcoa more competitive when markets fully recover.

The annual global consumption of aluminum products, both upstream and downstream, is expected to double over the next 15 years. This consumption boom will be driven primarily by growth in China, India, Russia and Brazil, whose demographics are accelerating development. However, Alcoa is facing declining aluminum prices, higher input costs and significant restructuring charges, which could pressure margins in the near to medium-term.

Also, Alcoa faces stiff competition from Aluminum Corporation of China Limited (ACH - Analyst Report), privately held Rio Tinto Alcan Inc. and RUSAL.