Alcoa shares squeezed like aluminium can under china pressure

China's persistent metals glut has lately been putting pressure on shares of Alcoa (AA), as dismal forecasts Wednesday contributed to the New York-based aluminium manufacturer's decline in share price of more than 5 per cent.

"China's campaign to cut industrial overcapacity could be derailed by mounting debts," Deutsche Bank analyst Jorge Beristain said in a Wednesday report.

For Huaibei Mining alone, one of China's largest coal-producing mining corporations, "debt in steel, coal, cement, and non-ferrous metal sectors totals 10 trillion Chinese yuan (about $1.6 trillion)," Beristain said in the report. "Although the Chinese government is providing more than 100 billion Chinese yuan ($15 billion) aid to handle layoffs in steel/coal industries, the funds will be made available only after debts are settled."

The oversupply is also affecting many U.S. steelmakers, as Real Money reported, where many producers have been forced to idle their mills to counterbalance depressed metal prices, cheap imports, and disappearing oil-and-gas customers.

Alcoa shares have been under such pressure throughout 2015, with the stock down more than 28 per cent over the past 12 months, as of Wednesday's closing levels. Meanwhile, shares of rival Rio Tinto (RIO) have declined nearly 36 per cent over the period.

"On metal, China aluminium prices on the Shanghai exchange fell to an all-time low during the quarter, driving about 70 per cent of China's smelting operating capacity into a cash-negative position," Alcoa CFO William Oplinger said of the glut on the company's fourth-quarter earnings call. "We've seen 3.9 million metric tons of announced curtailments during the second half of 2015. We would anticipate again that these would be fully executed by the end of the first quarter."

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