Alcoa: Aluminum Pricing Looks Set To Stabilize And Head Higher

Early Lockheed Lounge by Marc Newson, World-Aluminium.org

A few years back, I was particularly negative on many different materials-related stocks, from iron ore to steel, to copper. Since then, many of these materials (and related stocks) were decimated (several times over).

This has gotten to a point where arguably, and for many different materials, a large portion of existing producers are producing below cash costs. This is intrinsically unsustainable. As such, sooner or later these materials' prices are bound to stabilize and head higher.

Today, and in the context of covering Alcoa (NYSE:AA), I will be showing why I expect aluminum stability and improvement to be within sight. By "within sight," I mean "within the next 9-12 months."

First A Bit Of Background

Aluminum prices have been falling for, like, forever. After taking a plunge during the 2008 financial crisis, aluminum prices recovered for around 2 years, only to enter another 5-year long, hellish slide:

Source: LME.com

The original crash during the financial crisis was at least partially prompted by a massive increase in LME stocks (as a proxy for unbalanced supply and demand). This massive increase, as we can now see, is being eaten away for 2 years already:

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