Skip to Content
Stock Strategist Industry Reports

Is It Time to Buy Alcoa?

Aluminum producers are making tough decisions in a bleak environment. Which one will laugh last?

Mentioned: , , , ,

Since aluminum prices plummeted from last summer,  Alcoa's (AA) shares took a nosedive. The stock recently hit a 20-year low. Is it time to buy this U.S. aluminum giant, or any other aluminum-related stocks? We will analyze the industry structure and the aluminum value chain to identify the strategically well-positioned companies as potential candidates for long-term investment.

Demand from New Applications and China
First, let's first look at the supply and demand dynamics for this metal. Since Alcoa "invented" aluminum over a hundred years ago, aluminum gained broad application in people's daily lives--first in construction, then in beverage cans, and later in automobiles and airplanes. Today aluminum is the world's second most-used metal after steel. In the last decade, incremental aluminum demand arose primarily from China's industrialization needs. Chinese aluminum output more than quadrupled from the beginning of the century, and the country's share of global aluminum production jumped from 3% in 1980 to 34% in 2008. China ended 2008 as the world's largest aluminum-producing country.

Min Ye does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.