Well, it was about time.
I haven't been the only one to notice that the two largest aluminum companies -- Alcoa
Things have gotten better for Alcan. It reported a 7% revenue increase in the recently announced quarter, with volumes up about 3%. There are a few different ways to slice up the earnings side of the equation, but it's pretty clear that margins were much better, and operating earnings jumped significantly from the year-ago period. Even when you consider that some items like technology sales boosted results, it was still a good quarter.
To be fair, some of the improvement came from things well out of management's hands. Natural gas and other input prices have settled down a bit, and the steadily rising price of finished aluminum has certainly been a positive. By the same token, improvement is improvement, and I'm not one to look a gift horse in the mouth.
I'd also note that the company slightly tweaked its estimates for aluminum demand and supply. Management boosted its demand growth forecast for 2006 by 0.2% to 5.1% and its supply growth forecast by 0.1% to 4.1%. It now sees a net deficit of 300,000 tons for the year. China, with its unused capacity, is still a potential bogeyman, but it's not as though there's a huge amount of high-quality capacity just lying fallow around the world.
While price increases in aluminum haven't really kept pace with other basic materials like zinc and copper, I wouldn't just assume that aluminum will race to catch up. But that doesn't mean aluminum prices can't be firm for a while, nor that aluminum producers can't rake in some of the cash flow that other miners and refiners have seen.
For more metal missives:
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
