Alcoa earnings take hit amid falling aluminum prices

Yahoo Finance’s Ines Ferre joins the Live show to break down how Alcoa stock is trading amid falling aluminum prices.

Video transcript

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JARED BLIKRE: Alcoa stock down after the aluminum producer released its quarterly results. Revenue fell 20% year-over-year. And falling aluminum prices is the center of the discussion here. Ines Ferré here to break down those results for us. Ines.

INES FERRÉ: Yeah, Jared. And Alcoa reported a second consecutive quarter of losses. And part of this has to do with, as you had mentioned, falling prices when it comes to alumina-- that's a compound-- and aluminum.

Also, the management talking about a challenging environment last quarter. Higher energy costs, higher production costs, that prompted management to cut output on some of its-- out of some of its plants in Spain and also in Norway.

And we also saw weakness in construction. We saw weakness in Europe. We saw those China lockdowns. So really what happens with aluminum kind of indicates what's happening in the world when it comes to demand. And China dictates prices because more than 50% of the world's consumption is in China.

So what does this mean? Well, the outlook is rosier because during last night's call with management, management highlighted China demand. And that is expected to improve in 2023 as China reopens. So that's a bullish story when it comes to aluminum.

And also, two sectors to keep in mind, as well. Electric vehicles, fun fact that management put out there. 40%-- electric vehicles require 40% more aluminum than gas vehicles. And also packaging, that is another sector that is also bullish.

But when you take a look at Alcoa, the stock is down now 2%. And when you take a look at aluminum prices, the volatility that we saw with aluminum prices. Last year in the first half of the year, you had aluminum hitting 4,000 per metric ton. Right now it's around 26,000 per metric ton.

BRAD SMITH: Wow, that's an amazing stat. EVs require 40% more aluminum. I didn't know that.

INES FERRÉ: Exactly, so that's expected to be very bullish for aluminum going forward, as the world goes towards EV.