An Alcoa aluminum plant in Alcoa, Tennessee. Picture: REUTERS/WADE PAYNE
An Alcoa aluminum plant in Alcoa, Tennessee. Picture: REUTERS/WADE PAYNE

CHICAGO — Metals company Alcoa on Monday reported a quarterly net loss after charges related to shuttering parts of its traditional smelting business.

The New York-based company has been curtailing smelting capacity as the industry endures tumbling prices amid rising trade tension with China. Alcoa said last week it would close a plant in Evansville, Indiana, which would bring US aluminium output to its lowest level in more than 65 years.

London Metal Exchange aluminium prices, CMAL3, which fell 18.6% in 2015, are hovering near six-and-a-half-year lows as demand wanes in top-consumer China. The Midwest premium paid to producers on top of the LME price has fallen more than 60% to about 8.9c a pound from record highs last year.

In September, Alcoa announced it would split in two, spinning off its value-added aerospace and car parts business from its traditional aluminium smelting business that includes bauxite and alumina. The split will take place in the second half of this year and questions remain on how the company will divide up debt and pension liabilities between the two new entities.

Earlier on Monday, in good news for the added-value portion of Alcoa’s business, the company announced a $1.5bn long-term contract with General Electric’s aviation unit to supply components used in aircraft engines.

That follows several other major contracts in the aerospace industry the company announced during the last quarter.

"These contracts demonstrate that the push towards value-added business continues to show good results," CE Klaus Kleinfeld said in an interview after the results were announced.

But Mr Kleinfeld said Alcoa’s traditional business still faced "massive headwinds" from falling aluminium prices.

Alcoa on Monday posted a fourth-quarter loss of $500m, or 39c per share, compared with a net profit of $159m, or 11c a share, a year earlier.

Excluding charges for shuttering capacity and income tax charges, Alcoa would have posted a profit of $65m, or 4c a share above analyst expectations of 2c per share.

Alcoa said it expected global aluminium demand to increase by 6% in 2016 compared with 2015. The company said global aerospace sales should increase between 8% and 9% this year, while global automotive production should rise between 1% and 4%.

Reuters