Alcoa's Aluminum Cuts Point to a 'Regime Change'

In a recent article, Joe Deaux of Bloomberg Business states that Alcoa Inc.’s (NYSE:AA) aluminum-making cutbacks are “the clearest sign yet of a regime change.” Recently, the company announced plans to eliminate nearly a third of its domestic operating capacity on the back of poor aluminum prices.
As quoted in the market news:

Aluminum is down 19 percent this year to $1,501 a ton on the London Metal Exchange. The metal touched $1,460 last week, the lowest since 2009, and most American smelters can’t make money when prices are near $1,500 or below, Austin, Texas-based Harbor estimates. Plants overseas usually have the advantage of lower labor costs, cheaper energy expenses and weaker domestic currencies that favor exports to the U.S.
While output has been moving abroad for some time, the game changer in the past year has been the domination of China, where ballooning output has compounded a global surplus and driven prices so low that Bank of America estimates more than 50 percent of producers globally lose money. Smelters in the Asian country are still profitable, helped by higher physical premiums in the region.
China probably will account for 55 percent of global aluminum production this year, up from 24 percent in 2005, according to Harbor research. The U.S. has gone in the opposite direction: from 2.5 million tons in 2005 to 1.6 million in 2015, it said.

Click here to read the full Bloomberg Business report.