The New York based company, Alcoa Inc. has been churning out the lightweight metal used in everything from beverage cans to airplanes for the past 127 years and was a symbol of U.S. industrial might. Alcoa’s decision to eliminate 503,000 metric tons of smelting capacity accounts for about 31 percent of the U.S. total for primary aluminum, but less than one percent of the global total. A global glut has driven prices down by 27 percent in the past year, rendering American operations unprofitable and accelerating the pace of the industry’s demise. Aluminum is down 19 percent this year to $1,501 a ton on the London Metal Exchange. Plants overseas usually have the advantage of lower labor costs, cheaper energy expenses and weaker domestic currencies that favor exports to the U.S.. 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.
The decision made by Alcoa Inc is based on the increase in production of aluminum by China. They are able to supply for aluminum because of the cheap, available labor. The weaker Chinese currency means these products are favored exports for countries, such as the U.S., with more buying power to purchase the goods as exports.
http://www.bloomberg.com/news/articles/2015-11-03/when-a-127-year-old-u-s-industry-collapses-under-china-s-weight
1 comment:
Since the Alcoa industry is failing, people will have to invest in a different industry, most likely industries abroad, specifically China. The Alcoa industry even relies heavily on China's aluminum industry. Everyone is relying on foreign industries, because you go wherever the money goes. Aluminum itself is down 19% worldwide but China will probably account for 55% of global aluminum, it's keeping the industry alive. China has a ballooning output and has compounded a global surplus and driven prices so low that Bank of America estimates more than 50 percent of producers globally will lose money. However smelters in the Asian country are still profitable, helped by higher physical premiums in the region, but American aluminum industries are losing money and may shut down in the near future. Aluminum investors have to start investing abroad.
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