Alcoa's 'Neutral' Curtailment

RBC Capital Markets commented on Alcoa Inc

Tuesday following its decision to curtail 443,000 tonnes of smelting capacity at Suralco. Analyst Fraser Phillips noted that "Suralco is owned 60 percent by Alcoa and 40 percent by Alumina Limited through the Alcoa World Alumina and Chemicals group of companies and has total refining capacity of 2.2 million tonnes, of which 876,000 tonnes are currently idled." According to the analyst note, the Government of Suriname will acquire Suralco through a state-owned entity, including the mining, refining and Afobaka hydroelectric operations. A final agreement is expected by July 1, 2015. The curtailment was viewed as having "neutral" impact on the company with no material changes to Aloca's earnings. Aloca has been seeking to "move down to the 38th percentile of the global aluminium cost curve and the 21st percentile of the global alumina cost curve by 2016", according to Phillips. The company's actions "would represent a 5 percent reduction from the company's current cost position (43rd percentile) in aluminium and a 4 percent reduction from the company's current cost position (25th percentile) in alumina." The firm maintained a Sector Perform rating and $18 price target on the stock. Alcoa Inc recently traded at $13.41, up 2.70 percent.