Weekly Metals & Mining Summary: ArcelorMittal, Alcoa and Vale

by Trefis Team
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The past week saw only a few developments affecting mining and steel companies across the globe. Last Tuesday, the U.S. Fed minutes showed its reluctance for further quantitative easing unless growth subsides, which sent gold and silver prices south. [1] An increase in custom duties last month by one of the world’s largest gold consumer India has aided to the sell-off in the gold.

Both precious metals have shed most of this year’s gains amidst encouraging data for the U.S. economy. We summarize a few company specific developments related to steel behemoth ArcelorMittal (NYSE:MT), aluminum giant Alcoa (NYSE:AA) and the world’s largest iron ore miner Vale (NYSE:VALE), which could impact their value going forward.

ArcelorMittal

ArcelorMittal was in the news for a number of wrong reasons mostly related to the company’s South African operations. First, the South African government barred the company from its preferential list for infrastructure procurement program. Then, news made the rounds that the country’s Competition Commission indicted ArcelorMittal of colluding with other players to synchronize the price hikes and directed competition court to penalize the company. The South African government has lamented the company for exerting too much control over steel prices in the domestic market and is seeking to cut the company’s clout in the region.  The company, however, has found some comfort from improving market in the U.S, where it has raised prices of some of the products. We have discussed the issues in a note ArcelorMittal Faces Collusion Claims In S. Africa As Complaints Stack Up.

See Full Analysis of ArcelorMittal Here

Alcoa

Alcoa, which has planned to trim its smelting capacity by 12% this year, delayed the closing of Italian aluminum smelter till September after it reached an agreement with the labor unions and the government. In the meantime, the company is aggressively looking for a bidder and rumors have it that three suitors have approached the company to express their interest in the plant. We have discussed the issue in a note Alcoa Delays Closing of Italian Aluminum Smelter, Scouts for Buyer. Then, later in the week Alcoa announced cut in refining capacity in line with smelter capacity reduction. [2]

But, our eyes are on its first quarter earnings next Tuesday, where we expect it to post second consecutive loss for two quarters. It will be interesting to watch, if the company makes further announcements to control soaring input costs.

See Full Analysis of Alcoa Here

Vale

Vale faced a setback when it lost the court battle with Aquila where Vale claimed that RBC’s valuation of Aquila’ stake in their Belvedere joint venture has been highly inflated. In addition, the company will have to pay damages to the Aquila. Vale and Aquila have been wrangling over many of their joint ventures. We have discussed the issue in a note Vale’s Issues with Aquila Continue, Could Hurt Diversification Efforts.

Further, the latest news is that the company has idled two “Valemax” the world’s largest iron ore carriers for as long as a month. It has also delayed taking delivery of two new vessels following demand for iron ore slumped a bit. [3] We will soon discuss the full impact of the news in our next few articles.

See Full Analysis of Vale Here

Understand How a Company’s Products Impact its Stock Price at Trefis

Vale’s Biggest Ore Carriers Idle as Exports to China Slump

 

Notes:
  1. Minutes of the Federal Open Market Committee, FRB Press Release, April 03 2012 []
  2. Alcoa to Curtail Refining Capacity, Alcoa News Release, April 05 2012 []
  3. Vale’s Biggest Ore Carriers Idle as Exports to China Slump, BusinessWeek, April 05 2012 []
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