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How Alcoa’s Split Can Win Investors Back

Alcoa shares rose after the company announced plans to split.

Alcoa announced plans on Monday to separate its mining, refining and smelting businesses from its manufactured-products operations in a tax-free spinoff. The company expects the transaction to close in the second half of 2016.

The stock rose smartly in response. That is a relief for shareholders given the stock is down more than 40% so far this year.

And splitting the businesses makes sense: It will allow Alcoa to better emphasize the refined-products unit. Falling global demand for raw materials, nastily coinciding with a supply glut, has depressed the global aluminum price.

Aluminum alloy futures fetch $1,685 a ton on the London Metal Exchange, down more than 20% over the past year. Regional premiums to...