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Is Now The Time To Buy Alcoa?


The aluminum market has been oversupplied for several years now.

Alcoa has done all it can to cut costs.

The company is moving focus from the mining business to the parts business.

Alcoa will split the parts business from the mining business.

For some time now, the aluminum market has been flooded with oversupply. This has become a significant problem for Alcoa (NYSE:AA), whose share price has been cut from $17 at the start of 2015 to just over $10 currently. Despite the issue of oversupply, aluminum's vast array of uses makes it key for nearly every industry. Most notably, with the transportation industry looking for ways to improve fuel efficiency and reduce emissions, the dual light weight and durable nature of aluminum is becoming increasingly more popular, which should help better match supply and demand in the future.

In this article, I will examine Alcoa's current business, delve into what the company can expect for the future and discuss the risks that present themselves by investing in the stock.

Cost Cutting

Alcoa has been hard at work making changes, in an effort to save on the costs involved in the aluminum production aspect of its business. This became necessary as a result of fluctuations in China's demand for aluminum. With the country's growth accelerating at a rapid pace, aluminum demand saw an unprecedented spike, creating a massive need for supply. However, once growth inevitably slowed in China and throughout the world more generally, the market was left with an excess of supply, as demand could not keep pace. As could be expected, this caused prices to fall significantly.

As prices of the commodity have fallen, Alcoa has done all it can to control the aspects of the business it has control over - in this case, that means cutting...