Will Alcoa Inc (NYSE:AA) Increase Its Output To Meet Tanker Demands?

Albany, New York (09/22/2014) – The world’s biggest aluminum manufacturer Alcoa Inc (NYSE:AA) has been witnessing a favorable market conditions in the last few quarters. As a result, it could surpass the estimations of the Street analysts on earnings per share in the last two quarters. Now, with the demand increasing from liquefied natural gas or LNG tanker, will the company lift its output? The latest question arises on the back of news emanating from Japan about the increased demand and the domestic company’s intention to boost output.

Japan Demand

The domestic company and the third largest rolled aluminum products producer, UACJ Corp., indicated its intention to boost its capacity for sheets that are especially used in carriers of LNG by about 50% in the next year to meet the increasing demand from the tankers, Bloomberg reported. The Japanese company would lift its yearly output capacity to 54,000 metric tons for rolled aluminum from 36,000 tons currently. The company has set deadline of September 30 next year to complete the process.

UACJ is the leading aluminum producer in Japan with its rolled aluminum sheets supplied to shipbuilders like IHI Corp., Mitsubishi Heavy Industries Ltd., Hyundai Heavy Industries Co. and Kawasaki Heavy Industries Ltd. Japan is the biggest buyer of LNG and predicted to witness more dependence on natural gas to offset the nuclear power generation lost following the Fukushima disaster in 2011. It may require over 20 fresh LNG carriers to import shale gas from the U.S.

Will It Benefit Alcoa?

One of the primary reasons for the current demand is cut in output implemented by major companies including Alcoa and United Co. Rusal in the last few years. This is starting to generate part of the fruits. The demand has not come significantly from any specific sector or the economy though it showed resilience. Automakers were turning towards metal also affected the demand for aluminum.

The current demand witnessed in Japan could be more due to its internal requirements to shift its dependence on natural gas-based power projects to compensate the nuclear power loss. The demand would not likely to extend to other sectors.

However, Japan has recorded a high premium in aluminum and ranked second in Alcoa by generating $403 per metric ton during the second quarter. The company’s performance was impressive in the last few quarters due to product mix, and it is quite unlikely to boost output now since Alcoa Inc (NYSE:AA) believes that global inventories witnessed 37 days fall from the peak of 2009.

About the Author

Cooper is a graduated from Buffalo State College in New York with a bachelor's degree in Broadcast Journalism.

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