Alcoa 1Q16 Earnings Call Notes

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Klaus Kleinfeld

Slightly lower growth in aerospace

“Aerospace, we project 6% to 8% growth this year. This is a little lower than our 8% to 9% that we saw for this year earlier in the year. We see that the market is going through a transition given an unprecedented level of new model introductions. And we are seeing lower orders due to that for legacy models and a careful ramp up of the new models.”

Auto segment outlook stable

“Let’s go to automotive and let’s start with North America. We believe a 1% to 5% growth. This confirms our earlier view. Production is up 7.4%; strong sales 3.1%; sustained demand, also, we see the average age of the vehicles of 12 years and older is increasing. So, kind of pent-up demand showing in there. Stable inventories were 65 days. The average transaction price is up 2%. So all of that are pretty good news in that market in North America.”

It’s easier to flux capacity at a mine than a refinery

“Well, the nice thing is with the mining, it’s much easier to increase your capacity as well as to slow down your capacity. This is not like, I mean, in a refinery or in a smelter where you have, I mean, certain increments. I mean, in a smelter, you basically can typically only do half a line and in a refinery, it’s one, it’s a digester that’s a unit that you can bring up or down. In a bauxite mine, it’s much, much easier. And you can ramp it up and ramp it down much faster. You leave it in the ground, we’re still on aerospace. You leave it in the ground if there’s no demand and you bring it out. And frankly, I think we did not limit it by our own capabilities. We have one of the largest bauxite reserves.”

William Oplinger

Revising global demand forecast lower

“We’re revising our 2016 global demand for aluminum from 6% to 5% with consumption on pace to reach 59.7 million metric tons. The slight decline in demand is from two key markets, China and North America. Chinese growth is being reduced to 6.5% versus our prior forecast of 8% due to slower growth in the construction and electrical segments. North American demand growth is being reduced to 4%.”