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Alcoa Inc. (AA - Analyst Report) has announced the possibility of a cutback in aluminum production. The company said that it will review 460,000 metric tons of smelting capacity over the next 15 months for potential curtailment. Alcoa is taking this step to maintain its competitiveness as aluminum prices have declined by more than 33% from their peak level in 2011.

Alcoa has already idled 13% or 568,000 metric tons of smelting capacity and the possible curtailments will account for 11% of its global smelting capacity. While reviewing over the next 15 months, Alcoa will take into consideration plants that have long-term risk such as high energy costs or regulatory uncertainty.

Alcoa’s strategy of curtailments is consistent with its previously announced 2015 goal of lowering its position on the world aluminum production cost curve by 10 percentage points and the alumina cost curve by 7 percentage points.  

Alcoa remains on track to move down the cost curve and curtailed capacities in its upstream business. The curtailments will improve the competitiveness of the company’s Primary Products business.

A month ago, Alcoa released its first-quarter 2013 results. The company’s revenues were hurt by lower aluminum prices and reduced production in Alcoa’s European primary metals business. Revenues declined roughly 3% to $5,833 million from $6,006 million in the year-ago quarter and were below the Zacks Consensus Estimate of $5,857 million.

The company posted a profit of $149 million or 13 cents per share in the quarter, exceeding the profit of $94 million or 9 cents per share earned a year ago. The results were driven by strong demand across the aerospace and auto markets.

Excluding one-time special items, Alcoa earned $121 million or 11 cents a share in the quarter, beating the Zacks Consensus Estimate by a penny and also coming ahead of $105 million or 10 cents per share posted in the year-ago quarter.

Alcoa currently retains a short-term Zacks Rank #3 (Hold).

Other companies in the mining industry with favorable Zacks Rank are Cameco Corporation (CCJ - Snapshot Report), Atlatsa Resources Corporation (ATL - Snapshot Report), and Anglo American Platinum Ltd. (AGPPY). All of them hold a Zacks Rank #2 (Buy).

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