January 6, 2012 / 2:45 PM / in 6 years

Alcoa stock down after announcing metal output cut

(Reuters) - Alcoa Inc (AA.N) stock dropped over 2 percent on Friday, a day after the largest U.S. aluminum producer said it will cut global smelting capacity by 12 percent in the face of slumping metal prices.

In early trading on the New York Stock Exchange, Alcoa shares were down 2.4 percent at $9.14.

On Thursday, the company said it was closing down its Tennessee smelter and two potlines at a smelter in Rockdale, Texas, as part of a plan to cut 531,000 tonnes in annual output.

A worker walks near a power plant at Alcoa Fjardaal aluminium smelter, eastern Iceland, April 16, 2007. REUTERS/Stoyan Nenov

Analyst Tony Rizzuto, of Dahlman Rose & Co said although the action might be seen negatively in the short-term, he believes it is good for Alcoa and the industry.

“The move is in line with the company’s efforts to improve its position on the primary aluminum cost curve,” he said.

    “These actions, while likely to be viewed by some observers as negative, are a positive for Alcoa and the industry as it could lead to a more balanced supply/demand environment and provide some stability to aluminum pricing.”

    Alcoa, battling higher raw material costs and slumping metal prices, is expected by many Wall Street analysts to post a fourth-quarter loss next Monday.

    Reporting By Steve James; Editing by Gerald E. McCormick

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