Author: Signal Group

The trick with big, important numbers like China’s gross domestic product (GDP) is not working out what the data tells us, rather it’s what it doesn’t.

China’s economy met market expectations by expanding 6.8 percent year-on-year in the fourth quarter of last year, which put full-year growth at 6.9 percent, down from 7.3 percent in 2014 and the slowest pace of expansion in a quarter of a century.

Other economic data released on Tuesday came in slightly below market forecasts, with December industrial output up 5.9 percent year-on-year, retail sales up 11.1 percent and January to December fixed-asset investment up 10 percent.

What the data shows is that the trend of a slowing Chinese economy remains intact, as does the slow and somewhat painful process of shifting the drivers of growth from heavy industry and construction to consumer activity…

This has got to be the dumbest idea to come out of China in a while.

Is stockpiling more aluminum the answer, China? Really?

Not that I am suggesting China has a monopoly on stupid ideas, we have more than our fair share of them at home, but reports last week that six major Chinese companies are considering forming a joint venture company that will purchase primary aluminum and hold it in stock — for what ultimate end use or for how long isn’t clear — but the suggestion is it would support the market price. That stupidity will take a lot to beat.

Indeed, one analyst at China Merchants Futures went so far as to laughably suggest that “if they stockpile 500,000 metric tons in the first half of this year, the Chinese market may have a supply deficit,” according to Reuters.

Let’s Stockpile Aluminum!…

Alcoa Inc’s plans to close its 269,000 tonne-per-year Warrick smelter, announced on Thursday, will bring U.S. aluminum output to its lowest level in more than 65 years as the industry endures tumbling prices amid rising trade tensions with China.

Warrick is the largest currently-operating smelter in the United States and the biggest shoe to drop in a string of recent curtailments and closures, potentially boosting prices and possibly bolstering some U.S. producers’ claims they are harmed by subsidized Chinese production.

The Evansville, Indiana plant’s closure, which will take place by the end of the first quarter, will leave Alcoa with just one active smelter: the 130,000 tonne-per-year Massena West plant, which was saved from closure with $70 million in New York state aid…

The previous year was terrible for Alcoa (AA) investors. The stock ended the year with falls of 35%. The mining sector itself had the worst year since the global financial crisis of 2008–2009 and mining companies fell to multiyear lows during the year.

Norsk Hydro (NHYDY) was among the better-performing aluminum producers in 2015 and ended the year with falls of only about 13%. This is relatively less if we look at the carnage in the metals space. Century Aluminum (CENX) saw its market capitalization erode by more than 80% during the year as you can see in the graph above. Please note that Century Aluminum is majority-owned by mining giant Glencore (GLNCY).

Investors looking for a respite from last year’s fall were in for a disappointment as Alcoa and other aluminum producers resumed their downslide right at the beginning of 2016. Alcoa has seen a downward price movement of more than 25% so far in 2016….