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Tickers in this Article: AA, ACH, CENX
Like oil and gold, aluminum is another commodity that trades well below record high prices set in 2008. Aluminum reached an all-time high of $3,380/mt (metric tons) on the London Metal Exchange (LME) on July 10, 2008. As of February 6, 2009, a cash buyer could purchase the commodity for $1,421/mt.

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Alcoa's Q4 Smash-Up
According to the Aluminum Association, transportation, beverage cans and other packaging and building construction materials make up the largest markets for aluminum. Aluminum's close relationship to the slumping U.S. auto industry and the overall sagging global economy took a toll on Alcoa (NYSE:AA) in 2008. The Pittsburgh-based aluminum provider may share its home city with the World Champion Steelers, but the city's winning ways passed over Alcoa, which reported an 18% decrease in revenues, to $5.7 billion, for the fourth quarter of 2008. Alcoa also reported a loss from continuing operations of $1.16 per share, aided by a 35% decrease in the price of aluminum for the year. In addition to production cutbacks and liquidity initiatives set in motion at the beginning of the year to mitigate losses, Alcoa announced the painful decision to reduce its workforce by 13,500 employees. (For more on layoffs and how to fight for the best exit package, be sure to read The Layoff Payoff: A Severance Package.)

Foiled By The Competition
Aluminum Corporation of China (NYSE:ACH), located within a region that consumes most of the world's raw materials, is a clear competitor to Alcoa. In terms of five-year sales growth for the period ended February 6, Alcoa's 6.12% lags significantly behind Aluminum Corporation of China's 35.02%. Furthermore, even small cap competitor Century Aluminum (Nasdaq:CENX) tops Alcoa at 20.47%. While the sales numbers appear appealing, investors should note that they represent a look into the past and are not a projection for the future. Overall, the aluminum industry is expected face a difficult period for at least the next year.

Final Thoughts
A prolonged shift towards lighter, fuel-efficient vehicles by the auto industry may be the catalyst needed to rescue aluminum suppliers. While the picture painted by Alcoa's fourth quarter earnings reflect the turbulence of the global economy, its production cuts could lead to an eventual resurgence of aluminum providers, as customer supplies dwindle. Investors without at least a three-year window may find a more suitable investment for their portfolios elsewhere.

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