The shares of global aluminum giant Alcoa Corporation (NYSE: AA) rose a massive 30% in December. The big move higher started about two weeks into the month, reversing a downtrend that started in late October. The dramatic December advance left Alcoa with a full year gain of over 90%.
There was no particularly important company-specific news in December that would have resulted in such a huge price move. That said, it's worth noting that a few days before the end of the year Alcoa did announce that it would permanently close a facility in Texas and had reached an agreement to sell another facility located in Italy. It expects to see an $0.18 per share hit to earnings in the fourth quarter of 2017 because of these moves. However, these decisions will continue the company's push to streamline its operations and cut costs. That's a net long-term benefit, despite the near-term hit. This is interesting news, but, again, it wasn't what drove the price advance.
Alcoa's price advance was more basic: Aluminum prices started to move sharply higher on Dec. 13. The commodity's price advance basically lasted through the end of the year, with a small price retreat on the last trading day of December. Alcoa, at its core, is a commodity aluminum producer, with operations throughout the aluminum value chain. As with any commodity maker, a huge price advance in the commodity it sells is usually accompanied by improving investor sentiment for the company.
While it's hard to complain about a big price advance to cap a solid year, it's important to put the gain in perspective. Alcoa has performed quite well as a stand-alone company following the late 2016 break up with Arconic. However, it was a swift advance in commodity prices that led to the December stock price gain, nothing specific to the company.
That's not to suggest that 2018 won't be a good year for the company. In fact, Motley Fool's Maxx Chatsko recently highlighted the upside that could materialize for Alcoa as the new year unfolds. However, like December, commodity prices will likely play a vital role -- with China holding material sway over the direction of aluminum prices. If you like the outlook for aluminum then Alcoa is a great way to get exposure to the space. December, though, is a reminder of the outsize impact that often volatile commodity prices can have on the company's shares.
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