Alcoa Corporation (AA)

Alcoa mines bauxite, produces alumina and smelts aluminium — the whole chain.

Aluminium is an undifferentiated commodity and its price is set on the world exchange. Earnings are determined by position on the cost curve: smelting requires an enormous amount of electricity, so a plant beside cheap hydropower is profitable where a plant on expensive energy is not.

Hence the industry's peculiarity: a pot line cannot be shut down without severe consequences, so smelters keep running even at a loss while there is hope of the cycle turning. Demand comes from cars, packaging and construction, while supply depends on Chinese capacity and on tariffs. Risks: aluminium and energy prices, environmental requirements. The dividend is token.