Alcoa earnings drop with aluminum

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Scott Jagow: Wall Street has to be on edge about the next few days. Second-quarter profit reports start rolling in this afternoon. Investors wanna know: How much are energy prices and other raw materials dragging down the bottom line? And good grief, just how bad will the banks look? The earnings season begins today with Aluminum maker Alcoa. Here’s a preview from Ashley Milne-Tyte.

Ashley Milne-Tyte: Alcoa’s second-quarter earnings are likely to be lower than last year.

Leo Larkin is an equity analyst with Standard & Poors. He says demand for aluminum in the U.S. has fallen since 2007 given slowing car manufacturing and home construction. He says high energy costs have also squeezed Alcoa’s revenues this year.

Leo Larkin: They are moving in the direction of putting their facilities, particularly their smelters, in parts of the world where they can get low cost power. Because electricity is a very high component of aluminum manufacturing costs.

Still Larkin says, despite higher production costs, the average price of aluminum hasn’t changed that much from last year. Waning demand in Europe and the U.S. has been offset by a supply crunch in aluminum mining countries like South Africa and China.

In New York, I’m Ashley Milne-Tyte for Marketplace.