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Pisani: Alcoa—Good & Bad News

Economic recovery? Alcoa, the worst performer in the Dow Industrials, down 9 percent year to date, is a cautionary tale.

We start earnings today with Alcoa , and while it has operations all over the world, it is a wonderfully simple company. It is heavily leveraged to 1) the price of aluminum, and 2) energy costs, since producing aluminum is one of the most energy intensive of endeavors.

The good news: aluminum prices are up 8 percent year to date, to about $2,400 per metric ton (that's about $1.09 a pound).

The bad news: it was over $3,800 per metric ton in the summer of 2008, then dropped to about $1,300 in the spring of 2009, so while we have recovered nicely from the lows the concern is that demand remains very weak.

Also watch for charges on plant shutdowns (they announced about $180 million for demolition of smelting facilities).

Alcoa always has shutdowns so these should be considered normal operations and may shave a few pennies off earnings.

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