WSJ : Constellium CEO: Focus for Auto Aluminum Sheet Shifting to U.S.

Constellium CEO: Focus for Auto Aluminum Sheet Shifting to U.S.
Amsterdam Aluminum Company Ramping Up Investment in U.S. Operations to Meet Anticipated Car-Maker Demand

The growing use of aluminum in mass-produced American cars, led by the Ford F-150, is a “transformational” event that has led Constellium NV, one of the world’s biggest aluminum companies, to shift its focus to the U.S. from Europe, Chief Executive Pierre Vareille said in an interview.

Car makers are increasingly using aluminum instead of steel as they try to meet new government fuel-efficiency standards by making cars lighter. By 2025, 18% of all vehicles in the U.S. will have all-aluminum bodies, compared with less than 1% now, according to Ducker Worldwide, a consulting and market-research firm.

“In Europe, for the time being the cars that have switched to aluminum are high brand,” Mr. Vareille said. “In this country, it’s the high sellers, and it’s been very brutal, very quick.”

Amsterdam-based Constellium, a spinoff of Rio Tinto PLC’s Alcan unit, expects demand for sheet aluminum from the U.S. auto industry to grow to 1 million tons a year by 2020, from 100,000 tons a year now. It sees an increase to 600,000 tons from 200,000 tons in Europe over the same period.

There are only four companies with operations in the U.S. that can supply the aluminum sheet Detroit needs: Alcoa Inc., Novelis Inc., Logan Aluminum —and Constellium. There is so much demand for their metal that they are already getting auto makers to buy into seven-year-plus contracts.

Constellium, which also makes aluminum products for the beverage and aerospace industries, agreed to acquire a private Alabama company, Wise Metals Intermediate Holdings LLC, in October in a deal valued at $1.4 billion. Wise supplies aluminum for the beverage and food can industry.

Constellium will invest up to $750 million in the Alabama operations by 2022 and produce up to 200,000 tons of sheet a year for the auto industry. It plans to increase Wise’s total hot-mill capacity to more than 700,000 tons from 450,000 tons. Constellium is also building a $150 million facility in Bowling Green, Ky., to produce 100,000 tons of sheet aluminum a year.

WSJ : Negative Eurozone Inflation Doesn’t Make ECB’s Job Easy

Negative Eurozone Inflation Doesn’t Make ECB’s Job Easy
Quantitative Easing Looks a Step Closer

Quantitative easing looks a step closer in the eurozone. With inflation turning negative in December for the first time since 2009, the European Central Bank will be under intense pressure to respond—and it has been dropping heavy hints of further action, including sovereign bond purchases.

But the numbers still don’t make the decision straightforward for the ECB, given the complications that eurozone sovereign quantitative easing brings with it.

The eurozone still isn’t experiencing deflation, or a downward spiral in prices fueled by expectations that goods and services will be cheaper in future. December’s decline in headline inflation to minus 0.2% from 0.3% in November was driven by lower energy prices, which fell 6.3% on the year, and a drop in food prices, down 1%. That should be a boon to cash-strapped consumers.

So-called core inflation, which strips out energy, food, alcohol and tobacco, actually rose in December to 0.8% from 0.7%. That matches the 12-month average: core inflation has been low, but remarkably stable. Citigroup expects core inflation to average 0.7% this year.

Of course, the headline rate is what matters for the ECB, which aims to keep inflation below, but close to, 2%. Expectations are even more crucial. Market measures have fallen sharply, with the five-year/five-year inflation swap, a closely watched indicator of medium-term inflation expectations, now at 1.57%, according to Deutsche Bank .



The concern will be that with demand in the eurozone remaining weak, lower energy costs will prompt businesses to cut prices, leading to more entrenched downward pressure on inflation and increasing the chance of deflation. Consumers, who tend to extrapolate from the headline rate, might start to think about deferring spending. But since oil and food prices are driving inflation, it isn’t clear why that would be the case.

Nor is it clear that ECB sovereign-bond purchases would themselves address deflationary pressure from food and energy prices—except through delivering a weaker euro, where the ECB’s current efforts may already be having an effect. Barclays notes that prices for imported goods are starting to rebound, potentially providing countervailing upward pressure on inflation.

The more worrying number released Wednesday was actually the eurozone unemployment rate, which has stopped falling and remains stuck at 11.5%. That too masks underlying developments: while unemployment has fallen in Spain and Germany over the past year, it has risen in France and particularly Italy.

That is a big problem for the eurozone. But it is also a problem to be addressed by governments just as much as by the ECB.

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance: JCP +21.2%, (Nov/Dec comps +3.7%, narrows fourth quarter sales guidance to upper end of range), PKT +21.2%, GBX +9.5%, SONC +7.1%, SVU +3.3%, HALO +2%, MON +1.9%, SIRI +0.9%, SHLM +0.5%

M&A news: PEP +2.3% (3G Capital discusses that 3G Capital may consider targets such as PEP, CPB, K, KRFT , according to reports), CPB +2.1%.

Select oil/gas related names showing strength: SDRL +2.6%, PBR +1.8%, TOT +1.5%, RIG +1.4%, RDS.A +1%, HAL +1%

Other news: FRO +10.1% (still checking), MTW +6.5% (announces Execution of Senior Management Succession Plan) LGF +5.9% (announced the Hunger Games Mockingjay -- Part 1, will be released in China on February 8), ALKS +5.7% (announces positive topline results from the 12-week phase 2 study of ALKS 3831), NDRM +5.4% (cont momentum after yesterdays 8% move higher), WYY +4% (announced that it has received a Task Order under a previously awarded Federal Government Blanket Purchase Agreement), GOL +3.8% (announces a codeshare agreement with Korean Air), GMCR +3.2% (partners with Dr. Pepper (DPS) to sell soda capsules, according to reports), BLUE +3.2% (favorable commentary on Tuesday's Mad Money), TRVN +2.6% (announces the initiation of a Phase 2b clinical trial of TRV130 for acute postoperative pain in patients following abdominoplasty surgery ), TTM +2.5% (rebounding from yday's sell off), ADXS +2.4% (Advaxis and the GOG Foundation to collaborate on global Phase 3 clinical trial of ADXS-HPV in cervical cancer), MTG +2.3% (disclosed it is is implementing changes for bonuses to be paid in 2015 and modified change in control agreements), GPRO +2% (following JP Morgan Tech Forum), OCLS +2% (announces new dermatology division, IntraDerm Pharmaceuticals), GEVA +1.9% (prices 3.0 mln shares of common stock at $94.19 per share), ISIS +1.9% (favorable commentary on Tuesday's Mad Money), UUUU +1.9% (Energy Fuels and Uranerz (URZ) announce conference call and webcast hosted January 8), TWTR +1.8% (moving higher with futures), CERS +1.6% (prices ~12.7 mln share at $5.50/share for expected gross proceeds of $70 mln), INTC +1.3% (presented at CES), CLR +1.2% (following FastMoney mention (Brian Kelly buyer)), RAD +1% (favorable commentary on Tuesday's Mad Money).

Analyst comments: NLST +22.4% (upgraded to Buy at Needham; tgt $1.50), JNS +3.2% (upgraded to Overweight from Underweight at JP Morgan), FSLR +2.8% (upgraded to Neutral from Sell at Goldman), RMTI +1.9% (initiated with an Outperform at Oppenheimer), AXP +1.7% (upgraded to Buy from Neutral at Goldman), MANH +1.6% (upgraded to Strong Buy from Outperform at Raymond James), OUBS +1.3% (upgraded to Overweight at Barclays), AEO +1% (upgraded to Market Perform from Underperform at Cowen)

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: LIQT -40.2%, MERU -4.1%, MDCO -3.4%, (to offer $300 mln of Convertible Senior Notes due 2022; disclosed that it expects on a preliminary basis that its net revenue for 2014 will remain within the range of its previously announced guidance of $720-735 million, but expects it to be at the lower end of that range), MU -2%, LLY -1.6%,RPM -1.3%

Select metals/mining stocks trading lower: AG -2.5%, AUY -2%, AEM -1.8%, GDX -1.6%, SLV -1.1%, GOLD -0.9%, NEM -0.9%

Other news: KBIO -64.5% (reports top-line data for Phase 2 Study of KB001-A to treat pseudomonas aeruginosa lung infections in cystic fibrosis patients -- primary endpoint was not met), PT -8.4% (follow through from yday - Portugal authorities starting to investigate fraud at Portugal Telecom SGPS, according to report), HLF -7.9% (light volume - Bill Ackman (who is short) on CNBC says HLF will miss Q4 estimates and lower FY15 guidance due to deterioration in business (after he shined light on co's issues) and FX headwinds), WLT -6.3% (still checking), CDR -1.9% (will issue and sell 5 mln shares of its common stock in a public offering ), WG -1.5% (co made a payment of $32.75 mln to West African Gas Pipeline Company Limited on December 30, 2014; has now paid in full all sums due under the March 29, 2012 Settlement Agreement)

Analyst comments: SNY -2.5% (downgraded to Sell from Neutral at Citigroup ), MDSO -1.4% (downgraded to Neutral from Buy at Sun Trust Rbsn Humphrey), TMK -0.9% (downgraded to Hold from Buy at Deutsche Bank), INFA -0.7% (downgraded to Sector Perform at RBC Capital Mkts), SINA -0.6% (downgraded to Sector Perform from Outperform at Pacific Crest ), KMT -0.5% (downgraded to Hold from Buy at KeyBanc Capital Mkts), FOSL -0.5% (downgraded to Underperform from Neutral at BofA/Merrill
)

>>> Monsanto beats by $0.12, beats on revs; confirms FY15 EPS in-line, co lowers

--> MON +2.32% on pre-market very low volume

Monsanto beats by $0.12, beats on revs; confirms FY15 EPS in-line, co lowers seeds and genomics segment gross profit growth p

Reports Q1 (Nov) earnings of $0.47 per share, $0.12 better than the Capital IQ Consensus Estimate of $0.35; revenues fell 8.7% year/year to $2.87 bln vs the $2.8 bln consensus.
  • Co confirms in-line guidance for FY15, sees EPS of $5.75-6.00 vs. $5.87 Capital IQ Consensus Estimate.
  • MON delivered earnings per share for the first quarter of fiscal year 2015 ahead of expectations it outlined at the beginning of the fiscal year. The company also noted the USDA's final Environmental Impact Statement concluding that Monsanto's Roundup Ready® 2 Xtend™ soybeans and Bollgard II® XtendFlex™ cotton should be fully deregulated.
  • Gross profit for the 2015 first quarter also decreased over the prior year period to $1.4 billion. As previewed in the fourth quarter of fiscal year 2014, the decline in gross profit in the quarter is due largely to lower planted acres for corn in South America and in cotton in Australia, combined with a timing shift as the company moves more of its Agricultural Productivity business to branded-product sales that historically occur more in the third quarter.
  • Co lowers seeds and genomics segment gross profit growth
    • With the expectation of lower global corn acres, the seeds and genomics gross profit growth percentage for the year is now expected to be more in the range of high single digits, down from double-digit gross profit