Alcoa and China Power Investment Corporation recently signed a letter of intent for a joint venture to develop high end engineered aluminum products in China.

Alcoa is the world leader in the production and management of primary aluminum, fabricated aluminum and alumina, and its 'green' commitment helps it stand out versus competitors like Rusal, Rio Tinto, BHP Billiton and Chalco.

Our price estimate for Alcoa is $19.54, which is significantly higher than the current market price.

Opportunity for Industrial Grade Aluminum in China

The companies plan to jointly develop high end engineered products that will be used in various industries like automotive, aerospace, packaging and consumer electronics. The products will be primarily targeted at the Chinese industrial market for the time being.

Because aluminum is more lightweight and durable, the metal and its alloys are an ideal replacement for steel in many areas, such as the automotive sector which is focusing on reducing vehicle weights in order to improve fuel efficiency.

The JV will focus on the technical expertise of both the companies to leverage this growing market. Further official information on the joint venture is awaited.