Alcoa Inc. (AA) in collaboration with Codexis Inc. (CDXS) and CO2 Solution Inc. (TSX-V: CST) announced a new pilot program for carbon capture technology. The pilot program focuses on capturing carbon emissions, neutralizing them and turning them into a commercially viable product.
Alcoa will fund the project with $ 13.5 million from the U.S. Department of Energy. The companies will use scrubber technology to capture the emissions and then collaborate to treat a byproduct of aluminum manufacturing called alkaline clay.
The project will try to combine treated flue gas, enzymes and alkaline clay to make a mineral-rich product for use in environmental reclamation projects.
The company secured government grant to find ways of converting captured carbon dioxide emissions into useful products such as fuel, plastics, cement and fertilizers.
The pilot program is a part of Alcoa's ongoing commitment to enhance its operational sustainability. Moreover, it will use an innovative and proprietary in-duct scrubber technology to capture emissions.
Codexis and CO2 Solution have been collaborating since late 2009 on the development of custom carbonic anhydrase (CA) enzymes and processes that could significantly decrease the cost of carbon dioxide capture from industrial sources.
In January, Alcoa posted better-than-expected year-over-year results for the fourth quarter of 2010 with net earnings and revenues exceeding the Zacks Consensus Estimate. The company continues to benefit from its cost saving efforts. We believe the cost cuts will make Alcoa more competitive when markets fully recover.
The annual global consumption of aluminum products, both upstream and downstream, is expected to double over the next 15 years. This consumption boom will be driven primarily by growth in China, India, Russia and Brazil, whose demographics are accelerating development. However, Alcoa is facing declining aluminum prices, higher input costs and significant restructuring charges, which could pressure margins in the near to medium-term.
Moreover, Alcoa faces stiff competition from Aluminum Corporation of China Limited (ACH), privately held Rio Tinto Alcan Inc. and RUSAL.
We currently maintain our Neutral recommendation on Alcoa. Currently, we have a Zacks #3 Rank (Hold) on the stock.
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