Alcoa Inc (NYSE:AA)’s earnings for the first quarter could be lower than consensus although higher alumina prices offset aluminum. Analysts at Macquarie Equities Research expressed concern over the company’s reliance on productivity gains although

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Macquarie Equities Research analysts, Aldo Mazaferro and Luke MacFarlane projected that the earnings per share (EPS) for Alcoa Inc (NYSE:AA) in the first quarter is below the recent $0.11 consensus estimates.

According to them, the largest aluminum producer in the United States could highlight its difficulty in achieving its consensus earnings expectation for 2013 during its upcoming earnings report. They also expect the $0.59 consensus estimate for 2013 will be reduced after the company’s earnings report on April 8.

In a note to investors, Mazaferro and MacFarlane explained that they started their pricing outlook for the first quarter of 2013 slightly higher than average compared with the fourth quarter of 2012. However, the analysts emphasized that they remain cautious for the entire year of 2013 due to the continuing oversupply, which could weigh on pricing and negatively affect the earnings of Alcoa Inc (NYSE:AA).

According to the analysts, their slightly better-than-expected price trend for the first quarter changed into weaker than expected by the end of the quarter.

Maferro and MacFarlane explained, “We think optimism for a strong Chinese recovery cause aluminum pricing to strengthen early in the quarter, supporting AA’s stock price, but that weaker than expected Chinese demand after the Chinese New Year caused aluminum pricing to then fall about 12% or $170/t, to $1,867/t, at the end.”

The analysts believed that the new concerns over aluminum pricing would continue and it would hurt Alco (NYSE:AA)’s earnings. In addition, they emphasized that the key risks for the company include the high inventory on the LME and the potential for an unwinding of carry trades if interest rate increases or the contango in futures markets decreases.

Furthermore, Maferro and MacFarlane cited the strengthening of the Brazilian real, power outages at Rockdale, Anglesea, and Ma’aden JV start-up costs affect Alcoa Inc (NYSE:AA)’s first quarter earnings.

The analyst maintained their $0.07 earnings estimate for Alcoa. They expect a more downside risks than upside risks on their estimate.

“We worry about the reliance on consistent productivity gains to offset pricing weakness, and about the unpredictability of start-ups and outage costs,” the analysts said.