The price of aluminum continues to rise, as it has through all of 2009. A year ago the price stood at about $0.62/lb., compared with $1.06 currently. Alcoa, Inc. (AA) shares have followed along, trading in a range of $8.10-$17.60 and closing yesterday at $14.87.

Unlike other large aluminum miners BHP Billiton (BHP) and Rio Tinto (RTP), Alcoa depends almost exclusively on aluminum and bauxite mining and manufacturing for its revenues. Aluminum Corp. of China Ltd (ACH), aka Chinalco, another Alcoa competitor, also deals nearly exclusively in aluminum and bauxite mining and manufacturing.

Alcoa has revealed that it expects to take charges of about $260 million in the first quarter of 2010. About $80 million of the charge is a non-cash charge related to a change enacted in the recent health care reform bill. The rest is related to the closure of some of the company’s facilities, which will result in non-cash charges of about $135 million and $45 million in charges related to environmental and asset retirement obligations.

Perhaps as a result of that, an analyst with JP Morgan has cut Alcoa from ‘Overweight’ to ‘Neutral’ just four months after raising the rating. In December 2009, JP Morgan upped its share price target for Alcoa from $22 to $25 and boosted the EPS estimate for 2010 from $1.15 to $1.45. The consensus EPS estimate for 2010 is currently $0.77, up from $0.56 when Morgan raised its rating on Alcoa.

Alcoa has also wrung out a lot of costs, cutting more than 20,000 jobs in 2009. There’s not a lot left there for the company to use to improve its 2010 results.

The consensus EPS estimate for the first quarter of 2010 is $0.11, and Alcoa should be able to hit that target when it reports earnings on Monday. If that is in fact what happens, it will be due to the rising price for aluminum ore. JP Morgan’s analyst does not see that pricing trend going on for the full year, instead predicting an aluminum ore price of $0.92/lb.

A word is also in order regarding the non-cash $80 million charge related to the health care reform bill. When the Medicare Part D law was enacted in 2003, a provision in the bill paid employers a subsidy to extend prescription drug coverage to employees and retirees. In a special gift to employers, that subsidy was also excluded from taxation. The recently enacted Affordable Care Act eliminated that exclusion. Most companies have already booked that subsidy, so removing it is essentially a wash as it has no impact on cash.

Alcoa shares are down more than 2.5% in early trading today, while the other aluminum producers are all up, led by Chinalco which is up nearly 4%.

Tell us what you think here.

Related Articles:

• Video Game Stock Take Two Interactive (TTWO) is Carl Icahn’s Big Play
• China Orders Closure of Small Steel Mills
• China and U.S. Race for Australia’s Coal (BTU, YZC, CEO)