Aluminum

[winston]

China Aluminum Demand Growth to Drive Price, Novelis Says

China’s aluminum demand will grow 8 to 10 percent annually on average for the next five years on uses from beverage cans to cars, driving up prices over time, according to Novelis Inc., the world’s biggest user.

“One would expect the demand in China and Asia to drive up the aluminum price, given the scarcity of aluminum that’s available to the market,” Philip Martens, chief executive officer, said in an interview today in Changzhou city, Jiangsu province, where it will build its first automotive sheet manufacturing plant in China. Prices in London may return to $2,500-$2,700 a metric ton, he said, without giving a timeframe.

China accounts for about 40 percent of global consumption of aluminum. The metal, used in construction, beverage cans, electronics and the automotive sector, has fallen 23 percent in the past year in London on concerns that the sovereign debt crisis in Europe and the moderation of growth in the largest user could result in shrinking demand.

http://www.bloomberg.com/news/2012-04-1 ... -says.html

[winston]

China Aluminum Stockpiles Seen at Two-Year High on Supply Glut

Aluminum stockpiles in the main trading regions in China have climbed to the highest level in two years, as growth in supply outpaces demand in the world’s largest user, according to two industry surveys.


http://www.bloomberg.com/news/2012-10-2 ... -glut.html

[winston]

Aluminum: Further infrastructure- and construction-related stimulus from China should move prices up in 2013.

But the current level of supplies and high production capacity will put a floor on prices in 2014.

Aluminum ended 2012 at $2,087/metric ton. The projection for 2013 and 2014 is $2,300/metric ton - a 10.21% increase from the end of 2012.

Source: MS

[winston]

Aluminum Prices Post Biggest Weekly Decline in 14 Months

Aluminum fell, capping the biggest weekly drop in 14 months, on signs that increasing output in China will add to a global glut.

http://www.bloomberg.com/news/2013-02-2 ... plies.html

[winston]

China Purchases 300,000 Tons of Aluminum to Boost Local Prices

China’s state reserves manager signed agreements today with six smelters to buy 300,000 metric tons of aluminum at 15,137 yuan ($2,434) a ton in a bid to bolster local prices.

The State Bureau of Material Reserve will pay about 4 percent more than the spot price for the metal to be delivered in April and May, data provider SMM Information & Technology Co. said on its website today.

That compares with a spot price of 14,550 yuan on Shanghai’s Changjiang Nonferrous Metal Market.


http://www.bloomberg.com/news/2013-03-1 ... rices.html

[winston]

Why one essential commodity was "left behind" by the great 10-year bull market by Matt Badiali

An unusual thing happened over the past decade... one of the most common metals didn’t go up in price.

Most metal prices soared over the last decade. The price of gold rose 375%, from around $400 per ounce to peak around $1,900 per ounce. The price of silver, copper, lead, zinc, platinum, palladium and nickel all soared over that period too.

However, there is one metal that sat out the bull market. In fact, at $2,000 per ton, it’s the same price that it was back in the 1980’s. That metal is aluminum.

Aluminum is the second most used metal after iron. It’s consumed in enormous quantities to make everything from soda cans to car bodies. The problem is supply, because there is a lot of aluminum out there.

About 8.2% of the world’s crust is aluminum. It’s the most common element in the world. The problem is, it is the elemental world’s hook-up king. It is never alone. It’s always bonded to oxygen or potassium and sulphur.

To get the aluminum to separate takes a lot of energy. So much energy, that aluminum giants Alcoa, Rio Tinto, and Century Aluminum all built smelters in Iceland. Iceland has volcanoes, which produce lots of heat. The companies can tap the heat to make steam and generate cheap electricity.

So the companies ship aluminum ore – called bauxite - from the mine to Iceland. Then they ship the finished aluminum ingots to consumers.

As you would expect, with lots of supply and high costs, aluminum producers are struggling to make money. One of the world’s largest producers, Russian giant Rusal, is in real trouble.

It costs Rusal $1,970 per ton to produce, but in the second quarter of 2013, the company could only sell it for $1,886 per ton. That’s a loss of nearly $90 per ton. As my good friend Rick Rule would say, the company is trying to make up its loss on volume.

U.S. companies are facing similar trouble. For example, Century Aluminum sold $1.27 billion in aluminum in 2012. It cost the company $1.22 billion to do it. In other words, the company’s operating margin (that’s before it paid its taxes, electric bill, rent, etc...) was less than 4%. That’s terrible.

Credit rating agency Moody’s recently downgraded giant aluminum producer Alcoa’s bonds from investment grade to junk grade. They pointed to the poor price forecast for aluminum as the reason. Alcoa isn’t some tiny stuggling miner. This is the iconic company that leads the aluminum industry...and its shares are back where they started 20 years ago. You can see what I mean in this chart:

As you can see here, the market hates aluminum, but the world doesn't. This is an incredibly valuable commodity.

As longtime readers know, this is the best kind of market to look for value. Commodity prices cycle, high...then low...and then high again. When Moody's dumps the credit rating of a giant, blue-chip producer, I get interested in the sector.

Source: S&A Resource Report

[winston]

"Bad to less bad" rally sends aluminum producer Alcoa up 79% over the past eight months.

[winston]

A Preview of the Coming Commodity Boom By Amber Lee Mason

It's a textbook case of "markets working"… And it's making folks who understand "the lesson" big profits.

Back in October, my colleague Brian Hunt and I suggested DailyWealth Trader readers buy shares of America's largest aluminum maker, Alcoa (AA). The day after the recommendation, the stock jumped 8.8%. It hasn't looked back since. It's up a total of 70% since the write-up. And on Friday, it reached a three-year high.

Why did this happen? And if you're not in this trade, why should you care?

Well, this is how "boom and bust" commodity markets work. And if you take this idea to heart, you'll be able to multiply your money many times over in the next commodity boom.

Let me show you what I mean with Alcoa's long-term chart.

We're not doing this to check moving averages or momentum indicators… We can read this story from across the room…

Please Enable Images to See this

Alcoa shares were crushed in 2008 and 2009. The global economy contracted and folks thought the world was going to end. Reduced demand pushed down aluminum prices… and bad sentiment did the rest. Alcoa dropped from $45 to around $5.

Aluminum prices recovered from 2009 through 2011. But overproduction from China and a shaky global recovery pushed prices back down. Alcoa followed suit… and busted from $18 to $8.

That's where we were in October last year. But already, the market was at work…

Basic economics says that when prices fall, demand rises. If aluminum is cheap, industries will find more ways to use it. Today, for example, automakers are turning to lighter-weight aluminum over steel. The New York Times reports that carmakers will buy half a million tons of aluminum this year, up from 100,000 tons in 2012.

With global aluminum consumption at about 50 million tons, carmakers don't represent a huge portion of the market… yet. But their demand is expected to grow 30% per year through 2020.

Basic economics also says that when prices fall, supply contracts. If you can't make money selling aluminum, you'll make less of it. Even China, which for years insulated local producers from market forces, is curtailing production. Barron's reports that since 2011, annual production is down 1.2 million tons inside China… And it's down 2 million tons outside of China.

That's about 6% of global aluminum output… and according to Bank of America Merrill Lynch, supply will fall short of demand by more than half a million tons this year… and more than 1 million tons next year.

In short, the cure for low prices is low prices. Reduced supply and increased demand will lead to higher aluminum prices. And an improving global economy will add fuel to the trend.

With its 70% rise since October, Alcoa is already pricing in better sentiment and better economics. The key, as my colleague Steve Sjuggerud likes to point out, is to buy when things still look "bad." You must buy when most people can't stand the thought of buying the asset. Then you make the big profits as things get "less bad."

In DailyWealth Trader, we used this "tried and true" lesson with Alcoa to make a large profit in a short amount of time.

You'll be able to use this lesson again and again to make even bigger gains in the next commodity boom.

Source: Growth Stock Wire

[winston]

Aluminum giant Alcoa hits a new two-year high… up 78% over the past nine months.

[winston]

"Bad to less bad" rally sends Alcoa rocketing 107% over the past 12 months.