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Highlights
- Aluminium price in the global market has skyrocketed and is up by nearly 14% in 2022.
- The current rise in aluminium prices is mainly due to fear of tight supply and a decline in metal inventories.
Aluminium prices in the global market have skyrocketed and are up by nearly 14% in 2022. The benchmark aluminium futures are trading above USD 3100/ ton on the London Metal Exchange (LME), which is the highest level for lightweight metal since 2008.
The current rise in aluminium prices is mainly due to fear of tight supply and a decline in metal inventories. The Chinese city of Baise, also known as the aluminium capital of Southern China, had gone into lockdown on Monday due to a coronavirus outbreak. The city is the hub for aluminium mining and produces over two million tons of aluminium every year.
As per the local authority, aluminium production was not severely impacted. Still, due to travel restrictions, the transportation of raw materials and workers remains affected. As a result, inventories at the LME-registered warehouse have fallen to the lowest levels since 2007.
Aluminium production requires a high amount of energy which is primarily generated from coal-fired power plants. In the run-up to the ongoing Beijing winter Olympics, the Chinese authorities have restricted production to reduce pollution and improve air quality, resulting in lower aluminium output.
In addition, another key reason for the price rise is fear of sanctions on Russia if it invades and attacks Ukraine. Russia is one of the major aluminium producers worldwide.
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The rising aluminium prices are favourable for the companies operating in the segment. Let us look at FTSE listed aluminium stocks and their investment prospects:
South32 Limited (LON: S32)
The diversified metal and mining company has operations in different countries. The company mainly produce aluminium, manganese ore, zinc, and lead. The business reported higher operating margins for the quarter ended December 2021, mainly due to higher commodity prices. Also, the company reported a 4% rise in alumina production during the period.
The company’s stock price has been up by over 18% since 1 February 2022. Its current market cap stands at £10,229 million. In the last one year, the stock has given 63% returns to its shareholders.
Glencore Plc (LON: GLEN)
FTSE100 listed company is engaged in the mining and production of different industrial metals. The company has a stake in several aluminium mining companies. The rise in commodity prices in the last one year amid global economic recovery has benefitted the company. In the first half of 2021, the company reported a 32% rise in revenue at USD 93,805 million.
The company stock price has been up by over 9.5% since 1 February 2022. Its current market cap stands at £54,583 million. In the last one year, the stock has given 59.19% returns to its shareholders.
Rio Tinto Plc (LON: RIO)
The company does the mining and production of several industrial metals. It has mining operations in different countries and is one of the largest companies in the mining sector. The company’s full-year aluminium production was at 3.2 million tonnes in 2021. Also, the company has given higher production guidance for 2022 amid rising industry demand.
Rio Tinto Plc’s stock price has been up by over 9.3% since 1 February 2022. Its current market cap stands at £70,112 million. The stock has given 15.94% year to date returns to its shareholders.
