While there have been many headlines recently about gold breaking records, aluminum, the not-so-precious metal, is now breaking records of its own. Aluminum, the lightweight and versatile commodity used in diverse applications from Apple’s (NASDAQ:AAPL) MacBooks to beer cans, is experiencing a price surge unlike anything seen in decades.
The surge in aluminum prices may be sustained for a while, presenting a notable opportunity for investors. But before taking a look at how to invest in aluminum, it is important to understand the reasons behind this surge.
Trading Russian Aluminum Foiled
The price of commodity contracts for aluminum surged by 9.4% in a single day this week due to the ban on trading Russian metals on the London Metal Exchange (LME). This ban, in line with U.S. and UK sanctions, led to a significant intraday spike, marking the largest jump in aluminum prices in the entire 37-year history of this contract on the LME.
The trading ban on Russian metals is expected to tighten the aluminum supply by creating a situation where demand for the manufacturing material is outpacing what’s readily available.
Aluminum Is Essential for Green Infrastructure
Aluminum’s lightweight and high strength make it an important material for well-funded and growing sustainable energy infrastructure projects. These projects, many government-led, have bolstered the demand for aluminum in industrial applications.
Ever since much of the developed world began focusing on reducing carbon emissions, aluminum has been one mineral that has benefitted. The new need is high because of the metal’s uniqueness. Using aluminum instead of steel in car manufacturing can decrease weight, leading to lower energy consumption. Additionally, its lighter weight reduces the amount of energy required for transportation. It’s also heralded as a greener manufacturing material because it’s easily recyclable.
How Investors Can Cash in on Aluminum’s Price Trend
So, how can stock market investors cash in on this upward trend in the aluminum market? Below are pure-play aluminum producers with different attributes to consider.
For investors comfortable with picking specific stocks, companies like the 136-year-old Alcoa (NYSE:AA), which is the world’s leading producer of aluminum, are a pure play on the metal’s production. Century Aluminum (NASDAQ:CENX) is a major U.S. aluminum producer with few other product lines. Constellium SE (NYSE:CSTM) is a leader in the manufacturing and recycling of aluminum products. These companies stand to benefit directly from the rising price of aluminum.
A review of the TipRanks Comparison Results for these companies reveals what appears to be a clear favorite, with the Analyst Consensus showing a Buy on only one of the three companies.
Key Takeaway
The fundamental pressures causing the recent surge in aluminum prices are attributable to several factors, including a ban on Russian metals trading, increased demand for green infrastructure projects, and the essential role of aluminum in various industries.
This trend has caught the attention of investors, who are considering capitalizing on it by investing in individual aluminum producers.