To invest in aluminium
Unlike other metals
Unlike other metals, the history of aluminium does not go down in history for thousands of years. Although aluminum salts were used in ancient Greece and Rome to make paints and heal wounds, only in 19 century it began to be limited to use for the manufacture of a small number of luxury items and expensive jewelry.
Aluminium is not highly attractive to gold and silver, it is not used to protect against inflation and deflation. However, aluminium follows the changes very tightly, that occur in the surrounding life and leading industries, which makes its price movements more predictable, than for precious metals.
How to invest in aluminium
Aluminium Futures
A futures contract (futures) is a guaranteed trade in the future for a certain number of units of a commodity at a certain fixed price. This price is called the strike price or delivery price.. Goods are delivered and payment is due on a specific delivery date. for instance, on the New York Mercantile Exchange, NYMEX) one futures controls about 20 tons of aluminium. High price volatility is characteristic of aluminium futures, which makes trading aluminium futures very risky.
ETF
The abbreviation ETF stands for “Exchange Traded Fund” – “Exchange Traded Fund”. Such a fund consists of hundreds or even thousands of shares of different companies., collected on any basis. Investing in ETFs is buying a share of the fund, who owns the assets, for example, stocks or raw materials. Anyone can buy shares of such a fund..
Trading ETFs has significantly lower risk, than trading aluminum futures. Some funds offer a combination of several aluminium futures in one exchange note. Others offer a range of aluminium, copper and zinc in one investment basket. There are such ETFs, who invest in primary aluminium production worldwide.
The most popular ETFs in the aluminium market are [5]:
- iShares Dow Jones U.S. Basic Materials Sector Index Fund (IYM)
- iPath Dow Jones-UBS Aluminium Subindex Total Return ETN (JJU)
Aluminum producers’ shares
To invest in aluminium producer stocks can be more attractive to people, who are not prone to excessive risk. After analyzing all the strengths and weaknesses of each investment option, a company is chosen, which corresponds to specific investment plans. The most profitable shares of companies in the aluminium industry currently include the shares of the following companies [6]:
- Century Aluminium Company. holding company, which is a primary aluminium producer.
- Alcoa Corporation. Produces and sells bauxite, alumina and aluminium products.
- Constelle N.V. Designs and manufactures aluminium products for various segments of the aluminium market, including aerospace, automotive and packaging.
- Aluminium Corporation of China Limited. Aluminum producer, including bauxite mining, alumina production and primary aluminium smelting.
- Kaiser Aluminum Corporation. Refers to the recycling sector of the aluminium industry. Produces rolled, pressed and cold drawn semi-finished products for aerospace, defense, automotive, engineering, electronic and electrical industries.
Dividends
Dividends are payments, which companies pay to their shareholders. Payment of dividends is optional, but many companies do it. Dividends can be paid quarterly, annually or every two years . It depends on the policy of each individual company.
The largest aluminium producing companies
Aluminium Corporation of China (Chalco). The world’s largest Chinese manufacturer
- bauxite;
- alumina and
- primary aluminium.
The company is also engaged in the production and sale of aluminium alloy products., graphite products and other materials for aluminum electrolysis.
Hongqiao Group. China Investment and Holding Company China Hongqiao Group Limited. The main areas of activity are the production and sale of:
- molten aluminium alloys
- ingots from aluminium alloys
- foundry and rolled aluminium products
- aluminium busbars.
Xinfa Group. The company mainly produces and processes primary aluminium and other related products. Xingfa Aluminium is one of the oldest aluminium extrusion manufacturers in China.. This enterprise is a major manufacturer, specializing in the production of construction and industrial aluminium profiles.
Rio Tinto. Rio Tinto Aluminum is a division of Rio Tinto, a multinational mining company headquartered in Montreal, Canada.. Rio Tinto mines ores and produces metals, including iron ore, aluminum, copper and diamonds, electricity generation. The company has 24 production sites around the world. Aluminium products include sheet rolling ingots, extrusion ingots, pokrovki and more.
Alcoa. Alcoa is one of the world’s leading bauxite producers, alumina and aluminium products. Headquartered in Pittsburgh, Pennsylvania (USA). The company does business and has manufacturing facilities in ten countries around the world. Alcoa has the world’s largest bauxite production, one of the largest alumina production systems, as well as a global network of primary aluminium smelters.
Where to invest in aluminшum
Three segments of the aluminium industry
Aluminium industry can be divided into three main segments – three streams:
- Upstream: Mining of bauxite, alumina production and primary aluminum smelting.
- Midstream: Converting primary aluminum into technological semi-finished products for further production of finished aluminum products. for instance, rolled aluminum sheets, which are sold to car manufacturers.
- Downstream: Manufacturing of finished aluminum products, for example, aluminum alloys for the manufacture of rims, which are about two times lighter than steel.
Transport is the driving force behind the aluminum industry
There are a large number of target market niches and industries, who consume aluminium, including aerospace, automobile production, packaging of products and goods, construction.
However, the industry, which is really driving the aluminium industry forward today, is transport engineering. This industry is sharply focused on reducing fuel costs and one way to do this is to reduce vehicle weight.. Since similar aluminium structures on 10-40 % easier, than steel while maintaining strength, then this metal is capable, for example, with weight loss 15 % reduce fuel consumption by 7-20 %.
Automobile production
Governments around the world are setting increasingly stringent CO2 emission standards for cars. From 2010 by 2020 average carbon dioxide emissions should have dropped from 142 g / km to 95 g / km, that is on 3,9 % annually.
Aluminum is able to reduce the weight of the corresponding part by more than 50 % compared to competing materials. For niche models with an all-aluminum body, the weight savings are up to 30-40 %, from 70 to 140 kg depending on the size of the car.
Major American automakers, like Ford and troublemakers, such as Tesla, focused on aluminium applications, to reduce the weight of their vehicles for improved performance and safety. The well-known American CAFE industry standards require an increase in the period from 2011 by 2025 year of run for 1 liter of fuel not less, than twice. Therefore, car makers have virtually no other choice., as soon as you reduce the weight of your vehicles. Aluminum will play a major role in this challenge.
Electric cars
Electric cars are currently quite expensive, mainly due to the high cost of batteries. This is why it is important to make electric cars as energy efficient as possible. Losing weight is one of the most obvious ways to improve the energy efficiency of any vehicle, including, electric cars.
Material, which is used for weight loss, is often slightly more expensive, heavier classic materials. established, that an electric VW Golf class car can be made on 184 kg lighter, if aluminium is used instead of steel. The total cost of an aluminum electric car would be 635 less euro, than steel electric car.
Aerospace
Aluminium is also a very important metal for the aerospace industry.. Its ability to provide light weight to aluminium structures helps reduce aircraft weight, which enables airlines to save money on jet fuel. Since jet fuel is the main cost for air carriers, this pushes them to continue looking for ways to reduce the weight of passenger aircraft. It means, that it is necessary to continue replacing heavy components with lighter ones made of aluminium alloys.
Track and monitor
- Every aluminium investor must constantly monitor new directions and changes in the aluminum industry, as well as the dynamics of the economy as a whole, to understand in time, when aluminum prices are ready to rise.
- Aluminium stock trading is highly cyclical and commercially more complex than other metals. Therefore, it is necessary to constantly monitor the state of stock trading in aluminium and be sure to have a ready-made plan for a quick exit from it in case of an unfavorable market situation.
Invest in aluminium! It’s a top investment choice! With its predictable price movement & limited use prior to the 19th century, aluminium is ideal for investors.
Sources:
1. Aluminum Nation – https://www.aluminum.org/
2. Driving Modern Manufacturing – The Aluminum Association – 2020
3. Aluminium in Cars – Unlocking the Light-Weighting Potential – European Aluminium Association – 2020
4. How to Invest in Aluminum / Karen Rogers – https://finance.zacks.com/invest-aluminum-5655.html
5. Aluminum: Investing Essentials – An investing primer on the aluminum industry /Matthew DiLallo – https://www.fool.com/investing/general/2014/08/07/aluminum-investing-essentials.aspx
6. List of Aluminum ETFs – https://fknol.com/etf/list/aluminum.php
7. Top Aluminum Stocks With Highest Returns – https://fknol.com/list/best-performing/aluminum-stocks.php