We recently published a list of 10 Best Aluminum and Aluminum Mining Stocks To Buy. In this article, we are going to take a look at where Century Aluminum Company (NASDAQ:CENX) stands against other best aluminum and aluminum mining stocks to buy.
Aluminum is a versatile and lightweight metal known for its low density and being roughly one-third the weight of steel or copper. Its unique properties, such as high strength-to-weight ratio, corrosion resistance, and excellent conductivity, make it essential in various sectors, including transportation, construction, and packaging.
One of the primary drivers of aluminum’s growth is the increasing focus on sustainability across industries. With its recyclability and lower carbon footprint compared to other metals, aluminum is becoming a go-to material for green technologies. The automotive and electric vehicle (EV) industry, in particular, is driving demand for aluminum as manufacturers seek lightweight materials to improve efficiency and range. By incorporating aluminum into vehicle designs, automakers also meet regulatory standards for emissions reduction.
Aluminum also plays a critical role in the renewable energy sector, as the production of solar and wind products requires significant amounts of aluminum. In addition to these industries, aluminum’s unique properties make it an ideal material for food packaging, and the construction sector, including infrastructure, and development.
In the report, Opportunities for Aluminium in a Post-COVID Economy, conducted by CRU International, the global demand for aluminum is projected to rise by nearly 40% by 2030. The aluminum sector will need to produce an additional 33.3 million tonnes to meet this demand, with production increasing from 86.2 million tonnes in 2020 to 119.5 million tonnes by 2030 across all industrial sectors.
According to the report, two-thirds of this demand growth is expected to come from China, which will require 12.3 Mt, whereas the rest of Asia will add a further 8.6 Mt. North American region will require 5.1 Mt and Europe 4.8 Mt. Together, these four regions alone will account for more than 90% of the additional aluminum required globally.
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The Aluminum Market Amid Global Changes
In an interview with CNBC on November 12, William Oplinger, President and CEO of Alcoa, said that he considers the Chinese market a crucial factor in the aluminum industry. He noted that China’s enormous appetite for commodities, particularly in the green sector, has a significant impact on the aluminum market. China currently produces around 45 million metric tons of aluminum, out of a global market of 75 million metric tons. However, the country has capped its production capacity at 45 million metric tons, meaning that any growth in demand will be met through secondary and recycling sources.
In terms of near-term dynamics, Oplinger expressed optimism about the demand for aluminum, citing continued strength in the packaging business, growth in the automotive and transportation sector, and potential growth in building construction spurred by lower interest rates worldwide.
Looking ahead to the long term, Oplinger emphasized the importance of aluminum in the energy transition economy, highlighting growth opportunities in areas such as electrical conductors, photovoltaic cells, and electric vehicles.
Aluminum Market Sees Price Spike as China Cancels Export Tax Rebate
On November 29, China’s finance ministry announced that it would be making significant changes to its export tax rebate policy, set to take effect on December 1. The ministry announced that it will cancel the export tax rebate for several products, including aluminum and copper products. The announcement had an immediate impact on the market, with aluminum prices surging on the London Metal Exchange. Traders are anticipating that the cancellation of the export tax rebate for aluminum will curb the heavy flow of Chinese aluminum exports, leading to a reduction in global supply and a subsequent increase in prices.
As the aluminum industry continues to evolve amidst a changing global landscape, one thing remains certain, the growing demand for this versatile metal looks bright. With growing demand, shifting market dynamics, and emerging trends shaping the sector, now is an exciting time for investors to explore opportunities in the aluminum market.
Our Methodology
For this article, we sifted through Base Metal ETFs and online rankings to form an initial list of 20 companies that are involved in the production, extraction, processing, or sale of aluminum and aluminum-related products. We then used Insider Monkey’s Hedge Fund database to rank 10 stocks according to the largest number of hedge fund holders. The list is sorted in ascending order of hedge fund sentiment, as of the third quarter.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A warehouse of aluminum ingots, neatly lined up ready to be shipped.
Century Aluminum Company (NASDAQ:CENX)
Number of Hedge Fund Holders: 31
Century Aluminum Company (NASDAQ:CENX) produces high-quality, low-carbon aluminum for the automotive, construction, and packaging industries. The company owns and operates aluminum smelting facilities in the United States, Iceland, and the Netherlands. Additionally, Century Aluminum Company (NASDAQ:CENX) is the majority owner of the Jamalco alumina refinery in Jamaica.
Century Aluminum Company (NASDAQ:CENX) is actively evaluating opportunities to redevelop its Hawesville facility, the company’s largest U.S. plant, with a production capacity of around 250,000 metric tonnes of high-purity aluminum per year. The company has received strong interest from third parties to utilize the site for alternative purposes. However, Century Aluminum Company (NASDAQ:CENX) has engaged financial advisors for the overall evaluation of the site, as it has a significant value as an option for restart due to the higher aluminum price.
Previously, Century Aluminum Company (NASDAQ:CENX) was exposed to the fluctuations of the spot market for alumina, meaning its costs were subject to unpredictable price changes. However, after acquiring a controlling interest in Jamalco, an alumina production company, Century Aluminum Company (NASDAQ:CENX) is no longer reliant on volatile market prices. Instead, the company now sources its smelter alumina requirements directly from Jamalco or through long-term supply contracts linked to London Metal Exchange (LME) prices.
This change has allowed Century Aluminum Company (NASDAQ:CENX) to secure a more stable and predictable supply of alumina, reducing exposure to market volatility. The company is also capitalizing on favorable market dynamics with strong operational performance, notably at its smelters.
Overall, CENX ranks 4th on our list of best aluminum and aluminum mining stocks to buy. While we acknowledge the potential of CENX to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CENX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
