How to Invest in Aluminum

Aluminum Investing
aluminum foil

Wondering how to invest in aluminum? Learn what factors are impacting the industry and which publicly traded companies are available.

Aluminum is a silvery-white metal with a myriad of useful properties that make it a necessary component in many of our everyday products. For that reason, aluminum investing can offer exposure to growth in a number of market segments.

This important industrial metal is non-toxic, resistant to corrosion and has a high thermal conductivity; it's also the most abundant metal in the Earth’s crust.

Found in the minerals bauxite and cryolite, aluminum was first extracted in 1825. Often aluminum is alloyed with other metals, such as copper, magnesium, silicon, tin, zinc and manganese.

These alloys are lightweight and strong, making them desirable for use in aircraft and spacecraft. An alloy of boron and aluminum is used for electric power cables for transmission lines, and the metal is also used in cans, foils and utensils. Additionally, it can be deposited on the surface of glass to make mirrors.

If you’re interested in how to invest in aluminum and what the industry is all about, read on for a brief overview of the metal, from supply and demand to how to invest.

How to invest in aluminum: Supply and demand

China is the world’s largest producer of aluminum, but supply from the Asian nation has faced restrictions in recent years — the Chinese government has implemented anti-pollution policies that could put weight on the aluminum industry’s production activity.

China’s aluminum market is also facing external pressure due to ongoing trade disputes with the US. The two countries have been putting back-and-forth tariffs on each other for a few years now. President Joe Biden even reinstated former President Donald Trump’s tariffs as one of his first trade moves in office.

According to a FocusEconomics report from late 2021, higher energy prices have prompted Chinese smelters to slash aluminum production (an energy-intensive process) as a cost-cutting measure. Not surprisingly, the cutbacks have increased aluminum prices to levels not seen in over a decade.

Looking forward, Fortune Business Insights states that the global aluminum market is set to grow by a compound annual growth rate of 5.7 percent between 2019 and 2027 to reach US$242.44 billion. The biggest drivers of this growth will be the packaged foods, aerospace, electrical and automobile industries.

For its part, BCC Research estimates that the aluminum alloys market will exceed US$40 billion by 2027. Global factors projected to contribute to growth in this segment include growing demand from the transportation sector, particularly for improving fuel efficiency in the air and automobile sectors. The metal is also an efficient conductor of heat and electricity and is used in transmission lines, transformers and motors, making electrical applications another key driver of market growth.

What’s more, Research and Markets expects aluminum use in the global automotive industry to reach US$58 billion by 2026, with the Asia Pacific region as the largest consumer. Growth will be driven by increasing vehicle production, government emissions regulations and rising gas prices.

In terms of pricing, the International Monetary Fund believes aluminum will average US$2,276 per tonne in 2026, while the World Bank has predicted it will average US$2,400 per tonne by 2035.

How to invest in aluminum: Stocks and more

If you’re curious about getting involved in aluminum investing, going directly through aluminum-focused companies is a straightforward way to start. Companies such as American aluminum firm Alcoa (NYSE:AA) — which produces one-fifth of the world’s aluminum — and major Norwegian aluminum producer Norsk Hydro (OTCQX:NHYDY,SWX:NHY) are both viable options.

Elsewhere, companies like Aluminum Corporation of China (NYSE:ACH) have seen year-to-date gains. Similarly, Century Aluminum (NASDAQ:CENX), which US Commerce Secretary Wilbur Ross has identified as the sole producer of aluminum used for US fighter jets, has grown year-to-date.

China Hongqiao Group (OTC Pink:CHHQF,HKEX:1378), the world’s largest aluminum producer, and Rio Tinto (NYSE:RIO,LSE:RIO,ASX:RIO), which has aluminum operations in eight countries, are other heavyweight companies in the sector that investors may want to consider.

Further options for investing in the aluminum industry include the iPath Series B Bloomberg Aluminum Subindex Total Return ETN (ARCA:JJU), which is an exchange-traded note that delivers returns through a futures-based strategy. There's also the WisdomTree Aluminum (LSE:ALUM) exchange-traded commodity, which is designed to give investors exposure to a total return investment in aluminum.

In addition, ETF Securities offers leveraged and inverse aluminum exchange-traded products in European markets, along with traditional long-exposure funds.

Finally, the London Metal Exchange offers aluminum futures contracts quoted in US currency per tonne, with each contract representing 25 tonnes.

This is an updated version of an article first published by the Investing News Network in 2017.

Don’t forget to follow us @INN_Resource for real-time news updates!

Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.


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