The metal rally is back
The entire metals sector has been changing during the past several quarters. There have been upgrades by the brokerages—led by improving market conditions. It’s important to note that all the metal shares, including aluminum companies, were negatively impacted during the crisis. The share prices dropped as much as 80% for some of the companies. Now, the demand outlook is better. As a result, the shares have also improved.
The surge in Century Aluminum’s share price
The chart above shows the surge in aluminum company shares over the past year. As you can see, Century Aluminum has led the way with more than 150% returns. In the past three months, Century Aluminum has seen its share price almost double. Most of the brokerages have turned bullish for Century Aluminum. Many brokerages, including Deutsche Bank, have initiated coverage on Century Aluminum with a buy rating.
This optimism is supported by two factors. The primary factor is the bullish undertone in the entire metal stock. Along with the improved macro conditions, Century’s micro picture has also improved. The aluminum industry has been helped by increased demand from the core industries like the aerospace industry. There has also been increasing demand from the automotive sector. The automotive sector has shown an increased appetite for aluminum because it helps them make lighter vehicles. Lighter vehicles improve the fuel economy. They also help the automobile companies meet the U.S. government’s strict standards.
Recently, there have been certain court rulings in the favor of aluminum producers. We’ll look at these rulings in the next part of the series. These are critical judgments for aluminum producers like Century Aluminum (CENX), Alcoa (AA), Kaiser Aluminum Corp. (KALU), and Constellium (CSTM). It’s important to note that these companies form the investment universe for the SPDR S&P Metals and Mining ETF (XME).