Supply Uncertainty: Aluminum Takes the Baton from Copper



Supply uncertainty

Copper s is known for its unpredictable supply. Copper mining is concentrated in Latin America. The mined copper supply is susceptible to disruptions from protests to nature-related incidents. Aluminum’s supply chain is generally less prone to supply uncertainty compared to copper (FCX).

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In 2018, analysts expected disruptions in the copper supply. Labor negotiations at several leading mines were coming up. However, the copper supply has been resilient in 2018. On the other hand, the aluminum supply chain has faced several disruptions, especially regarding alumina. Earlier in 2018, alumina prices skyrocketed to all-time highs after President Trump imposed sanctions on Russian producer RUSAL.


Along with the sanctions on RUSAL, disruptions at Norsk Hydro’s (NHYDY) Alunorte refinery have impacted the alumina supply in 2018. The refinery was operating at 50% capacity. However, the refinery announced a complete shutdown earlier this month. The company has announced that it has been “granted an exceptional authorization,” which would enable it to run the plant at 50% capacity. The company also said, “We are now making every effort to go back to producing as we maintain our dialog with authorities to resume full production.”

Talking of price action, while Alcoa (AA) is trading down in pre-market trading on October 8, Century Aluminum (CENX) is trading higher. As an alumina buyer, Century Aluminum stands to benefit from lower alumina prices. Both of the stocks are down sharply in 2018 and underperforming the SPDR S&P Metals and Mining ETF (XME) despite President Trump’s Section 232 tariffs.

Read No Respite for Alcoa as Stock Nears 52-Week Lows for a detailed analysis of Alcoa’s bullish and bearish drivers.


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