Since nearly a decade ago, we have been monitoring the top aluminum stocks. Moreover, despite the global slump, these equities are resilient. As stock markets continue to decline, better purchasing chances should emerge.
Aluminum has several applications, and long-term demand should continue to rise. In addition, the most excellent aluminum firms may pass on increased prices to their clients. As inflation has increased, this is excellent news for investors. In addition, there is a parallel tendency among other metal firms. Here are some of the most attractive nickel stocks to consider.
It is advantageous to work from the top down to discover the most incredible aluminum stocks. Let us begin by examining the aluminum business in its entirety. Then, bearing this in mind, we will discuss the best aluminum stocks to monitor.
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Is Aluminum an Attractive Investment?
Over 20 percent of new automobile sales in China are now electric vehicles, which increases the need for aluminum. Aluminum companies such as Alcoa and Norsk Hydro and component manufacturers such as Constellium stand to gain from the increasing prevalence of electric vehicles.
Aluminum, a lightweight metal, keeps electric vehicles light, prolonging the battery’s life. Despite being more expensive than steel, the significantly lighter metal is quickly becoming the material of choice for electric vehicle components, such as battery housing. One estimate indicates that an EV requires 30 percent more aluminum than a gasoline-powered vehicle.
Lighter vehicles may utilize smaller batteries and drive farther on a single charge. Aluminum has excellent thermal management capabilities that may be utilized in electric vehicle (EV) chargers. It even accounts for 8 percent of the weight of solar panels. Furthermore, it is recyclable.
Aluminum is plentiful as an element, but its transformation into a metal needs many processes. First, the raw material bauxite is processed to generate alumina, an aluminum and oxygen combination. Second, aluminum is smelted from alumina, an intermediate product. Aluminum may then be rolled into a variety of forms. The commodity is also traded on the London Metals Exchange.
However, running aluminum smelters is energy-intensive. Coal is still used in the smelting process in China, which is responsible for producing more than half of the world’s aluminum. The net environmental advantage of switching to EVs is enhanced if low-carbon or recycled aluminum is utilized. Companies like Alcoa and Norsk Hydro sell low-carbon aluminum smelted with renewable energy. Recycling aluminum also reduces the metal’s carbon impact.
Aluminum remains the material of choice in several sectors, and it may be found in beer cans, cooking utensils, bicycles, airplanes, and numerous other places. The metal is in high demand, and its price should rise over the next five to ten years.
10 Best Aluminum Stocks You Should Consider in 2022
Alcoa is an integrated aluminum manufacturer and one of the world’s leading bauxite mining firms, the key raw material for aluminum production. Corporations own seven low-cost, high-quality bauxite mines in Australia, Brazil, Guinea, and Saudi Arabia.
The Alcoa refineries transform bauxite into alumina. The firm manages one of the world’s major third-party alumina companies with seven low-cost refineries in Australia, Brazil, and Spain.
Lastly, Alcoa manufactures a range of aluminum products through its melting and casting processes. Three-quarters of Alcoa’s smelting portfolio is powered by renewable energy to minimize production costs and greenhouse gas emissions.
Alcoa is making substantial investments in R&D to minimize its carbon footprint and enhance the overall sustainability of its operations. Its significant development initiatives include ELYSIA, a joint venture with Rio Tinto that aims to commercialize an innovative aluminum smelting method with no direct greenhouse gas emissions by 2024. In addition, the company is working on a project named ASTRAEA to refine post-consumer aluminum scrap into pure aluminum. The firm anticipates that its capital expenditures on sustainability and return-seeking projects will climb through 2024, with the possibility of spending even more if it pursues some of its new initiatives.
In the future, Alcoa intends to return more cash to its stockholders. In late 2021, the company reintroduced its quarterly dividend. Additionally, the company increased its share repurchase program. This overall capital allocation plan sets the firm for value-creating growth heading into 2024 when it might begin expanding or executing potentially ground-breaking technological innovations.
2. Kaiser Aluminum (KALU)
Kaiser Aluminum is the next firm on our list; it makes and distributes semi-fabricated specialty aluminum. Its products have applications in the aerospace, automotive, and engineering industries.
First, a word of caution: aluminum manufacturers will be in the most excellent position regarding aluminum stockpiles owing to price surges. Kaiser Aluminum is an end-user company that incorporates metal into its products. Indeed, it might experience a rise in the business, but probably not as much as producers.
Over the second quarter and the first half of 2021, this company’s shipments and revenues increased significantly. In the second quarter of 2021, sales reached $741 million, up 168 percent from $276 million a year previous. Similarly, net income climbed by 166 percent during the same period, from $6 million to $16 million in Q2 2021. The first part of the year saw sales increase by a staggering 65 percent. Overall, Kaiser is far more robust than it was a year ago.
There is considerable uncertainty around KALU stock, but this one is worthwhile for those who want to go beyond linear output. Supply-chain concerns should continue to benefit the company’s price increases for the foreseeable future.
Arconic was formerly a division of Alcoa. Nonetheless, the aluminum manufacturer broke off the business in 2016 to concentrate on its main aluminum business. To concentrate on its core global rolled products business, Arconic has now completed its spin-off by spinning off its engineered products and forgings company as Howmet Aerospace (NYSE: HWM) in 2020.
Arconic is now the top manufacturer of aluminum sheets, plates, and extrusions. In addition, unique architectural products are manufactured for aerospace, building & construction, industrial, and packaging applications.
Arconic anticipates a surge in demand for its goods. For example, manufacturers must produce more vehicles to make up for inventory shortages, resulting in an annual compound growth rate of 8 percent for auto body sheet goods. Increasing expenditures on non-residential development should increase demand for aluminum building components. The corporation makes substantial investments to fulfill this increased demand and cut expenses, and this should allow it to boost its future cash flow.
4. Vedanta (VEDL)
Vedanta is an Indian firm that operates in a variety of commodity-related industries. In addition to aluminum, the firm engages in the mining, oil, and gas industries and processes copper and iron ore.
The reason to explore buying the aluminum stock now is due to the skyrocketing price of aluminum. The corporation reported its highest-ever aluminum output in its most recent quarterly financial report, dated July 26th.
The sales during the time climbed 79 percent year-over-year (YOY). During the same period, EBITDA grew by 150 percent, outpacing the increase in revenue.
We see several reasons to be optimistic about VEDL stock going forward. First, it has been shown that China will continue to be a net importer of aluminum shortly, possibly for a more extended period. As a result of India’s closeness to China, there is potential for increasing profits. (Yes, I know their terrible political connection, but the potential still exists.)
Additionally, Vedanta operates across various commodity classes, and the corresponding supply chains of these commodities may likewise be experiencing similar difficulties as aluminum, indicating that, for instance, zinc could explode. Therefore, VEDL stock is not only a clever play on aluminum and it is also a general method for trading commodities.
5. Century Aluminum
Century Aluminum is a global aluminum manufacturer, and it runs four aluminum smelters in the United States and one in Iceland. Additionally, the corporation maintains aluminum reduction factories in both nations, and its plants manufacture primary aluminum products of standard quality and with added value.
Century Aluminum is making substantial investments to reduce its carbon emissions profile. In late January 2021, the firm inked a contract to purchase electricity from two wind farms under construction in Iceland. It also collaborated with the developer to devise a method for capturing carbon dioxide emitted by its plant, which could be utilized by the developer in a planned hydrogen facility adjacent to the site. These investments bolster the company’s goal to produce Natur-Al aluminum, which has one of the world’s smallest carbon footprints.
Additionally, the business is expanding the foundry at its Iceland location. Century Aluminum will be able to create additional low-carbon goods upon completion of the $120 million projects in 2024. In 2021, it also completed expansions at its smelters in Kentucky and South Carolina to meet the rising worldwide demand for aluminum.
6. Aluminum Corporation of China (ACH)
Let us begin our Aluminum Corporation of China talk with raw returns. Ultimately, as investors, this is what we are all concerned about. Since the beginning of 2021, the price of ACH stock has more than doubled, climbing from $9 per share to almost $20 per share today.
ACH is the inclusion on this list of aluminum stocks that deserves the most attention. Why? The primary explanation is the notion that Chinese corporations are accumulating and turning into sellers following their 2020 strategic measures. In addition, this company’s emphasis on procurement makes it a prominent figure in China’s aluminum story.
Aluminum Corporation of China is a manufacturer of raw materials and commodities. However, it would not be unusual to play a more significant import-export role, considering that smelting may relocate to neighboring Asian nations due to pollution rules. A few paragraphs from a corporate filing adequately summarize ACH: “We are a market leader in China’s non-ferrous metals business. In terms of worldwide scale, we placed among the leading companies in the aluminum business. We have profited from the growth of the PRC aluminum market, the largest aluminum market in the world. We transform bauxite into alumina, smelted into primary aluminum.”
There is an evident national danger here, considering the location of this name. Nonetheless, we get the impression that ACH stock may go much higher, and there is an information lag to exploit.
7. Rio Tinto
Rio Tinto is a worldwide, diversified mining business headquartered in London. It produces iron ore, aluminum, and copper, among other metals. In addition, it creates borates, lithium, diamonds, salt, and titanium dioxide.
Rio Tinto is an integrated producer of aluminum. It contains five bauxite mines, four alumina refineries, and fourteen aluminum smelting facilities. Additionally, hydropower facilities are utilized to cut energy prices and carbon emissions.
ANALYSIS, a joint venture with Alcoa, is one of its important long-term initiatives. This initiative, backed by Apple (NASDAQ: AAPL) and the governments of Canada and Quebec, intends to replace the greenhouse gas emissions produced by the aluminum smelting process with pure, clean oxygen. If implemented in every smelter in Canada, this innovative method may remove 6.5 million metric tons of greenhouse gas emissions, assuming viability. That is comparable to removing around 1.8 million vehicles from the road.
Rio Tinto has a prominent aluminum business, but unlike the other firms in this category, it is not a pure play on aluminum. The mining company generates most of its revenue (75 percent in the first half of 2021) from iron ore production. Aluminum provided just 9 percent, copper gave 9 percent, and minerals contributed 7 percent. Therefore, it may not be the most important choice for an investor seeking exposure to the aluminum market alone. Nonetheless, its variety offers advantages. This includes exposure to other markets (copper and iron ore) whose relevance in lowering carbon emissions should accelerate demand.
8. Constellium (CSTM)
The following company on this list of aluminum stocks is Constellium, a French maker of specialty rolled aluminum for aerospace, packaging, and automotive applications.
CSTM stock will likely attract investors interested in momentum stocks. This is because its price has climbed by 47 percent year-to-date (YTD). This consistent increasing tendency has pushed prices from about $14 to over $20. Moreover, this stock’s price should continue to rise, assuming the analyst consensus holds. According to Tipranks, four analysts covering CSTM have a mean price objective of $23.75, and all four ranks it as a purchase.
In the second quarter of 2021, Constellium exported 406,000 metric tons of aluminum, a 31 percent increase year-over-year. This rise resulted in sales of 1.5 billion euros ($1.77 billion), a 47 percent increase year-over-year. Moreover, according to CEO Jean-Marc Germain, this trend continues: “I am optimistic about the second half of the year. Except for the aerospace industry, demand from our major end markets is at or above pre-pandemic levels. We anticipate these favorable conditions to persist through at least the remainder of 2021. Based on our present projections, we are increasing our advice.”
Constellium anticipates an adjusted EBITDA range of 545 million to 560 million euros ($644.1 million to $661.80 million). It also anticipates at least 125 million euros ($147.7 million) in free cash flow for the year.
9. BHP Group (BBL)
BHP Group Limited is a global resources corporation with operations in Australia, Europe, China, Japan, India, South Korea, the rest of Asia, North America, South America, and globally. It operates in Petroleum, Copper, iron ore, and coal segments. The firm explores, develops, and produces oil and gas resources and mines gold, silver, copper, zinc, molybdenum, uranium, iron ore, and metallurgical and energy coal.
The shares of BHP Group started the day at $59.96, down from the previous close of $60.80. The most recent cost was $59.91 (25-minute delay). BHP Group is an NYSE-listed company with a trailing 12-month revenue of around USD61.2 billion and 40,110 employees.
10. Norsk Hydro (NHYDY)
Oslo, Norway, is the location Norsk Hydro is an industry leader in aluminum and renewable energy. In addition, they manufacture low-carbon aluminum, Hydro REDUXA, and recycled aluminum, Hydro CIRCAL. Hydro REDUXA reduces aluminum’s carbon footprint to less than 25% of the global average. Hydro also produces aluminum solutions for EV battery packs, enclosure frames, and other body structural components.
Norsk Hydro encourages using renewable energy to produce aluminum with a smaller carbon footprint. Their renewable energy portfolio includes hydropower, wind, solar, and hydrogen. Additionally, they have collaborations and joint ventures within the battery and recycling industries. In 2020, Hydro produced revenues over $15 billion, and it even yields a dividend, which is now greater than 3%.
The aluminum stocks listed above provide access to some of the industry’s top firms. It is difficult to forecast their movement in the short run, and recent market activity has been exceptionally volatile. In the years ahead, however, share prices should rise.
In general, the aluminum business offers lucrative investment options. Despite this, markets are constantly shifting, and the most good chances come and go. Therefore, you should constantly conduct your research.
Understanding your risk-taking capacity and proclivity is crucial. Furthermore, as you investigate other stocks and trading tactics, you should be able to increase your returns. At Top1 Markets, we provide a variety of investing strategies.