Top 3 Aluminum Stocks to Play Soaring Demand in China
Aluminum Imports to China Expected to Jump 2,446% in 5 Years
Aluminum imports to China are expected to increase more than 25 times by 2015.
You read that right...
The Chinese are gearing up to devour aluminum on a scale previously unimaginable, boosting imports from 200,000 tons to over 5 million tons in five short years!
And owning shares of companies that produce aluminum and aluminum-based products for export to China could leave a handful of perceptive investors juiced with heart-fluttering investment gains.
Today, I'll tell you about the top three public companies that are set to profit the most with projects and processing facilities in the two most important countries that export aluminum products to China.
But first, I want clear up some common confusion about aluminum products...
Investors are often confused by the differences between aluminum and alumina, and alumina and bauxite.
Here's exactly how it all breaks down:
A naturally occurring ore containing aluminum, oxygen, and hydrogen. Bauxite is the principal ore in the production of alumina. The bulk of world bauxite production (approximately 85%) is used as the feed stock in the production of alumina.
A synthetically produced aluminum oxide that is derivative of bauxite. Over 90% of world's alumina production is used as a starting material for the smelting of primary aluminum metal.
A final aluminum metal product that is produced using synthetically produced alumina from naturally occurring bauxite. That means, primary aluminum is made from non-recycled materials.
Secondary aluminum is also a final aluminum metal product that is produced using recycled material from scrap. Aluminum is 100% recyclable without any loss of its natural qualities. Recycling aluminum requires only 5% of the energy used to produce primary aluminum from ore.
The world's most successful aluminum companies have established and manage the full production cycle — from the extraction of raw materials to the production of a final metal product.
And it begins with controlling bauxite resources.
The world's resources of bauxite are spread around the world. There are only seven bauxite-rich areas: Western and Central Africa (mostly, Guinea), South America (Brazil, Venezuela, Suriname), the Caribbean (Jamaica), Oceania and Southern Asia (Australia, India), China, the Mediterranean (Greece, Turkey), and the Urals (Russia).
Due to the limited supply of raw materials, the global aluminum industry has been consolidating for the past 20 years.
And at this point, the main deposits of high-quality bauxites with high aluminum content are already divided up among the major players.
These companies make up the largest producers of bauxite, manufacturers of alumina, and smelters of aluminum in the world; they're at the helm of the global aluminum market.
A handful of these specific companies could be getting ready to pay investors as...
Aluminum imports to China are expected to jump 2,446% in five short years
China is already the world’s largest producer and consumer of primary aluminum.
But Texas-based Harbor Intelligence — the world's leading authority on the global aluminum market — believes the booming Chinese economy will drive the demand for aluminum-based products skyrocketing between 2011 and 2015.
In a recent report, Harbor Intelligence predicted China's imports of primary aluminum may rise from 198,000 tons in 2011 to 5.04 million tons in 2015.
Increased purchases by the world’s largest metals consumer may support an advance in global prices, specifically benefiting aluminum companies that produce aluminum products for export to China.
Approximately 60% of China's primary aluminum imports come from Russia. Another 20% is contributed by Australia, with the rest from other sources.
And by owning shares in public companies with bauxite, alumina processing, and aluminum smelting projects and facilities in Russia and Australia, investors are best leveraged to profit from Harbor's projected 2,446% increase in primary aluminum imports to China.
With that in mind, here are the top three largest public aluminum companies with assets in Russia and Australia.
United Company RUSAL (Hong Kong: 486)
|Share Price||$9.40||Corporate Presentation|
|Market Cap||$143 Billion|
United Company RUSAL (Hong Kong: 486) is the world’s largest producer of aluminum. The company's products are exported to clients in 70 countries.
RUSAL's assets include bauxite and nepheline ore mines, alumina refineries, aluminum smelters, casthouse business for production of alloys, foil mills, and production of packaging materials — as well as power-generating assets in 19 countries on 5 continents.
The company is comprised of 16 aluminum smelters, 12 alumina refineries, 8 bauxite mines, 3 powder metallurgy plants, 3 silicon smelters, 3 secondary aluminum plants, 3 aluminum foil mills, 2 cryolite plants, and one cathode plant.
In 2009, RUSAL produced 3.9 million tonnes of primary aluminum and 7.3 million tonnes of alumina, accounting for over 10% of the global output for both products.
This year, the company expects to increase production of primary aluminum to 4.0 million tonnes and production of alumina to 8.1 million tonnes.
RUSAL accounts for about 75% of all the primary aluminum produced (about 2.5 million tonnes) in Russia.
Alcoa (NYSE: AA)
|Share Price||$13.37||Corporate Presentation|
|Market Cap||$14 Billion|
Alcoa (NYSE: AA) is the third largest producer of aluminum in the world. From its operational headquarters in Pennsylvania, Alcoa conducts operations in 31 countries — including large operations in both Russia and Australia.
The company is focused on the production and management of primary aluminum and alumina through its active and growing participation in all major aspects of the aluminum industry: technology, mining, refining, smelting, fabricating, and recycling.
Aluminum and alumina represent more than three-fourths of Alcoa’s revenue. Non-aluminum products include precision castings and aerospace and industrial fasteners. Alcoa’s products are used worldwide in aircraft, automobiles, commercial transportation, packaging, building and construction, oil and gas, defense, and industrial applications.
Alcoa’s Australian operations represent the world’s largest integrated bauxite mining, alumina refining, aluminum smelting and rolling system, and aluminum recycling facilities.
The company's operations in Australia are 60% owned by Alcoa and 40% owned by Alumina (NYSE: AWC) and include 2 aluminum smelters, 3 alumina refineries, 2 bauxite mines, 1 secondary aluminum plant, and 2 aluminum rolling plants.
In 2009, Alcoa of Australia mined around 33 million tonnes of bauxite, produced 9 million tonnes of alumina, and 513,000 tonnes of primary aluminum.
Alcoa produces almost 45% of Australia’s alumina and over 25% of Australia’s aluminum. The company's alumina production in Western Australia accounts for 11% of total world demand.
Rio Tinto (NYSE: RIO)
|Share Price||$64.06||Corporate Presentation|
|Market Cap||$334 Billion|
Rio Tinto Alcan is one of five product groups operated by Rio Tinto (NYSE: RIO). Rio Tinto Alcan maintains large-scale, long life, efficient operations active on six continents and in 27 countries. This includes a significant presence in Australia.
The company's operations are derived from all stages of the aluminum production process including mining bauxite, refining bauxite into alumina, smelting alumina to produce aluminum, and manufacturing a large variety of fabricated and semi-fabricated aluminum and composite products.
Rio Tinto Alcan currently owns, operates, or has interests in 6 bauxite mines and deposits in 4 countries, 10 alumina refineries in 5 countries, and 23 aluminum smelters in 10 countries.
Annually, the company produces approximately 35 million tonnes of bauxite, 9 million tonnes of alumina, and 4 million tonnes of aluminum.
In 2009, Rio Tinto Alcan's Australian operations produced 333,600 tonnes to aluminum, 16.3 million tonnes of bauxite, and 1.4 million tonnes of alumina.
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