Aluminum Surges to a 13-Year High – What Stock Offers the Best Value?

Aluminum surged to a 13-year high demand, as the risk of shortages rose for the industrial metal.  Prices are up 54% for the year, reaching $3,132 a ton on the London Metal Exchange (LME), its highest price since 2008.

The metal is known to industry insiders as “solid electricity” – being used in everyday consumer items and electronics.  Each ton of the essential metal takes about 14 megawatt hours of power to produce.  The aluminum industry produces about 65 million tons a year, consuming enough energy to power a G7 nation.

Aluminum buyers and analysts are bullish on this industrial metal, in light of supply chain disruptions and a European energy crisis.  Add to this the looming threat of additional COVID outbreaks and the affect they have on mining operations, and you have an Aluminum market struggling to keep up with demand.

According to Allied Market Research, the Aluminum Market was valued at $147.2 billion in 2018, and is expected to reach $189.8 billion by 2026, representing a CAGR of 3.2% from 2019 to 2026.

Aluminum Stocks – Hunting for Value

Alcoa (NYSE:AA) is the US bellwether for aluminum and has had performance significantly ahead of its peers over the last year, rallying +234%.  In contrast Australian based Alumina (OTC:AWCMY) is up +7% and Kaiser Aluminum (NASDAQ:KALU) is flat for the year.

In the table below we’ve compiled a comp sheet of all the aluminum companies that have US listed tickers.  On a valuation basis we believe Century Aluminum (NASDAQ:CENX)  screens as one of the most attractive; trading on Forward P/E and Forward EV/EBITDA lower than the peer group average.

Aluminum Valuation Comp Sheet

Century Aluminum at a Glance

Century Aluminum is a global producer of primary aluminum and operates aluminum reduction facilities, or smelters, in the US and Iceland. It operates three US aluminum smelters in Kentucky and South Carolina and one aluminum smelter in Iceland.

With an annual production capacity of more than 1 million tons per year, the company produced approximately 794,000 tons of primary aluminum. Century Aluminum also owns a carbon anode production facility in Vlissingen, Netherlands. Glencore accounts for the vast majority of Century Aluminum’s sales. Century Aluminum generates about 65% of sales in the US.