The primary driver of the gains has been centred on aluminium fundamentals, with demand ramping up on aircraft orders, Japanese autos, construction and a recovering food and beverage container segment.
On the supply side, an Indonesian government-imposed ban on low-cost exports has impacted bauxite, meaning China is now relying heavily on existing stockpiles. While the market generally sorts itself out when it comes to supply/demand dynamics, for now it seems investors feel we’ll see a nickel-style acceleration in prices.
AWC’s financials have also been impressive, with the company managing to reduce debt levels and gain a better equity contribution from Alcoa World Alumina and Chemicals (AWAC). Analysts also feel that, while AWC had previously halted dividends, there is a good chance this will resume as debt levels decrease and the equity contribution increases.
From a price-action perspective, AWC has been in a solid uptrend since April and recently hit 52-week highs in the $1.78 region. Pullbacks continue to be used as a buying opportunity as we head into Alcoa’s results – which kick off the Q3 corporate earnings season on Wednesday.
Investors will be hoping for a bigger equity contribution. Should this come to fruition, we could see fresh highs being printed.