What does Alumina do?
Alumina Ltd [ASX:AWC] is a global bauxite miner and alumina refiner. It also has some exposure to aluminium smelting operations. It conducts this business thorough a joint venture with US listed Alcoa.
Alumina basically mines and refines the raw materials for aluminium, one of the most important commodities in the world.
What’s happening to AWC’s share price?
Today, AWC’s price jumped nearly 10%. The move came on the back of overnight news that China’s leadership is cutting back on steel and aluminium production in an effort to reduce winter smog.
The market took this to mean that lower production on rising demand means rising prices too. Presumably, the market’s bullish reaction to Trump’s ‘spend, spend, spend’ speech helped the share price too.
What now for AWC?
AWC benefits from a rise in commodity prices, ; and aluminium and the associated raw materials have increased strongly in price over the past 12 months.
This bodes well for AWC, as it has some of the best (lowest cost) bauxite mines in the world.
As a commodity raw material producer, AWC is a price taker. So it’s future depends very much on global demand for the metal. The move to make cars lighter (meaning less steel and more aluminium) is a good structural driver for the company.
And the outlook for the global economy has certainly picked up in 2017. The mood is bullish. This bodes well for future earnings.
The charting picture looks good too.
As you can see in the chart below, AWC has rallied strongly in the past six months. The price corrected recently, but today’s rally brings it back to longer- term highs.
The upward trend looks strong. Combined with a bullish outlook for global growth, AWC’s prospects look good.
Never assess a stock’s fundamentals without looking at the chart too. Combining fundamental analysis with charting can yield powerful results.
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Editor, Money Morning