In this piece, we will take a look at the ten best aluminum and aluminum mining stocks to buy. If you want to skip our introduction to the aluminum industry, then check out 5 Best Aluminum and Aluminum Mining Stocks To Buy.
Aluminum is one of the most important metals in the world especially due to its unique properties that place it somewhere in between a metal and a non metal. This is because while aluminum has a high melting point which makes it suitable for use in a variety of cases, the metal is not the best conductor of electricity. Aluminum is also quite resistant to corrosion in most conditions, which makes it a durable choice for building structures that require both robustness and less weight such as airplanes. Additionally, aluminum isn’t toxic either which makes it suitable for packaging edibles.
Looking at the global aluminum market as a whole, it was estimated to be worth $159 billion by the end of 2021 and $255 billion in the following year. From then until 2029, the industry is expected to grow at a compounded annual growth rate (CAGR) of 6.1% by the end of 2029 to be worth $255 billion by the end of the forecast period. The global aluminum industry, like other sectors, was disrupted during the coronavirus pandemic as large scale industry and manufacturing shut downs reduced the demand for the metal. A key benefit of aluminum is that the metal does not lose strength or consistency after recycling, which makes it quite suitable for use cases such as soft drink cans. Additionally, a key drive of global aluminum demand is expected to come from the automobile industry, due to the metal’s light weight and strength – advantages that we have mentioned above.
Shifting gears to take a look at aluminum prices, there are several indexes that track the commodity. Aluminum prices typically correlate with the economy, since more construction and industrial production incentivize producers to expand their mining activities and produce more. There are different grades of aluminum and their prices often vary by quite a bit. For example, earlier this year when the London Metals Exchange (LME) decided to continue allowing Russian aluminum to be listed, prices of European 5083 aluminum were around $5,000 a metric ton while prices for Chinese aluminum stood at roughly $2,600.
We’ve taken a detailed look at the global aluminum production roadmap as part of our coverage of the 15 Largest Aluminum Producing Countries In The World. This data shows that there wasn’t a single European country in the top five largest aluminum producers, and Chinese aluminum smelter output of 40 metric tons as of 2022 end was greater than the next 14 countries on the list. Therefore, it’s natural for the prices to be low, as greater supplies often mean aluminum producers are able to spread costs across a large number of operational units. Global aluminum consumption stood at a strong 65.78 million tons last year, and it is projected to 78 million tons by 2029. Aluminum production requires investment as well, since as opposed to crude oil where the mined product is simply shipped to a refinery, aluminum is not available in its pure form. Instead, the metal is mined by digging up bauxite from roughly 15 meters below the Earth’s surface.
Moving towards the corporate side of the industry, few standalone companies operate aluminum mines. Instead, large mining giants such as Rio Tinto Group (NYSE:RIO) typically produce the metal along with other mined products. However, since the market is unsaturated, firms that choose to exclusively focus on aluminum production often see greater cost savings and an enviable control of market share. One such example in the aluminum industry is the American firm Alcoa Corporation (NYSE:AA). Alcoa is one of the oldest companies in the world, which was set up more than a hundred years back in 1886. Its revenue for the four latest quarters sits at $11 billion, but intensely high production costs force the gross margin down to just 6.7%. So, for every $1,000 of aluminum that Alcoa mines, the firm is able to profit from just $67 of product. Its earnings performance has also fluttered recently, as out of the four latest quarters, the firm has beaten analyst EPS estimates in only two. Other pureplay aluminum companies are Kaiser Aluminum Corporation (NASDAQ:KALU) and Constellium SE (NYSE:CSTM).
As for the current state of aluminum business operations, here’s what the management of Constellium SE (NYSE:CSTM) had to say during the firm’s latest quarterly earnings call:
After a strong first quarter performance, our recordable case rate declined in the second quarter, leading to a rate of 1.9 per million hours worked for the first half of the year. This is a humbling reminder that while we always strive to deliver best-in-class safety performance, we need to constantly maintain our focus on safety to achieve the ambitious targets we have set. It is a never-ending task for our company and one we take very seriously. Turning to our financial results.
Shipments were 398,000 tons, down 6% compared to the second quarter of 2022 due to lower shipments in PARP and AS&I. Revenue of €2 billion decreased 14% compared to last year, as improved price and mix was more than offset by lower shipments and lower metal prices. Remember, while our revenues are affected by changes in metal prices, we operate a pass-through business model, which minimizes our exposure to metal price risk. Our value-added revenue, which reflects our sales, excluding the cost of metal was €785 million, up 11% compared to the same period last year. Our net income of €32 million in the quarter compared to a net loss of €32 million in the second quarter last year. As you can see in the bridge on the top right, adjusted EBITDA of €209 million in the quarter was up 5% compared to last year and is a new quarterly record for the company.
With these details in mind, we decided to take a look at some top aluminum stocks, with Crown Holdings, Inc. (NYSE:CCK), Alcoa Corporation (NYSE:AA), and Apollo Global Management, Inc. (NYSE:APO) ranking the highest.
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Our Methodology
To compile our list of the best aluminum and aluminum mining stocks we first made a list of all the companies that either pureplay aluminum firms or work with the metal as part of their broader operations. They were then ranked by the number of hedge fund shareholders as of June 2023.
10 Best Aluminum and Aluminum Mining Stocks To Buy
10. Kaiser Aluminum Corporation (NASDAQ:KALU)
Number of Hedge Fund Investors In Q2 2023: 11
Kaiser Aluminum Corporation (NASDAQ:KALU) is an American firm headquartered in Memphis, Tennessee. It makes and sells aluminum products for industrial and engineering use. Its shares are rated Hold on average by analysts which have also penned in a modest $2.28 share price upside based on the average price target.
During Q2 2023, 11 out of the 910 hedge funds part of Insider Monkey’s database had held a stake in Kaiser Aluminum Corporation (NASDAQ:KALU). Out of these, the firm’s biggest investor is Ken Fisher’s Fisher Asset Management since it owns 163,710 shares that are worth $11.7 million.
Along with Alcoa Corporation (NYSE:AA), Crown Holdings, Inc. (NYSE:CCK), and Apollo Global Management, Inc. (NYSE:APO), Kaiser Aluminum Corporation (NASDAQ:KALU) is a top aluminum stock.
9. Century Aluminum Company (NASDAQ:CENX)
Number of Hedge Fund Investors In Q2 2023: 15
Century Aluminum Company (NASDAQ:CENX) is another aluminum products company. It has operations in the U.S. and in Europe. The firm expanded its operations base earlier this year and saw activity in September when a Seattle based investment firm increased its stake in the company by 33%.
By the end of this year’s second quarter, 15 hedge funds out of the 910 tracked by Insider Monkey had bought the firm’s shares. Century Aluminum Company (NASDAQ:CENX)’s largest hedge fund investor among these is Ken Fisher’s Fisher Asset Management through its $21 million stake.
8. Tredegar Corporation (NYSE:TG)
Number of Hedge Fund Investors In Q2 2023: 17
Tredegar Corporation (NYSE:TG) is an aluminum end product company that produces goods that are used in construction. Institutional investors hold almost 70% of the firm’s shares, and given any jitters in the economy, the stock can become vulnerable since Tredegar Corporation (NYSE:TG)’s business is tied to the health of electronics production and other industries.
After digging through 910 hedge funds for their June quarter of 2023 investments, Insider Monkey discovered that 17 had invested in Tredegar Corporation (NYSE:TG). Mario Gabelli’s GAMCO Investors is the company’s biggest stakeholder since it owns $27.4 million worth of shares.
7. BHP Group Limited (NYSE:BHP)
Number of Hedge Fund Investors In Q2 2023: 23
BHP Group Limited (NYSE:BHP) is a global mining giant that engages in aluminum mining through its business divisions. Bullishness for natural resources seems to be on analysts’ minds as they have rated the stock as a Strong Buy on average and penned a $7 upside for the shares. However, investment bank Goldman Sachs is going against the tide, as it downgraded the shares to Neutral in a July 2023 analyst note and reduced the price target.
As of June 2023, 23 out of the 910 hedge funds surveyed by Insider Monkey were the firm’s investors. BHP Group Limited (NYSE:BHP)s largest shareholder out of these is Ken Fisher’s Fisher Asset Management through its $1.1 billion investment.
6. Reliance Steel & Aluminum Co. (NYSE:RS)
Number of Hedge Fund Investors In Q2 2023: 26
Reliance Steel & Aluminum Co. (NYSE:RS) is an American metal products manufacturer that deals in aluminum, copper, and other materials. Keybanc maintained an Overweight rating on the shares in July 2023, and the shares are rated Buy on average.
23 out of the 910 hedge funds part of Insider Monkey’s Q2 2023 database had bought Reliance Steel & Aluminum Co. (NYSE:RS)’s shares. Donald Yacktman’s Yacktman Asset Management is the biggest investor among these due to its $338 million stake.
Crown Holdings, Inc. (NYSE:CCK), Reliance Steel & Aluminum Co. (NYSE:RS), Alcoa Corporation (NYSE:AA), and Apollo Global Management, Inc. (NYSE:APO) are some best aluminum and aluminum stocks to buy.
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Disclosure: None. 10 Best Aluminum and Aluminum Mining Stocks To Buy is originally published on Insider Monkey.