Halfway through February, talk of a potential Russian invasion of Ukraine persists. As fear of global conflict spreads, aluminum prices have reached their highest levels since 2008. These price spikes have caused aluminum stocks to rise accordingly.
What’s Happening With Aluminum Stocks
Some of the biggest names in the aluminum space outperformed the market on Wednesday. Kaiser Aluminum (NASDAQ:KALU) closed up 1.9% while Century Aluminum (NASDAQ: CENX) gained 4.6%. Alcoa (NYSE:AA) won the trading day, closing higher by 5.1%.
This has generally been an impressive month for aluminum stocks, with CENX and AA each up by more than 20%. The reason for these moves is certainly worth a closer look.
Explaining the Rise in KALU, CENX and AA
Aluminum prices have been rising steadily for some time. Last week, Bloomberg reported that they were nearing a record as Goldman Sachs raised its 12-month price target on a ton of aluminum to $4,000. According to the bank, this target stems from “power rationing” in China and Europe.
Since then, aluminum prices haven’t been too far from Goldman’s target. Today, the metal once again spiked above $3,200 per ton.
Last month, Alcoa CEO Roy Harvey warned that any aggression involving Russia, the world’s second-largest aluminum provider, would likely lead to supply tightening. The events that have transpired since then have proven him correct. The market’s supply and demand forces have only served to benefit his company, though, as well as other aluminum stocks.
InvestorPlace wrote that if conflict persisted, steel and aluminum stocks would certainly be among those worth watching. Between the continuous Russia-Ukraine tensions and global supply chain difficulties, the powerful forces driving up aluminum prices are likely to continue.
What It Means
As of now, the future remains uncertain in the Russia-Ukraine conflict. While it dominates most media coverage, the smelter shutdowns happening in other countries also shouldn’t be ignored. Both have helped drive up aluminum prices. This tentatively bodes well for aluminum stocks, although geopolitical forces can be unpredictable.
On the date of publication, Samuel O’Brient did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
