While the prices of aluminum remain depressed for now, and companies like Alcoa (NYSE:AA) have suffered with low-prices, the future is starting to look a lot brighter for those with heave aluminum exposure, as prices are expected to rebound significantly over the next five years, and Alcoa is positioned to be a major beneficiary of that.
Even in the relatively short term Alcoa's net income is projected to double by 2012 because of these emerging circumstances of increased demand.
One example in regard to increased demand is with Airbus SAS, the largest producer of commercial aircraft in the world. They said in February they are going to acquire approximately 8,000 planes valued at about $1.2 trillion over the next 20 years.
Rio Alcan's CEO Jacynthe Cote estimates aluminum demand will most likely double over the next 10 to 15 years as emerging nations increase their acquisition of the metal and products which aluminum is used in making them.
Another largely hidden factor at this time is the soon-to-be launched aluminum ETFs, which will create a new market for the metal, and could change aluminum demand dynamics significantly.
For those with a longer investment outlook, aluminum could be one of the better investments over the next five years or so, but that assumes a lot in the sense of the condition of the global economy, which is anything but sure and solid at this time.
But it's not a matter of if this is going to happen, it's a matter of when. If the global economy slows down even more because of China and Europe, the time-frames would be extended longer into the future, so that must be considered in managing expectations.
Alcoa and other aluminum producers will be strong beneficiaries of the rebound in aluminum prices when they happen, and their share price will ultimately reflect that.
No comments:
Post a Comment