Aluminum imports to China are expected to increase more than 25 times by 2015. The Chinese are gearing up to devour aluminum on a scale previously unimaginable, boosting imports from 200,000 tons to over 5 million tons in five short years! And owning shares of companies that produce aluminum and aluminum-based products for export to China could leave a handful of perceptive investors juiced with heart-fluttering investment gains. Today, I'll tell you about the top three public companies that are set to profit the most with projects and processing facilities in the two most important countries that export aluminum products to China. Investors are often confused by the differences between aluminum and alumina, and alumina and bauxite. Here's exactly how it all breaks down:
Bauxite A naturally occurring ore containing aluminum, oxygen, and hydrogen. Bauxite is the principal ore in the production of alumina. The bulk of world bauxite production (approximately 85%) is used as the feed stock in the production of alumina.
Alumina A synthetically produced aluminum oxide that is derivative of bauxite. Over 90% of world's alumina production is used as a starting material for the smelting of primary aluminum metal.
Primary Aluminum A final aluminum metal product that is produced using synthetically produced alumina from naturally occurring bauxite. That means, primary aluminum is made from non-recycled materials.
Secondary Aluminum Secondary aluminum is also a final aluminum metal product that is produced using recycled material from scrap. Aluminum is 100% recyclable without any loss of its natural qualities. Recycling aluminum requires only 5% of the energy used to produce primary aluminum from ore.
The world's most successful aluminum companies have established and manage the full production cycle from the extraction of raw materials to the production of a final metal product. And it begins with controlling bauxite resources. The world's resources of bauxite are spread around the world. There are only seven bauxite-rich areas: Western and Central Africa (mostly, Guinea), South America (Brazil, Venezuela, Suriname), the Caribbean (Jamaica), Oceania and Southern Asia (Australia, India), China, the Mediterranean (Greece, Turkey), and the Urals (Russia).
Due to the limited supply of raw materials, the global aluminum industry has been consolidating for the past 20 years. And at this point, the main deposits of high-quality bauxites with high aluminum content are already divided up among the major players. These companies make up the largest producers of bauxite, manufacturers of alumina, and smelters of aluminum in the world; they're at the helm of the global aluminum market. Aluminum imports to China are expected to jump 2,446% in five short years China is already the worlds largest producer and consumer of primary aluminum. But Texas-based Harbor Intelligence the world's leading authority on the global aluminum market believes the booming Chinese economy will drive the demand for aluminum-based products skyrocketing between 2011 and 2015. In a recent report, Harbor Intelligence predicted China's imports of primary aluminum may rise from 198,000 tons in 2011 to 5.04 million tons in 2015.
Increased purchases by the worlds largest metals consumer may support an advance in global prices, specifically benefiting aluminum companies that produce aluminum products for export to China. Approximately 60% of China's primary aluminum imports come from Russia. Another 20% is contributed by Australia, with the rest from other sources.
And by owning shares in public companies with bauxite, alumina processing, and aluminum smelting projects and facilities in Russia and Australia, investors are best leveraged to profit from Harbor's projected 2,446% increase in primary aluminum imports to China.
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I'm not sure which three companies are plugged, but what better leverage can you get to take advantage of this movement than through ORD? In my opinion this is ground level buying at its best. My shares are locked away for good, only to be joined by more as funds permit.
Cheers.
BAU Price at posting:
18.0¢ Sentiment: None Disclosure: Held
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