High purity alumina stocks are quietly preparing for an...

High purity alumina stocks are quietly preparing for an impending boom

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Pic: 2012 (2009), Columbia Pictures.

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Demand for high purity alumina (HPA) — a specialised product used in lithium-ion batteries, LED lights, and more – is growing a lot faster than supply. There are three advanced ASX stocks ready to take advantage.

In December, CRU estimated that the ~60,000 tonnes per year ‘4N’ (99.99 per cent purity) HPA market would stay in relative balance until this year, after which supply deficits build to nearly 30,000 tonnes a year by 2028:

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Pic: CRU

This niche market is about to get a rocket from the massive amounts of post-COVID-19 stimulus being poured into the nascent EV sector.

There’s up to ~5kg of HPA in every electric vehicle. Benchmark Mineral Intelligence principal James Clark said the multiplier effect of EV growth “means high purity alumina demand in 5 and 10 years will be very significant”.

And that is on top of demand from the established, but still growing, LED market.

A massive advantage

There are three main HPA focused stocks on the ASX: FYI Resources (ASX:FYI), Alpha HPA (ASX:A4N), and Altech Chemicals (ASX:ATC).

These near term producers use completely different methods to achieve the production of high quality HPA.

But what these companies have in common are their huge operating cost advantages over existing producers in a growing, supply-constrained market.

Currently HPA is sourced from expensive feedstock, such as refined aluminium metal, which puts current global operating cash costs for 4N at around $US15,000/t.

FYI, Alpha and Altech reckon they can do it for $US6,217/t, $US5,940/t and $US9,900/t respectively, which means big profits at current 4N prices of between $US25,000 and $US30,000/t.