A top executive at one of the world’s largest trading companies has labelled aluminium as a “very bullish story”, suggesting the world could run out of stocks of the critically important industrial commodity in two years.

Trafigura head of aluminium trading Phillipe Mueller told Bloomberg this week “you could see parabolic spikes once stocks run out”.

Aluminium prices turned on Friday as shadow stocks flooded into LME stockpiles, sliding 3.5% to US$3137/t, but have been on an upward trajectory for several months on the back of supply issues largely caused by power shortages in Europe and China.

They hit a 13-year peak of US$3333/t on the LME on Thursday, closing in on the all time high of US$3375/t set in July 2008.

Russia is, surprise, surprise, also a major producer of aluminium through Rusal, making it yet another commodity impacted by Russia’s potential conflict in Ukraine.

The Shanghai Metals Market said 15.02Mt of capacity cuts in three Chinese provinces for environmental reasons would also support prices.


Big miners undervalued to spot prices

The near record aluminium spot price is one of the reasons Ord Minnett says bulk miners are undervalued on consensus targets.

Rising prices this year in commodities ranging from aluminium, coal and iron ore to nickel have put a gap between spot commodities and analysts’ expectations.

Higher commodity prices generally mean stronger earnings, with BHP (ASX:BHP), Mineral Resources (ASX:MIN) and South32 (ASX:S32) among the ASX-listed miners with the highest gulf between their spot price valuation and Bloomberg consensus.

“Strong bulk commodity prices, along with aluminium, put iron ore plays and South32 (S32, Buy) at the top of the mark-to-market table, all of which display more than 50% potential upside to consensus operating earnings (EBITDA) if prices hold,” Ord Minnett said in a client note.

Supercharged lithium prices have not yet been factored into stocks either, Ord Minnett analysts said, with tailwinds there, although a dip in US hot rolled coil steel prices meant steel stocks are now in a small downgrade cycle.

Bluescope Steel (ASX:BSL) had enjoyed record profits last year on the back of barnstorming US steel revenues.

South32 was up 2.4% today with gold and coal stocks the other strong performers.

Coal miner New Hope Corp’s (ASX:NHC) shares rose 4.02% after the company announced the appointment of acting CEO and former CFO Robert Bishop as its new CEO on a $950,000pa plus pay packet following the surprise resignation of Reinhold Schmidt last month.

Financial controller Rebecca Rinaldi, who had been acting CFO, will step into that role full time.

The materials sector dropped 0.38% for the day as Chinese Government interventions weighed on iron ore prices.



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