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Aluminium is all around us, all of the time. Cars, aircraft, buildings, and food and drink packaging all use the white metal. It’s light, strong and conducts electricity.
The aluminium price has surged over the last year and is around $3,600 per tonne in March 2022. Global demand for aluminium is expected to remain high, so we’ve put together this guide to explain why aluminium is important and look at ways to invest in aluminium stocks.
What is aluminium?
Unlike gold and silver, aluminium isn’t found in recognisable form in the ground. To produce aluminium, you have to mine large quantities of bauxite, a red rock that contains a lot of aluminium minerals. Bauxite is crushed and processed to produce alumina. This is then converted into aluminium.
Aluminium is light, strong and conducts electricity very well. It’s also easy to recycle. Aluminium melts easily and recycling it uses much less energy than producing new metal. One leading aluminium producer estimates that 75% of all the aluminium ever produced is still in use today.
Invest in aluminium stocks from the UK
- Rio Tinto (RIO)
- Alcoa (AA)
- Reliance Steel & Aluminum (RS)
How to invest in aluminium stocks
- Choose a platform. If you’re a beginner, our share-dealing table below can help you choose.
- Open your account. You’ll need your ID, bank details and national insurance number.
- Confirm your payment details. You’ll need to fund your account with a bank transfer, debit card or credit card.
- Search the platform for aluminium stock codes.
- Research the shares you want to buy. The platform should provide the latest information available.
- Buy your shares. It’s that simple.
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Ways to invest in aluminium
If you’d like to invest in aluminium stocks, there are several possible choices. To get started you’ll need a stocks and shares ISA, share dealing account or perhaps a self-invested personal pension (SIPP).
Once you’ve chosen a trading or investing platform, you’ll need to follow a few simple steps so that you can start trading.
- Create an account with your chosen provider. You’ll probably have to provide some ID to verify your name and address.
- Fund your account. Most platforms let you add money to your account by bank transfer, credit or debit card.
- Make your investment. Search for your chosen investment on your trading platform and submit a buy order.
Strategy 1
Invest in aluminium stocks
Investing in aluminium stocks means buying shares in the companies that produce aluminium. The 3 biggest aluminium producers in the world are Russia, China and Australia. Some big producers are listed on the UK stock market, but others are listed overseas.
Pros
- Investing in aluminium stocks could provide capital gains and dividend income over time.
- Big producers can remain profitable even when the price of aluminium falls.
Cons
- Investing in individual aluminium stocks is less diversified than investing through an ETF. If the producer runs into trouble, your losses could be high.
- Commodity prices can be volatile and may rise or fall suddenly. Share prices could drop quickly if market conditions change.
Compare brokers to buy aluminium stocks
Strategy 2
Invest in aluminium ETFs
Exchange-traded funds allow you to invest in a basket of assets by purchasing a single stock. An aluminium ETF can provide a more diversified exposure to aluminium. A number of these funds are available on UK investing platforms.
There are 2 types of aluminium ETF. Equity-based ETFs will buy shares in aluminium producers. These are intended to provide exposure to the companies that make aluminium. They may also pay dividends.
Other aluminium ETFs invest in futures instead. Futures are leveraged instruments that track the price of a commodity. Aluminium ETFs that buy futures generally aim to track the price of aluminium directly, although this can’t be guaranteed.
Pros
- Buying aluminium ETFs can give you a more diversified exposure to aluminium stocks.
- You can choose to invest directly in the price of aluminium or in a basket of aluminium producers.
Cons
- ETFs that buy commodity futures can suffer sudden price moves in volatile market conditions.
- The diversification of an aluminium ETF is limited to aluminium stocks. If market conditions change for the whole sector, the performance of the ETF could be volatile.
Compare brokers to buy aluminium ETFs
Strategy 3
Invest in aluminium futures
Buying a futures contract means agreeing to pay today’s price at a fixed time in the future. Buying aluminium futures is a high-risk way to gain exposure to the metal.
If the price goes up, then you make a profit. If the price falls, you lose money. What makes futures so risky is that they are leveraged. When you buy a futures contract, you only pay the margin, or deposit. You don’t pay the full value of the contract.
For this reason, losses on futures contracts can be much bigger than your original deposit. If you choose to trade futures, you need to make sure you understand the potential losses if the price goes against you.
Pros
- Aluminium futures can deliver big profits if market conditions are favourable.
- Futures can give you direct exposure to the aluminium price without requiring you to purchase the metal outright.
Cons
- Investing in futures can magnify your losses if the price goes against you. Losses may be much greater than your original deposit.
- Futures expire after a certain period. This can force you to close your position or rollover your contract to a new position. This can result in losses that are hard to predict.
Compare brokers to buy aluminium futures
Take a deeper dive into aluminium stocks
If you're interested in investing in the aluminium industry, take a closer look at what companies in this industry do and how the stocks have historically performed. Keep in mind that positive past performance doesn't guarantee that a stock will continue to rise in the future.1. Rio Tinto (RIO)
Rio Tinto Group engages in exploring, mining, and processing mineral resources worldwide. The company operates through Iron Ore, Aluminium, Copper, and Minerals Segments. The Iron Ore segment engages in the iron ore mining, and salt and gypsum production in Western Australia.
Rio Tinto stock opened the day at 5,041.00p after a previous close of 4,975.50p. The latest price was 5,037.00p (25-minute delay). Rio Tinto is listed on the London Stock Exchange (LSE), has a trailing 12-month revenue of around 54 billion and employs 57,000 staff. All prices are listed in pence sterling.
- Market capitalization: $80,053,338,112
- P/E ratio: 10.3571
- PEG ratio: 0
2. Alcoa (AA)
Alcoa Corporation, together with its subsidiaries, produces and sells bauxite, alumina, and aluminum products in the United States, Spain, Australia, Iceland, Norway, Brazil, Canada, and internationally. The company operates through two segments, Alumina and Aluminum. It engages in bauxite mining operations; and processes bauxite into alumina and sells it to customers who process it into industrial chemical products, as well as aluminum smelting and casting businesses.
Alcoa stock opened the day at $33.75 after a previous close of $32.91. The latest price was $33.43 (25-minute delay). Alcoa is listed on the NYSE, has a trailing 12-month revenue of around USD£10.7 billion and employs 13,600 staff.
- Market capitalization: $6,270,269,440
- PEG ratio: -0.29
3. Reliance Steel-and-Aluminum (RS)
Reliance, Inc. operates as a diversified metal solutions provider and the metals service center company in the United States, Canada, and internationally. The company distributes a line of approximately 100,000 metal products, including alloy, aluminum, brass, copper, carbon steel, stainless steel, titanium, and specialty steel products; and provides metals processing services to general manufacturing, non-residential construction, transportation, aerospace, energy, electronics and semiconductor fabrication, and heavy industries.
Reliance Steel-and-Aluminum stock opened the day at $302.01 after a previous close of $308.15. The latest price was $304.05 (25-minute delay). Reliance Steel-and-Aluminum is listed on the NYSE, has a trailing 12-month revenue of around USD$14.5 billion and employs 15,000 staff.
- Market capitalization: $17,464,578,048
- P/E ratio: 14.1847
- PEG ratio: 1.2
Why is aluminium suddenly so valuable?
The price of aluminium is around $3,600 per tonne in late March 2022, close to record highs. The aluminium price has surged in recent months for 3 reasons.
- Energy prices. Producing aluminium requires a lot of energy. Typically, around one-third of the cost of aluminium is energy. Surging gas and coal prices have pushed up the price of aluminium.
- Ukraine conflict. Russia is one of the world’s largest producers of aluminium. There’s a risk that export bans and sanctions will interfere with global supplies of aluminium.
- Strong demand. While supply is under threat, demand for aluminium remains high. One growth area is electric vehicles, which use more aluminium than conventional cars.
What is aluminium used for?
Aluminium is used for many different things, including:
- Car manufacturing
- Food and drink cans
- Aircraft
- Consumer electronics, including smartphones
- Electric cables
- Construction
Compare platforms for trading aluminium stocks
Table: sorted by promoted deals first
The following share-dealing platforms offer access to a wide range of global (and UK) businesses. See which offers the most attractive rates for your needs, then simply head to the provider’s website and search for the name of the company you want to invest in.
1 - 7 of 8
All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.
Bottom line
Investing in aluminium stocks could give you exposure to an industrial metal that’s essential for modern life. Demand is expected to remain strong and prices are high at the moment.
However, commodity prices can be volatile and may rise or fall very suddenly. A drop in the price of aluminium could cause the price of aluminium stocks to drop, so we think it’s important to consider investing aluminium as part of a diversified portfolio.
Finder survey: Would Brits consider investing in aluminium stocks?
48% of people we surveyed said they already invest in aluminium stocks or would consider investing in aluminium stocks.
| Response | |
|---|---|
| I would consider it | 42.07% |
| Not sure | 31.18% |
| I wouldn't consider it | 20.85% |
| I already invest in this | 5.9% |
Source: Finder survey by Censuswide of Brits, December 2023
Frequently asked questions
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- Anglo Pacific Group
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