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Alcoa Corporation (ASX:AAI) has been a clear winner of the US-Iran war when it comes to Strait of Hormuz shipping concerns, because that corridor carries a lot of the aluminum seaborne trade, now flowing less freely.
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At the time of writing, ASX-listed Alcoa shares are up +14% over the last month and +30% YTD.On Wednesday, those metrics got stronger.
Aluminium prices hit 4 year highs overnight on the UK London Metal Exchange (LME), touching US$3,678/tn at the time of writing after fresh concerns from the Chinese market have further informed bullish bets on the commodity price climbing higher.
Despite reports from last week Chinese coal plant developers were speeding up applications and construction timelines for new assets to come online, aluminium prices are climbing on Wednesday because the market believes the Chinese government may curb output in an upcoming review of industrial emissions contributions.
That review process is intertwined with the situation in the Middle East. Since the Strait of Hormuz was effectively shuttered, Chinese smelters have been ramping up activity to address capacity shortages in the market.
This capacity shortfall can be divined in the price action for aluminium futures on the LME in the last three months. But according to reports from Chinese outfit MySteel, a smelter in the Guangxi province of China recently cut output of molten aluminium.
At the same time, the Chinese government’s answer to a Department of Resources stated earlier this month that as part of an upcoming review into emissions, the oil and gas sector, as well as steel refineries, will also be analysed – and the market is betting the Chinese government want to slow down activity to meet with national overhead green targets.
Investors looking at China are thinking the same factors driving domestic coal plant developers to hit the ground running could eventually hit the aluminium sector, too: China’s plans to align itself with its own 2030 environmental targets, and beyond.
According to Chinese government media, the country’s grid is now up to 60% renewables. The Red Dragon has without doubt outstripped Australia and America in the build-out of wind and solar, which it’s been working on since the early 2020’s – and the market’s taking note.
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