Why the Alumina share price climbed higher on Monday

The Alumina Limited (ASX: AWC) share price charged as much as 2.9% higher at market open on Monday morning.

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Alumina Limited (ASX: AWC) share price charged as much as 2.9% higher at market open on Monday morning as one of China's top aluminium producers announced reductions in output at one of its largest alumina plants.

Xinfa Group announced over the weekend that short supply of bauxite, used in the production of aluminium, has led to a 500,000-tonne annual cut in production at its Xinfa plant.

So why did the Alumina share price charge higher yesterday?

The weekend announcement from Xinfa provides further support for higher alumina prices over the next 12 months. The world's largest alumina refinery, Alunorte in Brazil, was shut down in October 2018 by Norsk Hydro, reducing 5% of the global supply of alumina at the time.

Alumina charged 12.77% higher on that day in October, however, yesterday's final closing price of $2.48 per share was ultimately a small move of just 1.22%. Personally, I'm a big fan of Alumina and think that this latest move pushes the company even further into the 'Buy' basket for 2019, with further gains expected in the coming weeks amid earnings season.

Joint venture partner Alcoa Corporation announced strong Q4 2018 production numbers with adjusted EBITDA of $683 million in its Alumina Segment. The stock is currently yielding a fully-franked 9.64% to be one of the best income stocks in the ASX200 at the moment.

Whilst I'm wary of the highly-cyclical mining sector at this stage in the economic cycle, Alumina is trading on a P/E multiple of 10.2, which is well below the ASX200 average of approximately 16, so there's a strong case for capital growth on top of the juicy yield.

Foolish Takeaway

 I like the fundamental and technical factors at play for Alumina and think it could soar in 2019 to lead the ASX200 metals and mining sector. Tactically, high-yield stocks could be a real portfolio strength with signs of slowing growth options in the market, however, I would also be considering adding a capital stability stock such as Wesfarmers Ltd (ASX: WES) for balance.

Motley Fool contributor Lachlan Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Share Gainers

These were the best-performing ASX 200 shares in March

These shares made their shareholders smile in March thanks to some very big gains.

Read more »

Businessman using a digital tablet with a graphical chart, symbolising the stock market.
Opinions

2 ASX shares I have been buying in 2024!

I’m a believer in the long-term outlook of these stocks.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

Broker Notes

Brokers name 3 ASX shares to buy now

Here's why brokers are feeling bullish about these three shares this week.

Read more »

A young man clasps his hand to his head with his eyes closed and a pained expression on his face as he clasps a laptop computer in front of him, seemingly learning of bad news or a poor investment.
Share Fallers

Why Burgundy Diamond Mines, Clarity Pharmaceuticals, EML, and Zip are sinking today

These ASX shares are ending the week in the red. But why?

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

a young boy dressed up in a business suit and tie has a cute grin and holds two fingers up.
Opinions

2 of my top ASX 200 shares to consider buying before April

I would happily exchange dollars for these two shares right now.

Read more »