Alumina’s share price is up 15% this year, is there more to come?

Photo: Alumina

Alumina Limited (ASX: AWC) has seen its share price rise 17% so far this year to $1.34, on the back of rising aluminium prices.

Alumina share price Mar 2016

Source: Yahoo Finance


Alumina doesn’t actually produce any aluminium at all – it only holds 40% of Alcoa World Alumina & Chemicals (AWAC) – the world’s largest alumina business (alumina is the key ingredient for aluminium). Alcoa Inc GDR (ASX: AAI) owns the remaining 60% of AWAC and is the manager.

Since mid-January, aluminium is the second-best performing commodity behind zinc, rising 8%, but more gains appear to be unlikely.

Both JP Morgan and Goldman Sachs are forecasting aluminium prices to fall. Goldman Sachs expects both copper and aluminium prices to slide as much as 20% over the next 12 months. JP Morgan says global supply increased by 9% in 2015 – compared to 4% growth in demand.

China’s aluminium smelters reduced their capacity by closer to 15% in 2015 according to, but production is expected to sharply increase from this month despite weak domestic demand, leading to increased exports of aluminium, and putting more downward pressure on prices.

Foolish takeaway

Like other resources companies, Alumina is almost totally dependent on commodities prices. With aluminium prices under pressure, Alumina’s share price is likely to follow.

Foolish investors might want to steer clear, despite the 6.7% fully franked dividend (Alumina only started paying dividends last year – and they could fall or be cancelled at any time).

Discover the 'new breed' of blue chips that could take your portfolio higher in 2016

Forget Alumina, BHP and Woodside. These 3 "new breed" top blue chips for 2016 pay fully franked dividends and offer the very real prospect of significant capital appreciation. Click here to learn more.

The report is free! No credit card required.

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. 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 Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.