A jump in hard commodities in overnight trade has sparked a rally in the share prices of our miners but it's aluminium that is stealing the limelight as the metal staged its best one-day surge in over six years.
We live in strange times as investors can't tell if US President Donald Trump is our best or worst friend as his off-the-cuff policies have triggered wild swings in markets to both extremes.
But this time investors exposed to aluminium can thank him as the commodity jumped 4.7% on the London Metal Exchange to US$2,139 a tonne on the back of sanctions against Russian aluminium giant Rusal, which is one of the world's largest producers and the second largest supplier of the material to the US.
What's more, the strong rally in the metal may be sustainable. Unlike Trump's tariffs on Chinese imports that are seen to be political posturing ahead of negotiations, the sanctions against Rusal is likely to stay for some time given Russia's alleged meddling in the US elections and its other aggressive transgressions.
The US sees Russia as a political manipulator, while it regards China as a trade manipulator. The latter is a far more forgivable "crime".
The risk of that Rusal will dump excess stock of aluminium on global markets at depressed prices may not be that great either. The sanctions could make other western consumers of the metal reluctant to trade with the company for risk of running foul with the US.
What all this means is that aluminium could prove to be the best performing metal in 2018!
That would be great news for our aluminium producers like Alumina Limited (ASX: AWC) – which I regard as Australia's most passive "miner" – and South32 Ltd (ASX: S32).
But it could also be a significant development for Rio Tinto Limited (ASX: RIO) as the diversified mining giant may follow BHP Billiton Limited's (ASX: BHP) footsteps in spinning off non-core assets.
BHP floated South32 in 2015 and Rio Tinto is looking at a similar IPO divestment for its aluminium business after it failed to get a high enough offer through a trade sale.
Rio Tinto inherited its aluminium assets as part of its disastrous US$38 billion acquisition of Canadian-based Alcan Inc. in 2007.
A spin-off of this business, particularly against the backdrop of a stronger-for-longer aluminium market, is likely to give Rio Tinto's share price an added boost.
But mining isn't the only sector where optimism is running high. The experts at the Motley Fool are very bullish on another niche sector of our market.
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