Alcoa, the largest US aluminum producer, is almost always one of the first companies to report quarterly earnings. Whether you own their stock or not, they’re a great company to follow because aluminum is used in the production of so many things. They reported earlier this week and I was pretty happy with some of their comments. They expect demand from China to increase 11% this year – another confirmation that China has turned the corner. They’re also forecasting an increase in consumption by Brazil, India and Russia, as well as the Aerospace, Heavy Truck & Trailer and Building & Construction Industries – all very positive signs.
Lead is still one of my favorite ways to play China’s economic rebound (read why here, if you missed it). Prices on the Shanghai Futures Exchange have been lagging the price of lead on the London Metal Exchange (LME) because China’s imports slowed last year on sluggish demand from the auto industry. Prices on the LME should come down to narrow the gap and if it does, I’ll be increasing exposure. I still expect shortage issues to appear in late 2013 and 2014, especially if China’s economy is expanding again.
Sugar is still bouncing around 19 cents/pound. Reports have shown that a lot of supply remains in Brazil and not enough demand to pick it up. This makes sense because sugar hasn’t taken a big dip below 19 cents yet, which means Brazil is still selling it as sugar instead of turning it into ethanol. It will probably take a few months, and maybe lower prices, before we see the supply/demand fundamentals shift. I’m continuing to wait for a decent dip below 19 cents to add to this position as a long-term, undervalued investment.
Lead – 3 year chart
Sugar – 3 year chart
-Nick