The demand for aluminum and its price are rising with the reopening of industrial activities and we think Constellium (NYSE:CSTM) is well-positioned to benefit from the industry tailwinds. However, with supply chain bottlenecks remaining a concern, we think fundamentally weak Alcoa (NYSE:AA) and Century Aluminum (NASDAQ:CENX) are best avoided now. Let’s discuss.The lightweight and recyclable properties of aluminum make it a suitable alternative in a wide range of applications. With the reopening of industrial activities, surging aluminum demand has pushed aluminum prices up to 10-year highs. The metal has climbed almost 80% in price from May 2020, and analysts expect the global aluminum market to grow at a 5% CAGR of 5% between 2021 - 2026.
Given this backdrop, we think fundamentally sound aluminum stock Constellium SE (CSTM) could soar in price in the near term.
Conversely, a military coup in Guinea, the location of the world’s largest bauxite reserves, is anticipated to precipitate a supply shortage and uncertainty in the market. So, we think fundamentally weak aluminum stocks Alcoa Corporation (AA) and Century Aluminum Company (CENX) are best avoided now.