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Why These Aluminum ETFs & Stocks Jumped on Monday

Sanghamitra Saha
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Sanction tensions are back in Russia. The country suffered a lot in 2014 when the Obama government punished it following its Crimea (erstwhile Ukrainian territory) annexation. And now, the Trump government does not like Russia’s backing of the Syrian government (read: Russia ETFs Crash: What Went Wrong in 2014?).

Russia has been condemned internationally over the weekend for supporting the Syrian government which is allegedly responsible for a chemical weapons attack. The U.S. President cautioned that a “big price” is to be paid by the Syrian regime and its Russian and Iranian allies if allegations about the chemical attack were confirmed. 

The United States has already imposed its harshest sanctions to date against Russian oligarchs, officials, businesses and agencies. The sanctions forbid U.S. citizens or entities from doing business with the sanctioned Russian entities. Russian stocks staged the biggest decline since the Crimea standoff in 2014, causing VanEck Vectors Russia ETF RSX to lose about 10.5% on Apr 9. However, one segment that benefited from Russia sanctions is aluminum.

Inside the Surge in Aluminum

Benchmark aluminum on the London Metal Exchange logged its highest level in more than a month as sanctions targeted Russian aluminum company Rusal Plc. The sanctions freeze all of Rusal's assets that are under U.S. jurisdiction and levied sanctions against oligarch Oleg Deripaska, a billionaire who ran Rusal, as per CNBC. The company makes up about 7% of the global aluminum production. Needless to say, this raised the concerns about tightening global supplies.

Content director of Metals Pricing and Market Engagement at S&P Global Platts commented that this sanction will push up the price of U.S. aluminum as President Trump has already announced an import tariff of 10% of aluminum. Later, tariff exemptions were given to EU plus six other nations but restrictions on China was reiterated.

“Russia was [the] second-largest import source behind China for the unwrought aluminum category, which is a “major category,” as per S&P Global Platts, quoted on MarketWatch (read: Trade Tensions or Not, Stay Safe with These ETFs).

Investors should note that Aluminum prices gained a lot last year thanks to China’s efforts of lowering illegal or polluting capacity. “Forced closures of unapproved plants to curb overcapacity and heavy cuts in production over the winter months to ease choking pollution,” led to a surge in Aluminum prices, as per a source.  

ETFs & Stocks to Benefit

iPath Bloomberg Aluminum SubTR ETN JJU – Up 4.7% on Apr 9

The underlying Bloomberg Aluminum Subindex Total Return reflects the returns that are potentially available through an unleveraged investment in the futures contracts on aluminum. It charges 75 bps in fees. The product was up 8.7% in the last one year (as of Apr 9, 2018) (read: Why These Commodity ETFs Are on a Tear).

iPath Pure Beta Aluminum ETN FOIL – Up 0.69% on Apr 9

The underlying Barclays Aluminum Pure Beta TR Index reflects the returns that are potentially available through an unleveraged investment in the futures contracts in the Aluminum markets. The product charges 75 bps in fees.

Alcoa Corp. AA – Up 5.2% on Apr 9

The Zacks Rank #3 (Hold) company is a global industry leader in bauxite, alumina and aluminum products.

Century Aluminum Company CENX – Up 12.0% on Apr 9

The Zacks Rank #1 (Strong Buy) company is a primary aluminum producer.

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IPATH-PB ALUMNM (FOIL): ETF Research Reports
 
VANECK-RUSSIA (RSX): ETF Research Reports
 
Alcoa Corp. (AA) : Free Stock Analysis Report
 
Century Aluminum Company (CENX) : Free Stock Analysis Report
 
IPATH-BB ALMN (JJU): ETF Research Reports
 
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