What happened
Shares of aluminum company Alcoa (AA +4.08%) couldn't wait to go higher on Monday, rising 10.8% through 12:30 p.m. EDT after analysts at Argus raised their price target on the metals giant.
Some good news (for Alcoa) out of Australia is also helping to keep today's rally going.
Image source: Getty Images.
So what
Let's begin with the price target news. This morning, Argus raised its estimate of Alcoa's value to $95 a share (versus the $90 and change the stock currently costs), reports StreetInsider.com.
Already bullish on Alcoa with a "buy" rating, today Argus argued that Alcoa is "a well-run company with a strong track record" and is worth even more than it previously thought possible. Argus cited "the company's improving balance sheet, rising aluminium prices, and recent developments in the Chinese and Russian markets" as reasons for its optimism.
Which "developments," specifically? Well, as NPR just reported, the nation of Australia banned the export of alumina and aluminum ores to Russia last night. Russia uses these resources to manufacture aluminum. Indeed, it's the third largest producer of aluminum in the world after China and India.
Now what
NPR reports that Australia instituted its ban with the specific intent to "curtail Russia's ability to produce aluminum," which it points out "is a critical input into weaponry, including guns, ammunition and missiles." Without Australia's raw materials, however, Russia will lose 20% of its annual alumina imports, curbing the country's ability to produce aluminum. (And cutting global aluminum production by as much as 720 million tons, if I'm doing my math correctly.)
Now granted, it's an open question what effect this will have on global aluminum markets, given that Russia has already been hit by significant sanctions that curb its ability to export aluminum at all. But there should still be some effect from these new sanctions, and it should work to the benefit of companies like Alcoa that still are able to produce and sell aluminum internationally.
To that extent, investors' decision to bid up Alcoa stock today makes sense.
