Aluminum stocks Alcan (NYSE:AL) and Alcoa (NYSE:AA) are gonna drive me nuts before this cycle is over. Not that that's an especially long drive, mind you.

In the case of Alcan, the stock has already had quite a run from October of 2005, since investors have hopped aboard the twin notions that aluminum prices still have room to run and that this company is further along in terms of cost competitiveness and development schedules. Now, add in the fact that Alcan's management is forecasting a market deficit of aluminum for 2006 and you can see why there are those who believe the good times have just begun.

Fourth-quarter results take a little bit of time to understand. After all, a 23% drop in revenue, a 31% drop in volume, and a big loss would seem to be bad news. Fact is, though, that volume was actually up almost 23% when you exclude the contribution of since spun-off Novelis (NYSE:NVL), and average price realizations (for ingots at least) were up more than 3%.

Looking at the segments, bauxite and alumina saw higher profits, but Alcan got a definite break here as positive currency movements offset higher operating costs. High costs were also an issue with engineered products and packaging, and both of those units saw segment profit declines. Primary metal, though, was a trooper this quarter, and operating profits there were some 80% higher.

I won't even bother trying to talk about cash flow here because cyclical boom (and bust) cycles have nothing to do with anything that logical. Return on capital? We don't need no stinkin' return on capital. We've got momentum, baby!

So I will compare Alcan to other recent commodity boomers like copper player Phelps Dodge (NYSE:PD), steel maker Nucor (NYSE:NUE), coal company Peabody (NYSE:BTU), and iron ore concern CVRD (NYSE:RIO). Let's look at the move from the five-year low to recent highs (excluding dividends):

Company

Returns

Phelps Dodge

630%

Nucor

429%

Peabody

1101%

CVRD

616%

Alcan

123%



Nifty, huh? Now this relative comparison has to be about the worst way to value a stock. But I think it does go to show that the story might not be even close to over for aluminum companies like Alcan or Alcoa. Still, even you intrepid commodity cyclists should make sure to remember that you're just dating here, not necessarily looking to settle down for the long haul.

For more Foolish thoughts on aluminum:

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).