As we are all aware, metals markets have been on fire over the past couple of years, driven by the overall strength of the global economy and insatiable demand from developing nations such as China and India. While I acknowledge that metal prices have backed off from their recent highs, I believe global demand will remain fairly robust. China's economy continues to expand at a double-digit clip, India's GDP growth is clocking in at around 9%, and according to the World Bank, emerging markets overall should see growth that remains above 5.5% for both 2006 and 2007. Driven by the developing-market growth engine, the global economy is expected to expand by 4.9% in 2006 before slowing a mite to 4.5% in 2007.

Whew, that was a mouthful, wasn't it?

In any case, my point is simple: Global economic growth remains strong, and demand for commodities continues to be robust. As a result, I believe that metal stocks, among other commodity plays, have further room to run. Two of my favorite plays in the sector are Aluminum Corporation of China (NYSE:ACH), better known as Chalco, and Southern Copper (NYSE:PCU). Let's take a look and see if I haven't gone soft in the head.

Aluminum Corporation of China
Chalco is the largest manufacturer of alumina and aluminum in China, producing approximately 7.2 million tons of alumina in 2005 (making it the world's second-largest player after behemoth Alcoa (NYSE:AA)) and more than 1 million tons of aluminum. At the end of last year, Chalco's nine owned or operated plants had annual production capacity of 8.3 million tons of alumina and 1.5 million tons of aluminum. These numbers, not to mention a number of recent acquisitions, give the company some wiggle room in terms of ramping up supply in a country where, according to rival Alcoa's estimates, aluminum demand is expected to increase at a compound annual rate of 12.5% between 2005 and 2009.

Now, let's take a look at aluminum prices, which have been on a tear this year. The metal currently commands a cash price of roughly $1.31 per pound on the London Metal Exchange (LME), up 54% from 2005. Despite the perennial bears' predictions of an imminent decline, I believe prices will continue their upward trajectory; Century Aluminum's (NASDAQ:CENX) president recently noted that he expects "healthy" aluminum demand growth of 4%-6% in 2006 and 2007, but only a 2%-3% increase in production capacity. Simply put, demand growth continues to outpace production capacity increases and will continue to do so for the near future, especially in China. In such a tight supply-and-demand situation, prices can't help but rise.

If you're not convinced yet, take a look at Chalco's valuation. At a price of around $20.90 per share, Chalco trades at roughly 7 times fiscal 2006 estimates, a 30% discount to Alcoa, while offering a yield of roughly 3.8%.

Need I say more?

Let's move on now to my other favorite: Southern Copper.

Southern Copper
Southern Copper, majority-owned by Grupo Mexico, holds the largest copper reserves of any publicly traded company in the world with an estimated 45.3 million tons at the end of 2005. In 2005, the company's mines -- all located within the politically stable nations of Peru and Mexico -- produced roughly 1.5 billion pounds of copper, 317 million pounds of zinc, 33 million pounds of molybdenum, and 18 million ounces of silver.

I'll grant you that copper prices have weakened over the last couple of months, trading at around $3.07 per pound, down from $3.50 a pound in August, but this still represents a 84% increase over the $1.67 per pound averaged in 2005.

I'm not too worried on that score, especially in light of Southern Copper's recent announcement that it had massively raised its reserve estimates for its Toquepala and Cuajone copper mines in Peru. Get this: The company now believes that its reserves at Toquepala and Cuajone are 83% and 8%, respectively, greater than previously estimated. As the company's president pointed out, that would mean that annual production would rise by 30,000 tons at each mine from 2009 onward.

Whew, talk about a windfall!

In simple terms, Southern Copper can now count on organic production growth of 10% just from these increased reserves, and it won't be forced into expensive acquisitions like some other competitors. Did I mention that the company's review of its reserves at its Mexican mines is due out next year?

Southern Copper's valuation is nothing to sneeze at, either. At a recent price of $57.80, shares of Southern Copper trade at a mere seven times forward earnings estimates, a 53% discount to the company's projected earnings growth rate, while carrying a yield north of 9%. Call me a Fool, but that's just too tempting a valuation to pass up.

Hot prospects
Both Chalco and Southern Copper should continue to benefit from the strength of the global economy; both are leading players in their respective markets; and both are attractively valued, while paying hefty dividends. I'd urge investors to take another look at both of these red-hot metal plays -- they won't melt down anytime soon.

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Fool contributor Will Frankenhoff is enjoying his time writing for the Fool more than playing golf, reading The Financial Times, or rooting for the Jints. He welcomes your feedback. He does not own shares in any of the companies mentioned above. The Fool has a disclosure policy.