THE GREEN METAL

 

The LME, or London Metal Exchange, is the world's largest commodity exchange. More than a trillion dollars' worth of commodities are traded every single day. Metals like aluminium, zinc, lead, copper, and nickel are traded. Almost 3.7 billion Tonnes of various metals are traded annually for an approximate amount of $14.5 trillion. That's 3X the GDP of Japan. Aluminium accounts for more than two-thirds of the $14.5 trillion in traded value. Aluminium is the world's largest commodity for metals in terms of trading volumes. Aluminium is mined from bauxite ores. The largest number of bauxite mines are found in the state of Jharkhand. There are two high-grade bauxite deposits in the belt of Orissa. Orissa accounts for 49% of total bauxite produced in India, followed by Gujarat with 24%, Jharkhand with 9%, and Maharashtra and Chhattisgarh with 8%. But why am I talking about aluminum? You are about to find why.

Aluminium is called the green metal because it is a very environmentally friendly metal. Recycling this material saves 95% of the energy required to produce aluminium from raw materials. It can be recycled infinite times. Aluminium is one of the rarest metals that has multiple applications. Aluminium, as a metal, has many uses that are not restricted to a particular sector. Some of the qualities that make aluminum such an important industrial metal are its weight and strength. Aluminium is one of the strongest and, at the same time, one of the lightest metals available. This quality of aluminum makes it an integral metal for the aircraft industry. Aluminium is a good conductor of heat. It is malleable and, hence, when mixed with other metals, it increases their strength. Aluminium is also corrosion resistant. This quality of metal makes it one of the most important metals in the submarine industry as well. Iron, steel, and aluminum are the strongest metals, but what differentiates aluminium is its weight.

Bauxite ores are mined from bauxite mines. Out of that ore, alumina is produced. That alumina is further transferred to aluminium smelters where aluminum is produced. Around 4-5 tons of bauxite is required to produce 2 tons of alumina. Out of that 2 tons of alumina, 1 ton of aluminium is produced. Aluminium has 3 main industrial uses:

1. Consumer products: Aluminium is used in the consumer sector because it holds the taste of the product, repels water, and increases the shelf life of the product.

2. Transportation: Aluminium is used in the production of train engines, which increases their fuel efficiency and reduces carbon emissions. Lighter fuel means better fuel efficiency.

3. Electrical: Aluminum's low-density property makes it favourable for long-distance power lines, replacing copper wires.

The People's Republic of China accounts for half of the world's volume of aluminium production and consumption; no other country is anywhere near China on this measure. China satisfies all of its demand for primary metals exclusively with its own production, which is why it is often regarded separately from the rest of the world's volume. The global aluminum market today can be divided into 2 parts. China and the rest of the world

Aluminium has fairly established itself in the construction area as well: skyscrapers, metal frames, buildings, or regular residential houses can't do without it. Windows and door panels, roofing, frameworks, load-carrying structures, elements of external decoration, etc., are manufactured today using aluminum and aluminium-based alloys. This infinitely upward trend is accounted for by the fact that aluminium is the metal of progress. Transportation accounts for 27% of (AL) consumption, followed by construction with 25%, foils and packaging with 16%, electrical engineering with 13%, and machines and equipment with 9%.

The demand for aluminium is expected to increase in developing countries like India. India is going through a technological shift that is going to increase aluminium demand in the years to come. Copper wiring is going to be replaced with aluminum wires. 5G installation in our country has started and aluminum is supposed to play a key role. Just like silver, aluminium is going to play an integral part in our economy. Aluminium is also used in the production of solar panels. At the end of the day, aluminium is a commodity, and commodities move in a cycle. Now, these cycles are too hard to predict because geopolitics plays a crucial role. Since the US and Germany import a lot of aluminium and China is the one who provides them with the required aluminium, and considering the fact that all of them are in economic turmoil, the demand for aluminium is expected to stay below pre-covid levels. We, as investors, don't have to time this cycle, but what we can do is invest in aluminium mining and producing companies so that when the international turmoil softens, we can take advantage of the commodity cycle. India has 3 major aluminium producing companies, which include Vedanta, NALCO, and Hindalco. Among these, Vedanta happens to be the biggest player. Invest in financially strong company with great management and an exceptional track record. Believe me, you don't want to miss this opportunity.