What Happened to Alumina Limited’s Share Price?

Alumina Limited [ASX:AWC] opened substantially lower on Tuesday. Trading at AU$1.88 a share by 2pm on the 27th of January, the stock had shed 2.09% from the previous close. This is a somewhat surprising move for the stock after several major banks recently upgraded the company’s stock rating.

Why Did This Happen to AWC Shares?

It’s a tale of the ‘two-tier market’. When the broad index was higher in the day led by banks and healthcare companies, miners such as Rio Tinto, BHP Billiton and Fortescue Metals suffered falls.

The cause, further drops in the Chinese iron ore price put yet another nail in the coffin of resources exporters. Iron ore miners are particularly suffering from an oversupply and weak demand situation.

Alumina Limited is a bauxite mining and alumina refiner, however, it is not immune from bad news on the China demand side, even if it is not strictly aluminium related.

It is hard to believe the oversupply in Chinese aluminium is truly over. With Chinese demand patchy and energy prices at ultra depressed levels, can you count on commodity prices to rebound?

What Now for Alumina Limited?

The truth of the matter is companies such as Alcoa are turning out better than expected quarterly results. Alcoa has cited improved premiums on aluminium sales and better prices for bauxite and alumina.

Alumina Limited on the other hand is in the raw material business and will surely benefit from higher prices of alumina and bauxite. Currently, the prices of alumina and bauxite continue to outperform the prices of aluminium.