AWC

AWC has seen prices rise (alumina ASP) and costs escalate (shipping, freight, electricity, caustic soda). Shown below are costs increasing from low 200’s to now low 300’s.

They are a Q1 cash cost producer, and as such manage to maintain a pretty decent margin, regardless of what’s going on, however, based on current Alumina pricing (~$330) the margin will shrink.

AWC have little to no debt. If China slows (taking commodities with it) or prices correct further (monetary policy, USD etc) or if energy costs continue to add to overall cost pressures, they should be okay.

But the market, given the yield is ~7%, doesn’t want a bar of them, because of the near term margin pressures.

It would appear that much of the supply curve is underwater, at current prices. That is clearly unsustainable, and will lead to significant supply curtailments. We are already seeing many European producers reduce output.

AWC gives us exposure to the longer run EV/green-energy story, e.g. a world that need the lightweight flexible material for electric vehicles, solar modules, wind farms etc, at a very cheap multiple on a through-cycle earnings basis.

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