The Altech Chemicals Ltd (ASX: ATC) share price is soaring today, peaking around midday at 26% higher than yesterday’s close. Altech shares are now changing hands at 8.2 cents apiece, 22.39% higher.
Altech shares are well ahead of the S&P/ASX 300 Metals and Mining Index (AXMM), which has slipped into the red.
Shares in the alumina producer are on the move despite there being no market sensitive news today. In light of this, let’s investigate further.
Why are Altech Chemicals shares soaring today?
In the absence of any specific news, one has to look immediately to the commodity markets for an explanation.
Foolish investors will likely know that we are in the midst of a commodities supercycle reminiscent of the commodities boom of the 2000s, which peaked around 2007.
Consequently, the entire commodities basket is fetching multiyear highs.
Altech is a leading producer of alumina. Alumina is a key ingredient that is smelted in the primary production process to form aluminium.
As such, the company has exposure to the price of aluminium and the price it commands in the spot and futures markets.
Given this situation, the company is considered a price taker. That means it must work with what prices are on offer in the commodities markets, instead of bargaining or looking for alternative places to sell into.
Aluminium has been on a stairway headed straight north over the last 12 months. It has increased 46% from US$1,998/tonne to now trade at US$2,915 per tonne.
Strong demand and supply shortages, in addition to a military coup in Guinea, a major exporter of alumina’s key ingredient bauxite, have sent prices soaring this year.
In the short term, aluminium has made another move from 30 September, jumping US$65/tonne.
It appears the relationship has carried through to the Altech Chemicals share price, as it has popped over 31% from 6.2 cents on 1 October.
As a result of the recent moves, Altech Chemicals shares are now trading above their previous 52-week high.
Altech Chemicals share price snapshot
The Altech Chemicals share price has climbed 105% this year to date, well ahead of the S&P/ASX 200 Index (ASX: XJO) return of just 7.7%.
Altech shares have gained 64% in the past year. And they have rallied 17.14% just this past month.
The post Why is the Altech Chemicals (ASX:ATC) share price soaring 22% today? appeared first on The Motley Fool Australia.
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The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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