Aluminium and steel-related commodities drive S32’s earnings, with bauxite, alumina and aluminium at the core, plus silver, while the company is also a major global manganese producer with exposure to met coal. This leaves S32 well leveraged to steel demand, a theme we like amid the global push toward decarbonisation, but with less exposure to iron ore than peers like BHP and Rio, where rising supply could prove a headwind.
This week has seen aluminium prices in Japan hit 11-year highs, triggered by supply disruptions out of the Middle East, while overnight the LME contract closed at its highest price since mid-2022. While the overnight strength is unlikely to ignite the share price short term as investors/traders look through the short-term noise from the Iran War, it will provide a tailwind to earnings if prices remain elevated.
- We can see S32 trading above $5.00 in the coming months, or 15% higher.
MM is bullish towards S32 around $4.35
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