Reuters reported that the shares in US aluminum producers Alcoa Inc and Century Aluminum Company rose sharply on expectations the metal's price could rise if Chinese electricity price increases reduce the global supply of aluminum.
According to option analytics firm Trade Alert, Alcoa stock closed up 2.7% at USD 12.80. Century Aluminum's was up 5.1% at USD 12.69 on the Nasdaq, while Kaiser Aluminum Corporation rose 5 cents to USD 38.40. Alcoa options activity was heavy with overall volume 2.6 times greater than its average daily turnover near the close.
Traders exchanged about 164,000 contracts led by the trading of 144,000 Alcoa calls, which give the right to buy the shares at a fixed price by a certain date.
Analysts said that the stock move was probably a reaction to China's announcement it will raise power tariff surcharges for some energy intensive businesses by 50% to 100% from June 1st 2010.
Electricity is the major power source for aluminum smelting and the analysts suggested some Chinese smelters could go out of business if the power price goes up. That would affect the global supply of the metal used in auto and aviation manufacturing, construction and household appliances.
The increase, posted on the National Development and Reform Commission's website, said that the affected companies were mainly in the aluminum, cement, steel, zinc, ferroalloy, calcium carbide and sodium hydroxide sectors.
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