Which Metals to Short?

In a non-scientific survey, LME Week attendees were asked which base metals they would most like to take a short position in over the next 12 months. Nearly 40% said aluminum, which should come as no surprise to anyone. One-third said their first choice for a short play was copper.

Rio Tinto PLC (NYSE: RIO) and Alcoa Inc. (NYSE: AA) do not need to hear this. Alcoa’s stock posted a two-year low in early September and is down about 18% over the past two years. Rio Tinto stock is essentially flat over the past two years, though it is down about 20% from its two-year high.

Copper, which is selling for around $7,260 a metric ton today, is not expected to show any significant gain next year. That is due mainly to lower demand from China. The LME Week survey indicated that 90% of those responding thought Chinese growth would be no better than equal to this year’s growth.

Shares of Alcoa were down about 1.4% in late afternoon trading Monday, at $7.85 in a 52-week range of $7.63 to $9.37. Alcoa reports third-quarter results after markets close Tuesday night. Analysts expect the company to post earnings per share of $0.05 on revenues of $5.66 billion.