ALUMINUM - Abundant + Energy Expen$ive

Despite being the world's most abundantly available metal, ALUMINUM is the MOST-Energy Intensive to produce. Aluminum makes up about 8% of the Earth's solid surface weight and is the 3rd most abundant of all elements, behind oxygen and silicon. However, because of its strong affinity to oxygen, it is almost never found in the elemental state; instead it is found in oxides or silicates.

According to Wikipedia, Electric Power represents about 20% to 40% of the total cost of producing aluminium, depending on the location of the smelter. As a result, Aluminum Smelters tend to be situated where electric power is both plentiful and inexpensive, such as: South Africa, the South Island of New Zealand, Australia, China, the Middle East, Russia, Quebec, Canada and Iceland.

According to Bloomberg, the energy used by China's aluminum smelters each week is enough to provide electricity for more than 2 million people for a year.

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The Chinese Are Cutting (and Prices are Rising) :

* According to the British Geological Survey, China was the World's Largest Producer of Aluminium in 2005 with almost 20% world market share..followed by Russia, Canada and the U.S.

* China's largest aluminum smelters agreed on 7/10/08 to cut output by as much as 10%

* As a result of China's recently announced production cut, the research arm of Goldman Sachs (GS) cut their 2008 forecast expectations for a global aluminum surplus of 275,000 tons this year to 62,000 tons because of power shortages in China and South Africa...Because of a tightening supply environment Goldman Sachs also RAISED its 2008-2010 Aluminum Price Forecasts:

- Raised 2008: From $1.30 to $1.39 a pound (+7%)
- Raised 2009: From $1.32 to $1.60 a pound (+21%)
- Raised 2010: From $1.25 5o $1.45 a pound (+16%)

* Goldman Sachs also believes Chinese aluminum demand will rise 20% in 2009 and 15% in 2010, resulting in deficits (of supply)

bloomberg.com/apps/news?pid=20601087&sid=aHuHv.qdqDTY&refer=home

Data Courtesy: Bloomberg + Wikipedia
Full Disclosure: I own shares of GS.