The Alumina Limited (ASX: AWC) share price charged as much as 2.9% higher at market open on Monday morning as one of China's top aluminium producers announced reductions in output at one of its largest alumina plants.
Xinfa Group announced over the weekend that short supply of bauxite, used in the production of aluminium, has led to a 500,000-tonne annual cut in production at its Xinfa plant.
So why did the Alumina share price charge higher yesterday?
The weekend announcement from Xinfa provides further support for higher alumina prices over the next 12 months. The world's largest alumina refinery, Alunorte in Brazil, was shut down in October 2018 by Norsk Hydro, reducing 5% of the global supply of alumina at the time.
Alumina charged 12.77% higher on that day in October, however, yesterday's final closing price of $2.48 per share was ultimately a small move of just 1.22%. Personally, I'm a big fan of Alumina and think that this latest move pushes the company even further into the 'Buy' basket for 2019, with further gains expected in the coming weeks amid earnings season.
Joint venture partner Alcoa Corporation announced strong Q4 2018 production numbers with adjusted EBITDA of $683 million in its Alumina Segment. The stock is currently yielding a fully-franked 9.64% to be one of the best income stocks in the ASX200 at the moment.
Whilst I'm wary of the highly-cyclical mining sector at this stage in the economic cycle, Alumina is trading on a P/E multiple of 10.2, which is well below the ASX200 average of approximately 16, so there's a strong case for capital growth on top of the juicy yield.
Foolish Takeaway
I like the fundamental and technical factors at play for Alumina and think it could soar in 2019 to lead the ASX200 metals and mining sector. Tactically, high-yield stocks could be a real portfolio strength with signs of slowing growth options in the market, however, I would also be considering adding a capital stability stock such as Wesfarmers Ltd (ASX: WES) for balance.
