Is it aluminum’s time to shine? Citigroup thinks so.

In the next 12 months, Citigroup Global Markets thinks Alcoa (AA-N) is going to move from US$32.78 per share to US$50 per share on the back of stronger aluminum prices.

“It’s Ally’s turn,” Citigroup asserts in a July 6 research report.

“After lagging badly,” aluminum is “primed to participate” in the supercycle, it maintains.

Prices will climb to US$1.70 per lb. this year from their current US$1.43 per lb. range and to US$2-$2.20 per lb. in 2009-2010, the bank calculates.

Since late January, aluminum has traded at between US$1.27 per lb. and US$1.44 per lb., up from US$1.07 at the end of 2007.

Structural changes are set to drive the commodity. Slower global production and the possibility that China will shift to net importer status are two tailwinds that will lift aluminum higher.

Another is likely to come in the form of tax increases in emerging markets that are designed to slow energy-intensive exports, the bank predicts.

Overall, vanishing aluminum surpluses, the possibility that China will move to a “neutral/importer status,” higher cost curves due to rising energy prices, as well as gains in metal substitution, will all contribute to a revival in aluminum prices.

“The threat of Chinese capacity is overstated and aluminum is winning the substitution battle with other metals,” the research states.

While exchange inventories are up 24% year-to-date, the total stock ratio for aluminum is at about 26 days, a “near record low.”

In addition, Citigroup believes that about 2% of estimated production in 2008 has been lost due to power disruptions and high energy costs.

In the United States, Alcoa cut production in mid-June at its Rockdale smelter in Texas because of power supply problems. In Brazil, the Valesul smelter slashed output by 20% due to rising spot power prices and in the United Kingdom, a fire at the Anglesey smelter reduced output to about one third, Citigroup says.

Meanwhile in Western Australia, a gas pipeline explosion on Varanus Island has cut gas supply by about 30%. In China, the power disruptions in the first quarter of the year resulted in an estimated loss of about 600 kilotons and in South Africa, aluminum production has been reduced by about 150 kilotons per year and Citigroup believes the cutbacks will last several years.

Citigroup forecasts a net deficit of aluminum of about 211 kilotons this year and 495 kilotons in 2009 and 2010. It predicts supply growing 4.5% this year, 7% next year and 8.1% in 2010.

In terms of Alcoa and its share price, Citigroup notes that the Pittsburgh-headquartered alumina and aluminum producer is focusing investments on high-margin bauxite/alumina and Greenfield smelters “while shaving downstream underperformers.”

It argues that Alcoa is one of the few major metals companies “with a deep bench of development projects capable of driving organic growth for the next five to ten years.”