Shares of several aluminium producers such as NALCO, Vedanta Aluminium and Hindalco declined up to 6% in intraday deals on Tuesday, 16 June, tracking a sharp decline in global aluminium prices.
NALCO was among the top losers today as it shed nearly 6% and hit a low of ₹359.60 apiece on the BSE. Recently demerged Vedanta group entity, Vedanta Aluminium — which listed on the bourses a day ago — was locked in the 5% lower price band for the second straight session.
Largecap stock Hindalco also witnessed strong selling pressure as it shed over 3% today. Hind Aluminium and Maan Aluminium were some other stocks from the pack that traded with cuts of over 1% today. Some of these stocks also dragged the Nifty Metal index almost 2% lower.
Why are aluminium stocks falling?
The resolution to the US-Iran war has sent aluminium prices sharply lower, which is weighing on the shares of these companies. According to a Reuters report, the benchmark three-month aluminium on the London Metal Exchange was down 5% at $3,357 a metric ton a day ago, its lowest since March 27.
Investors are selling aluminium as the peace deal between the US and Iran is expected to restore the passageway through the Strait of Hormuz and could once again boost exports from the Middle East. Producers in the region, typically accounting for around 9% of global supply, use the crucial waterway to ship their metal to global markets and import raw materials, the report by Reuters added.
Outlook for aluminium prices
That said, analysts at Axis Securities do not expect the prices to retreat to historical sub-$2,500 levels. In the short term, they see aluminium prices in the range of $3,000 – $3,800/t, driven by the Hormuz supply drought and acute physical backwardation.
Over the long-term period of 2028-2030, aluminium’s structural equilibrium floor is seen at $2,800 – $3,000/t. This “Incentive Price” is required to amortise high Indonesian capex and offset the rising marginal cost of compliant (green) electrons, added the brokerage.
“We assess that although prices could correct from the elevated levels due to inflation concerns, they are likely to be supported by structural fundamental support from rising cost support and tight metal balance,” it added. It added that aluminium price assumptions remain unchanged at $3,295/t, $3,175/t and $3,025/t for FY26/27/28, respectively.
In terms of stock-specific counters, Axis Securities maintained its BUY ratings on Hindalco and NALCO.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
