The recent rise in alumina prices has brought attention to metal stocks like Vedanta, National Aluminium Company (NALCO), Hindalco Industries, Arfin India, Century Extrusions, Maan Aluminium, and MMP Industries. Higher alumina prices often lead to increased aluminium prices, affecting the profits of aluminium smelters, especially those without their own alumina refineries.
On Monday, aluminium company stocks showed mixed performance. NALCO shares reached a 52-week high, while Arfin India and Century Extrusions saw gains of 3% to 7%. On the other hand, shares of Vedanta, Hindalco, Maan Aluminium, and MMP Industries ended lower.
According to Kapil Shah, a technical analyst at Emkay Global, the rise in aluminium prices has boosted stocks like NALCO and Hindalco. He noted that aluminium prices have been rising for the past 14 weeks, up by 18%. He also mentioned that aluminium is set for a breakout from a long-term bullish pattern, with the potential to increase by 25% from current levels.
Alumina Prices at Record Highs
As of October 21, alumina prices hit a new high of RMB 4642 per ton, continuing their upward trend from last week. Last Wednesday, the cash price on the London Metal Exchange (LME) was $633.35 per metric ton, which has significantly impacted aluminium smelters’ profitability worldwide.
Why Are Alumina Prices Rising?
Several factors are driving alumina prices up, including supply chain disruptions, raw material shortages, restrictions on mining in China, and reduced production outside China. The demand for aluminium alloy ingots, used in industries like automotive and manufacturing, is also growing. Additionally, higher production costs due to limited bauxite availability have added to the price surge. Export issues in Guinea, a major supplier of bauxite to China, have further contributed to the rising prices.
Impact on Aluminium Prices and Indian Companies
Aluminium prices have been rising, reaching a two-year high of $2,695 per tonne in May 2024. China’s production cap of 45 million tonnes per year, despite being the world’s largest producer, has caused global supply shortages. This, combined with increasing demand, is expected to lead to a continued supply deficit in the coming years.
Indian aluminium companies like NALCO, Vedanta, and Hindalco, which account for about 2% of India’s GDP, are expected to benefit from this trend.
Stocks to Watch
Kapil Shah highlighted that NALCO has shown significant strength and recently hit an all-time high. If the stock sees a moderate dip to around ₹215 or ₹200, it could present a good buying opportunity, with an upside potential to ₹260 or ₹280.
For Hindalco, the stock is on an upward trend and may continue rising if it stays above the ₹710 level. Any small correction to ₹710 could offer a good chance to buy, with a potential upside target of ₹845.
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