NALCO, Hindalco gain up to 8% as global aluminium prices hit 7-week high amid Mideast tensions
NALCO and Hindalco shares rallied sharply on Wednesday as global aluminium prices hit a seven-week high amid Middle East tensions and fresh supply concerns. A production cut at Brazil’s Alunorte refinery, multi-decade-low LME inventories and disrupted Middle East shipments have tightened the market, supporting aluminium prices and Indian producers.
Indian aluminium stocks surged on Wednesday following a significant disruption in global metal markets. National Aluminium Company (NALCO) shares jumped as much as 8% to Rs 418.95, while Hindalco Industries rose 2.7% to around Rs 1,080.60. The buying surge occurred as global aluminium prices reached a seven-week high in London.The primary driver behind the rally was a production cut at Norsk Hydro’s Alunorte facility in Brazil, a major alumina producer.
The company reported Alunorte had reduced output to 50% of capacity due to an unexpected supply disruption from its natural gas supplier, CELBA.Alumina is a crucial raw material for smelters to produce primary aluminium. Any reduction in alumina output can tighten raw material supplies and disrupt the global aluminium supply chain.
Although Norsk Hydro stated Alunorte plans to return production to full capacity once natural gas availability resumes, the recovery timeline remains uncertain due to financial troubles at CELBA, a firm undergoing complex financial restructuring.Middle East tensions and low inventories added to the supply-side disruptions. The ongoing Iran conflict has severely hampered physical metal shipments from the Middle East, a key production hub responsible for about one-tenth of the world's aluminium supply.
Although prices briefly eased after the conflict's early days, they have since rallied strongly since late June. The steady decline in aluminum stockpiles at London Metal Exchange warehouses, now down to nearly a quarter of a million tons (the lowest since November 1990), has further tightened supply.In addition to the supply squeeze, geopolitical developments are likely to keep prices elevated.
U.S. President Donald Trump recently put forward stringent new demands on Iran, including financial compensation for victims of Tehran's actions. Iran, in turn, has demanded reparations as part of talks to de-escalate the conflict. These entrenched positions suggest a prolonged period of geopolitical deadlock, which analysts believe will support aluminium prices.
For Indian manufacturers like NALCO and Hindalco, higher global prices and constrained supply provide a favorable environment for improved earnings and profitability.
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