Shares of aluminium producers in India—Hindalco Industries and National Aluminium Company—gained on February 9 as the price of the metal hit a 13-year high to cross $3,200 a tonne.
The price of aluminium has risen more than 14 percent in the international market this year on concerns that the supply-demand gap could lead to a tight market for the commodity for the rest of 2022.
Plant closure and capacity cuts in several European and Chinese smelters recently have added to concerns that supply will not be able to keep up with the rising demand, bolstered by the reopening of the economy as the COVID-19 pandemic shows signs of ebbing.
The surge in prices has been primarily been driven by the actions of China, one of the largest exporters in the world.
Driven by pollution concerns, Chinese smelters were reducing capacity in the run-up to the Winter Olympics that got underway in Beijing on February 4.
Aluminium demand has been rising as reflected in the decline in inventory of the metal at London Metal Exchange warehouses to its lowest levels since 2007, a Reuters report said.
The continued threat of sanctions against Russia, one of the largest producers, has also weighed on sentiment, as the country’s misadventure in neighbouring Ukraine is expected to trigger a backlash from US-led North Atlantic Treaty Organisation members.
For companies like Hindalco, the rise in aluminium prices is a boon, especially for its arms Novelis Corporation and Aleris Corporation.
From a structural point of view, the use of metal in the development of electric vehicles and in other green transition technology is also seen as a long-term positive for the Aditya Birla group firm.
Investors are of the opinion that the continued rise in aluminium prices abroad will feed into strong earnings for Hindalco and NALCO in the coming quarters.
At 1.56 pm, shares of Hindalco were up 2.2 percent at Rs 538.1 on the NSE, while those of NALCO were trading higher by 3 percent at Rs 122.8o.
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