Hindalco's shine relies on aluminium prices

For the metal industry, China is a crucial market, and hence its improving economy bodes well for demand. Here, the better-than-expected growth in China’s industrial output by 4.6% year-on-year and 7.6% rise in retail sales in October is positive. Understandably, Indian metal stocks gathered momentum on Wednesday. Amid this, shares of Hindalco Industries Ltd were not immune, rising by 4% and also touching a new 52-week high. Prior to this, the stock was up 3% in 2023 so far.

- Vineetha Sampath

But to keep investor sentiment intact, a significant uptick in demand for aluminium is necessary, which in turn would lift the metal’s prices. The profitability of Hindalco’s India business hinges on how aluminium prices behave on the London Metal Exchange (LME). However, triggers for an upward trajectory appear limited, at least in the near term. LME aluminium prices have been range-bound at $2,100-2,300 per tonne in the last few months. What’s more, Hindalco expects the metal’s price to be contained in this range ahead. In 2023 so far, global aluminium consumption has been flat year-on-year at 52.2 million tonnes as higher interest rates and inflation are keeping demand in check.

“We estimate the aluminium market to remain in surplus in the medium term and forecast LME aluminum price at $2,250/2,350 per tonne for FY2024/25E," said analysts at Kotak Institutional Equities in a report on 12 November.