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Investors who timed the metal rally well seem to have made quick gains, especially in aluminium stocks. Shares of most aluminium producers are now trading just a notch below their lifetime highs, reflecting enthusiasm in the sector.
National Aluminium Co is 0.6% shy of its all-time high. Hindalco is about 1% away. Vedanta is about 8% below its peak.
Over the past year, the rally in metal stocks has been sharp and broad-based. Nalco has surged 172%, Hindalco is up 65% and Vedanta has gained 75%, all comfortably outpacing the Nifty Metal index, which itself climbed 47% over the same period.
Aluminium staged a defiant solo rally in March while most non-ferrous metals stumbled: Tin on the London Metal Exchange led the retreat, followed by copper’s 8% slide and nickel’s 4% dip. Even zinc and lead on the LME couldn't hold their ground, dropping over 2%. Bucking the trend entirely, aluminium pulled off a massive 13% surge, leaving its peers in the dust.
This surge, according to Elara Capital, was driven by supply concerns amid the escalating West Asia conflict, with disruptions to smelters in Abu Dhabi and Bahrain and logistical bottlenecks due to blockades in the Strait of Hormuz tightening supply. Higher gas prices have also raised production costs of gas-based smelters, further firming up aluminium prices, the brokerage said in its 21 April report.
The LME aluminium inventory declined by about 49,000 tonnes in March, adding to the already tight supply scenario, the brokerage added. It expects aluminium prices to stay elevated, supported by high thermal coal costs, elevated capacity utilization and supply disruptions in West Asia, which accounts for approximately 8% of global production.
Satyadeep Jain, lead analyst – cement, metals, mining & utilities at Ambit Capital, expects aluminium prices to ease and fall below the $3,000 mark by the end of 2026. He noted that the Street remains split: while some see prices climbing towards $4,000, which could drive earnings expansion and lift stock prices, others remain more cautious.
“Every $100 move in LME aluminium prices has roughly a ₹3.5 per share impact on Hindalco’s EPS,” he highlighted, underlining the sharp sensitivity of earnings to metal price swings.
However, he said there is now more room for a downside than an upside in aluminium stocks. A supply ramp-up in Indonesia in the second half and any de-escalation in geopolitical risk/disruption would present a downside. Ambit Capital, which tracks Hindalco, currently has a ‘sell’ call on the stock.
LME aluminium prices are likely to stay firm in the near term, underpinned by falling inventory and lingering supply-side risks. Some market participants caution that if prices stay elevated for too long, it could start to dent demand, especially across downstream sectors.
The impact of higher gas prices, which continues to influence production costs, remains a key factor to watch, they added.
A further upside from current levels is likely only if fresh supply disruptions emerge, which could add momentum not just to aluminium, but the broader non-ferrous metals space as well, pointed out Aditya Welekar, senior research analyst – metals at Axis Securities.
He noted that valuations have already caught up with recent disruptions, with most of the positives now largely priced in. He said metals will be in a “sweet spot” over the next six months but doesn’t see significant value emerging as fundamentals are already reflected in current valuations.
According to Bloomberg data, valuations across aluminium stocks are now well above their long-term averages. Nalco is trading at 15.36 times price-to-earnings ratio, significantly higher than its five-year average of 9.12 times, while Hindalco is at 14.4 times versus a long-term average of 10.72 times. Vedanta stands out even more at a 28.54 multiple, compared with its historical average of 12.11 times.
At current valuations, Kotak Institutional Equities’ pecking order is Vedanta, Nalco and Hindalco.
“Indian Ali (aluminium) producers should benefit from higher prices and a weaker INR, partly offset by existing hedges and a coal cost increase,” Kotak said in a 15 April note.
Kranthi Bathini, equity strategist at Wealthmills Securities, said metal stocks are largely tactical plays rather than long-term stories. In his view, these opportunities tend to be cyclical and short-lived, driven more by global price movements and macro factors than sustained fundamentals, making timing key for investors rather than a buy-and-hold approach.
According to Welekar, the US Federal Reserve’s rate cut trajectory is a key factor. While the Fed had earlier indicated a potential 50 bps cut – either in one or two moves – the prolonged war in West Asia could delay or even reduce the expected easing.
“If the interest rates are constant, then it is not conducive for metals,” he explained.
If interest rates stay high, it’s not supportive for metals because higher borrowing costs slow industrial activity and demand. It also strengthens the dollar, making commodities more expensive and further weighing on consumption.
Dipti has spent nearly a decade happily knee-deep in the fast-moving, occasionally nerve-wracking, and always fascinating world of stock markets, tracking everything from sharp sell-offs to surprise rallies, and the narratives that drive them. She began her journalism journey at Informist, sharpened her market instincts at CNBC Digital and Moneycontrol, and is now charting new territory with Mint. Here, she is exploring new ground, bringing together sharp analysis, on-ground insights, and a keen eye for what really moves markets.Before stepping into journalism, Dipti studied law and worked with a solicitor firm for close to three years, an experience that gave her a strong foundation in analytical thinking, contracts, and corporate structures. But the pull of markets and storytelling proved stronger, prompting a switch from law to journalism.She writes about stocks and investments, but that’s only part of the story. Dipti also teams up with market experts to turn complex trends into sharp, easy-to-understand videos, occasionally peeks at deals and acquisitions, and regularly picks the brains of industry leaders. Somewhere between earnings calls, market swings, and boardroom chatter, she’s always looking for the next story that explains what’s really moving the markets.