Relief for NALCO and Hindalco investors as aluminium demand to outpace supply through H2 FY2022

Aluminium has been seeing a volatile trend in the global metals market for the past two months. In mid-October, the LME aluminium prices hit multi-year highs at US$3198/t but then recorded a steep downfall to US$2550/t in early November before stabilizing at around US$2700/t.

Going ahead, volatility is likely to continue. Analysts expect demand to drop due to the decrement in global growth, while they also anticipate a tight supply of the metal due to high energy costs. However, the second quarter of FY2021-22 saw strong aluminium demand outside China from sectors like construction and packaging. But demand from the auto sector, the key aluminium consumer, was sluggish as automobile production was slow due to chip shortages. The aviation sector was also in a slowdown.

In India, the aluminium industry has a potential growth market due to infrastructure and construction activities, which is why Fitch estimates domestic consumption to hit 9.5 million tonnes by 2030 from 2.6 million tonnes in 2021-22. Current domestic production of aluminium is about 4 million tonnes.

This is good news for both NALCO and Hindalco. The latter, in a presentation, said global aluminium production during January-September 2021 was up by 5 per cent to 50.6 million tonnes, of which China accounted for 29 million tonnes. But consumption was 51.50 million tonnes, with China consuming 30.1 million tonnes, leading to a reduction in inventory.

Novelis, Hindalco’s subsidiary expertized in producing flat-rolled aluminium products, registered consolidation revenues of INR 31,237 crore from operations in Q2 2021, up by 23 per cent Y-o-Y from INR 25,283 crore and 5 per cent Q-o-Q from INR 29,657 crore.

The share prices of Hindalco and Nalco have seen large swings. Hindalco is up 83 per cent YoY but it is down 12 per cent in the last month. Nalco is up 122 per cent YoY and down 9 per cent in the last month. There could be an upside to both stocks if aluminium prices stabilise and move up.

source https://www.alcircle.com/news/relief-for-nalco-and-hindalco-investors-as-aluminium-demand-to-outpace-supply-through-h2-fy2022-73011