Metal stocks end mixed as alumina prices continue to hit all-time high; Vedanta, Hindalco, NALCO to gain focus | Stock Market News

Metal stocks: The recent surge in alumina prices has brought increased attention to metal stocks such as Vedanta, National Aluminium Company (NALCO), Hindalco Industries, Arfin India, Century Extrusions, Maan Aluminium, and MMP Industries. An increase in alumina prices usually translates into an increase in aluminium prices eating away the profits generated by aluminium smelters – especially those that don’t have their own alumina refinery.

During Monday’s session, the stock prices of aluminium companies traded mixed in reaction to various news developments. NALCO share price touched 52-week high, while shares of Arfin India and Century Extrusions climbed by 3% to 7%. In contrast, Vedanta, Hindalco, Maan Aluminium, and MMP Industries saw their shares close in the red.

 According to Kapil Shah, Technical Analyst, Emkay Global, and Technical Analysis Trainer at Finlearn Academy, the upward movement of aluminium has also positively impacted equity stocks such as NALCO and Hindalco.

“Aluminium on the MCX has exhibited a bullish continuation pattern. Over the past 14 weeks, Aluminium has appreciated by 18%. Furthermore, Aluminium is poised for a breakout from a 2.5-year Cup & Handle pattern, indicating a bullish continuation. This breakout has the potential to reach the previous high of 310, representing a 25% increase from the current level of 250, highlighted Kapil.

Today, October 21, the price of alumina started at a record high of RMB 4642 per ton, showing a percentage increase since last week, as reported by alcircle.com.

Last week has seen a surge in alumina prices, reaching unprecedented levels and squeezing profits at aluminium smelters globally. According to Reuters, the cash price on the London Metal Exchange (LME), which is tied to the Platts benchmark Australian alumina assessment, ended at $633.35 per metric ton on Wednesday. As a result, the ratio to the price of aluminium has risen to nearly 25%.

Why are alumina prices hitting the rooftop?

According to the media reports, a range of reasons including supply chain interruptions, scarcity of raw materials, limitations on mining in China, reduced production outside of China, growing need for aluminium alloy ingots in sectors such as automotive and manufacturing, and increased production expenses due to limited bauxite availability, are all playing a part in the increase in alumina prices. These scarcities are anticipated to maintain elevated aluminium prices, as alumina and bauxite are essential for aluminium manufacturing.

The latest surge in prices was caused by reports of export issues in Guinea, a primary source of bauxite for China’s alumina refineries.

What’s the impact on the aluminium prices and Indian aluminium companies?

According to NS Ramaswamy Head CRM & Commodities of Ventura Securities, aluminium prices have been surging and remain bullish after witnessing a two-year high of $2695 a tonne on 29th May 2024. China’s supply bind is resulting in a global shortage after a deficit in 2023.

Aluminium supply is expected to remain constrained over the short term, primarily due to China’s self-imposed production cap of 45 million tonnes annually. Despite being the world’s largest producer, responsible for about 60% of global output, China’s production ceiling means the country has limited capacity to expand further. Thus, an expected supply tightness in the foreseeable future.

The sluggish growth combined with a predicted increase in demand of over 4% annually in the coming years reinforces the likelihood of a persistent supply deficit.

The aluminium production of the Indian companies contributes nearly 2% of India’s GDP. Indian aluminium companies like NALCO, Vedanta, and Hindalco are the leading stocks to gain traction, highlighted Ramaswamy.

Stocks to Buy 

On the technical front, Kapil Shah pointed out that among the prominent stocks, NALCO has demonstrated significant strength. It has achieved a 15-year high breakout, followed by a bullish continuation indication. The stock is presently trading at an all-time high level. A moderate decline to the 215 or 200 level could present an attractive buying opportunity. Based on Fibonacci Extension in the short to mid-term, the stock has an upside potential of 260 and 280. Investors are advised to consider holding for enhanced returns.

Regarding Hindalco, the stock is following an upward trajectory within a rising channel on a higher time frame. In the short term, the stock is anticipated to uphold a bullish stance above the 710 level. A minor correction to the 710 level can be leveraged for accumulation. The potential upside could extend to the 845 level, believes Shah. 

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decision.