Aluminium prices on the London Metal Exchange jumped 6% to near four-year highs on Monday. Benchmark LME three-month aluminium rose to $3,492 per metric tonne, the highest since March 19.
Aluminium Bahrain, which runs the world’s largest single-site smelter, on Sunday said that it was assessing the damage from the Iranian strikes. Emirates Global Aluminium, meanwhile, said its plant sustained “significant damage”.
Worries around aluminium supply disruption have increased since the onset of the war, which began earlier this month with US-Israeli strikes killing Iran’s former supreme leader Ayatollah Ali Khamenei and resulting in massive retaliation from Tehran. Fear is now rising over a ground offensive and the entry of Yemen’s Iran-aligned Houthis.
Aluminium producers in the Gulf, which represents around 9% of the metal’s global supply, have been unable to send shipments through the Strait of Hormuz as a result of rising uncertainties. Aluminium Bahrain has already begun shutting smelting lines representing 19% of its capacity earlier this month, with the latest damage likely to have a further impact.
The shares of Indian aluminium producers NALCO and Hindalco Industries surged sharply today on account of rising prices. NALCO shares jumped more than 6% to trade at around Rs 395 apiece, while Hindalco shares gained over 5% to trade at nearly Rs 913 apiece. The shares were the top gainers on the Nifty Metal index, which was the only sectoral index trading in the green amid an overall bearish sentiment on Dalal Street.
Aluminium to keep shining?
JM Financial advised caution, as supply disruptions are occurring at a time when demand momentum is weakening, thereby limiting sustained upside. “Overall, while supply disruptions and cost pressures continue to provide a floor to aluminium prices, the balance is gradually shifting, with demand sensitivity at higher price levels likely to drive increased volatility going forward,” it said.
On the cost side, rising energy inputs led by LPG and LNG shortages are supporting marginal cost curves and reinforcing price floors, partially offset by an emerging alumina surplus easing input pressures, it added. “Hindalco’s India operations, Vedanta and NALCO remain the key beneficiaries of higher aluminium prices for 1HFY27E, even as 2H is likely to mark mean reversion as supply restrictions ease. All in all, we recommend approaching aluminium names with caution,” it concluded.
(With inputs from Reuters)
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