‘Rally in aluminium co shares may take a pause’

Mumbai : The record-breaking rally in shares of domestic aluminium producers could take a breather given that prices of the are unlikely to gain much from current levels, said experts. Shares of , and National Aluminium Co ended higher on Friday even as the Metal index, and benchmarks Nifty 50 and Sensex ended in the red.

“Those holding the shares of these companies can continue to do so, but I would not suggest buying these shares at the current levels, except for Vedanta, where investors need to maintain a strict stop loss,” said Aditya Welekar, analyst at Axis Securities. “We are at a level where a large part of the rally has already happened,” he said.

After gaining 16-25% over the last month, shares of both Hindalco Industries and National Aluminium Co tested their lifetime highs on Friday. Shares of Vedanta, the country’s largest producer of the metal, have jumped nearly 48% in a month and are at their highest level in two years.

Prices of aluminium on the LME, meanwhile, have rallied more than 11% in a month amid news of manufacturing activity picking up in China and US, sanctions on Russia for the metal and some supply disruption for bauxite in Guinea. Bauxite is the raw material used in the production of aluminium.

“The probability of (aluminium) prices falling from the current levels is higher than the probability of even sustaining at the current levels. What is see is prices normalizing in the range of $2,400-$2,500/tonne,” Welekar said. Aluminium prices were at $2,591 a tonne on the LME.

The demand for aluminium in the March quarter has been better than expectations, mainly led by China, and this combination of better demand and a rigid supply pushes the market into a deficit for 2024/2025 from a surplus earlier, Kotak Institutional Equities said in a report on Friday.

While the brokerage now expects the global demand for aluminium to grow at 2.6% in 2024 as against 1.2% estimated earlier, it believes the rally in aluminium prices because of the sanctions on Russia is not justified. “…we do not see it as structurally impacting demand-supply as it should just realign trade flows,” it said in its report.

The slowing real estate market in the world’s second largest economy, which is also the world’s largest producer of commodities, has been weighing base metals over the last few months.

Source: Stocks-Markets-Economic Times