Non-ferrous metal prices are on the rise, fueled by a mix of global influences, where LME aluminium prices have seen a 5 per cent increase over the last month. Heightened geopolitical tensions, a weaker dollar index and dwindling inventories are all contributing to the strength seen in key commodities like aluminium, zinc and copper. Analysts point out that these factors are creating a positive atmosphere for the sector, helping to maintain a strong sense of investor confidence.
Kotak Institutional Equities highlights that the market fundamentals are currently delicate due to a lack of cost support and some uncertainties around tariffs that could really put a damper on demand. The firm further pointed out that alumina prices are currently sitting close to a two-year low. With the new additional capacity, it is expected to see a continued structural surplus in the market. Meanwhile, aluminium has surged to levels unwitnessed since February 2022 and with the Russia-Ukraine conflict, it is hitting record highs even as demand pressures continue to loom.
Kotak said, "We see downside risks to aluminium prices and remain cautious on producers such as Nalco, Vedanta, and Hindalco. We find better risk-reward in ferrous players due to stronger growth visibility, supportive trade policies, and superior return profiles."
Aluminium demand forecast
Global aluminium demand saw a 2.7 per cent increase year-on-year in the first half of calendar year 2025. However, Kotak is predicting a slowdown in the latter half of the year due to trade-related uncertainties and potential demand erosion.
The brokerage expects demand growth to ease to 1.8 per cent in CY2025E and 1.7 per cent in CY2026E, a drop from 3.7 per cent in CY2024. Additionally, the decrease in regional premiums outside the US highlights the shaky demand outlook.
To know more about the global primary aluminium industry 2025 outlook, read “Global Aluminium Industry Outlook 2025”
China's production growth
Aluminium production growth in China is set to slow down due to the capacity cap, but new capacity coming online in regions outside of China should help fill the gap. According to Kotak, the global aluminium market is expected to face a slight deficit of 140,000 tonnes in 2025 and 90,000 tonnes in 2026. The brokerage also predicts that LME aluminium prices will hover between USD 2,550 and USD 2,600 per tonne for the fiscal year 2026-27, which is a bit lower than the current spot price of USD 2,700 per tonne.
Kotak pointed out that alumina prices have dropped by 50 per cent year-to-date in calendar year 2025, now sitting at USD 341 per tonne (FoB Australia). This decline comes as supply conditions start to stabilise with new capacity coming online. With an expected uptick in Chinese supply in the near term and a strong pipeline of global projects, the brokerage believes the market will continue to experience a structural surplus in the medium term.
LME forecasts
Alumina prices will hover around 14 to 15 per cent of LME aluminium from FY2026 to FY2028, which is lower than what has been historically. With some favourable macro trends and reduced input costs for alumina and thermal coal, aluminium prices have surged, pushing spot spreads up to USD 1,640 per tonne, which is significantly higher than the long-term average of USD 1,000 per tonne. The peak, which was witnessed in February 2022, hitting USD 1,690 per tonne, largely due to worries about supply disruptions stemming from the Russia-Ukraine conflict, is coming back.
Kotak estimates that about 98 per cent of the world's aluminium smelting capacity is currently making a profit based on cash costs at the current price levels.
Domestic policy support
In India, some recent policy changes are giving a demand boost due to the GST 2.0 framework. The framework states that the tax on household items made of aluminium and copper has dropped from 12 per cent to just 5 per cent. This reduction is expected to encourage more retail spending, support industries downstream and create new opportunities for expanding profit margins.
Also read: Hindalco plunges 4% in a five-day slump while Vedanta and Nalco follow suit
Company-wise share price movement
Vedanta Ltd
On September 19, Vedanta's share price opened at INR 457.60 (USD 5.54), where the intraday high was recorded at INR 457.95 (USD 5.55) and the intraday low was INR 452.50 (USD 5.48). On the same day, the market closed at INR 455.75 (USD 5.52). However, at the beginning of this week, the share price was seen at INR 457.95 (USD 5.55), representing a week-on-week decline of 0.48 per cent. On the same day of the previous month, the firm's share price was at INR 450.50 (USD 5.45), showing a month-on-month increase of 1.16 per cent.
Hindalco Industries Ltd
On September 19, Hindalco's share price opened at INR 747.80 (USD 9.06), where the intraday high was recorded at INR 748.30 (USD 9.06) and the intraday low was INR 739.80 (USD 8.96). On the same day, the market closed at INR 744.50 (USD 9.01). However, at the beginning of this week, the share price was seen at INR 757.85 (USD 8.55), representing a week-on-week decline of 1.33 per cent. On the same day of the previous month, the firm's share price was at INR 706.70 (USD 8.53), showing a month-on-month increase of 5.35 per cent.
NALCO Ltd
On September 19, NALCO's share price opened at INR 211.75 (USD 2.57), where the intraday highest was recorded at INR 212.16 (USD 2.57) and the intraday lowest was INR 210.40 (USD 2.55). On the same day, the market closed at INR 211.88 (USD 2.57). However, at the beginning of this week, the share price was seen at INR 219.66 (USD 2.66), representing a week-on-week decline of 3.54 per cent. On the same day of the previous month, the firm's share price was at INR 191.31 (USD 2.32), showing a month-on-month increase of 10.75 per cent.
The brokerage has set target prices of INR 450 (USD 5.45) for Vedanta, INR 705 (USD 8.53) for Hindalco, INR 220 (USD 2.66) for Nalco and INR 350 (USD 4.24) for Hindustan Zinc.
Also read: Indian metal sector: stock price dynamics under review
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