Aluminium Stocks of Hindalco, NALCO and Vedanta under pressure after sharp drop in LME Prices

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Shares of Hindalco, Vedanta and NALCO fell sharply after aluminium prices declined in global markets following reports of a preliminary peace agreement between the United States and Iran.

Aluminium prices on the London Metal Exchange (LME) dropped 4.4 per cent to about USD 3,379.50 per tonne, their lowest level since March. The decline came as traders reacted to expectations that the Strait of Hormuz could reopen, easing concerns over supply disruptions in the Middle East.

The fall in aluminium prices weighed on metal stocks, with the Nifty Metal index among the weakest-performing sectoral indices during the session.

NALCO was the biggest loser among the three companies, falling nearly 6per cent. It is most exposed as it primarily sells alumina and primary aluminium. Vedanta declined around 5 per cent, while Hindalco lost close to 4 per cent.

In recent months, aluminium prices had risen on fears that tensions in the Middle East could disrupt shipments of alumina, aluminium and other raw materials. Concerns over the Strait of Hormuz, a key global shipping route, had also supported prices.

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The prospect of a US-Iran agreement has changed market sentiment. Traders now expect supply chains to improve and previously delayed shipments to move more freely, reducing concerns about a shortage of aluminium in the global market.

Analysts said companies with greater exposure to primary aluminium prices could face more pressure if the metal continues to weaken. NALCO remains highly dependent on alumina and primary aluminium sales, while Vedanta's aluminium business is also closely linked to movements in global metal prices.

Analysts said NALCO is more exposed to fluctuations in aluminium and alumina prices because of its focus on primary metal production. Hindalco is considered relatively better placed due to its downstream business, including rolled products, foil and its Novelis operations, while Vedanta falls somewhere in between.

The revenue of Q4FY26 is INR 781 billion (USD 8.3 billion) for Hindalco, INR 51 billion (USD 540 million) for NALCO and INR 515 billion (USD 5.4 billion) for Vedanta.

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According to analysts at Bank of America, “Aluminium prices look vulnerable near-term as supply risks ease and demand concerns persist.”  The brokerage noted that Middle Eastern production accounts for nearly 10 per cent of global aluminium supply, while rising production in China could offset earlier supply disruptions. Market participants are also watching additional supply from Indonesia and the possible release of inventories that were affected by disruptions in the Middle East.

Despite the recent correction, some brokerages remain positive on the sector's long-term outlook. Axis Securities said aluminium prices are unlikely to return to historical lows below USD 2,500 per tonne and maintained its aluminium price estimates at USD 3,295 per tonne for FY26, USD 3,175 per tonne for FY27 and USD 3,025 per tonne for FY28. The brokerage also retained its positive view on Hindalco and NALCO.

The latest market reaction was largely driven by the 4.4 per cent drop in LME aluminium prices after reports of a US-Iran peace agreement reduced fears of supply disruptions in the Middle East. Investors will continue to monitor aluminium prices, Chinese production trends and developments around the Strait of Hormuz, which remain important factors for the sector.