Alunorte production recovery by Norsk Hydro pressures Indian aluminium shares

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Aluminium prices have come under pressure after Norsk Hydro resumed higher alumina production at its Alunorte refinery in Brazil, easing concerns over raw material availability. The development followed a temporary production cut earlier this month due to gas supply disruptions and weighed on shares of Indian aluminium producers, which had benefited from higher alumina prices.

Aluminium prices settled 1.73 per cent lower at INR 346.80 (USD 3.64), as improving supply prospects from the Middle East and the expected return of production at Emirates Global Aluminium's (EGA) Al Taweelah smelter also reduced concerns over supply shortages. However, losses remained limited by low global inventories and the recent disruption at Alunorte.

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Norsk Hydro reported that Alunorte has begun increasing alumina production after reaching a temporary agreement with its gas supplier, CELBA, over terminal access. The restart follows approval from Brazil's oil, natural gas and biofuels regulator ANP, allowing the company to become a self-importer of natural gas. The company estimates that reduced operations resulted in the loss of around 100,000 to 120,000 tonnes of alumina production.

The refinery, which has an annual alumina production capacity of around 6.3 million tonnes, had reduced output to 50 per cent of capacity on August 12 because of the gas shortage. The announcement had pushed alumina prices higher and lifted shares of Indian producers including NALCO, Hindalco and Vedanta Aluminium, with some stocks gaining as much as 8 per cent during that trading session.

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The production restart has reversed part of that sentiment. Shares of NALCO fell 5.5 per cent, while Hindalco and Vedanta Aluminium declined about 2 per cent and 1 per cent, respectively, in early trade. Higher alumina prices are particularly important for NALCO, where alumina contributed around 27 per cent of FY26 EBIT and 44 per cent of FY25 EBIT.

Despite the improvement at Alunorte, supply conditions remain relatively tight. LME aluminium inventories declined to 254,900 tonnes from 262,650 tonnes on August 3 and have fallen sharply from 416,775 tonnes at the end of March. Global primary aluminium production fell 1.5 per cent year-on-year to 5.98 million tonnes in June, while Gulf output dropped 33 per cent to 332,000 tonnes.