Indian aluminium producers benefitting from China’s anti-pollution crackdowns

As China is busy drawing up implementation regulations for its environmental protection tax law, aluminium producers in India and elsewhere stand benefitted from the price impact the Asian country has on the global light metal industry.

Source: Google

Aluminium accounts for nearly 50 per cent of the revenue of National Aluminium Company Limited (NALCO) and Hindalco, and around 30 per cent of Vedanta. With the LME aluminium price hovering above US$2,100 per tonne on worries over supply from China, the shares of all these three Indian aluminium majors have surged high on the S&P BSE Metal Index.

Hindalco Industries Ltd. has climbed 44 per cent and Vedanta Ltd. has risen 33 per cent; Nalco's has been a lower than moderate rise of nearly 4 per cent.

China has been the key influencer in the market for the past five years, driving global demand-supply dynamics and prices. China's growth story as the emerging industrial metal hub has “broken the nexus between global growth and rising commodity prices as the latter has become more China-centric”, David Lennox, Resource Analyst at Fat Prophets observed.

"Where China goes, commodity prices go," Lennox said. With China extending the time frame of its aluminium smelter capacity cuts till 2017 end, the uptrend in LME aluminium is expected to continue; and that would have a positive impact on aluminium companies’ financials, opine market watchers.