NALCO shares stoop low under international alumina pricing influence

Shares of NALCO saw a sharp decline of over 7 per cent on Thursday, December 12, dropping to their lowest point of the day. Answering to the question of why several key factors have weighed in on this nationally and internationally.

The primary trigger appears to be the movement in alumina prices, a critical raw material for aluminium production. NALCO, being one of the leading players in the alumina market, is particularly sensitive to these transnational price fluctuations, especially as the state-run company sells a significant portion of its alumina on the open market.

Post alumina prices surge from US$600 to US$820 per tonne in the past few months, they have cooled off recently to around US$700 per tonne contributing as a major factor to this decline. There is also the reduced demand from Chinese aluminium smelters, who are finding the current alumina prices too high. Many smelters have started shutting down due to a lack of demand, which has led to decreased need for alumina.

Furthermore, Australian miner South32 has pulled its production guidance for its aluminium smelter in Mozambique following violent unrest after the disputed presidential elections. South32 had initially expected to produce 350,000 tonnes of aluminium, which would have required around 700,000 tonnes of alumina. The removal of this output from the market is expected to reduce the overall demand for Alumina, which could ease the supply deficit.

For NALCO, the company is set to commission a new 1 MTPA alumina refinery next year, which could influence its future production and pricing.

Despite the recent decline, analysts remain optimistic about the long-term prospects for Alumina prices, expecting them to remain above historical averages. Of the 11 analysts covering NALCO, five have a ‘buy’ rating, while three recommend a ‘hold’ and three suggest a ‘sell’ on the stock.

Currently, NALCO's shares are trading at INR 228.7, down 8.5 per cent. The stock had previously surged 71 per cent in 2024, with profit-booking now taking place at higher levels.

Image credit: Nalco