Supply deficit drives aluminium price momentum; Vedanta leads analysts pick

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At Kotak Institutional Equities’ Chasing Growth 2026 conference, Sumangal Nevatia, analyst at Kotak Institutional Equities, set out a clear hierarchy within the metals space, and aluminium, in his view, sits firmly at the top.

The analyst argued that the metal’s appeal lies not in exuberant demand assumptions, but in a structural imbalance that is proving difficult to resolve. Global consumption, he noted, is expanding at a steady annual pace of roughly 2-3 per cent. Under ordinary circumstances, that sort of growth might be manageable. The difficulty, however, is on the supply side.

China, which dominates global output, has imposed a production ceiling of 45 million tonnes. Beyond China’s borders, the industry faces a different but equally restrictive obstacle: power. Smelters in regions such as the United States, Europe and Africa are contending with unreliable electricity access and an absence of long-term power agreements. Without secure and competitively priced energy, expanding capacity becomes commercially unviable. As a result, fresh supply is failing to keep up with demand.

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Given that few large projects are due to come on stream, Nevatia believes aluminium prices are likely to remain at levels that justify new investment, effectively creating a floor under the market.

Demand dynamics add a further layer of resilience. Expenditure linked to the energy transition is lifting requirements for lightweight, conductive materials, while the rapid development of data centres is increasing the need for aluminium in both electrical systems and structural components. In addition, relative pricing is encouraging substitution. With the copper-to-aluminium price ratio hovering near four times, well above historical thresholds that typically prompt redesign, manufacturers are progressively shifting towards aluminium as a cost-effective alternative.

Against this backdrop, Nevatia identified Vedanta as his preferred exposure, suggesting potential upside of 25–30 per cent. He characterised it as one of the few companies in the sector delivering growth over both the medium and longer term. Approximately half of Vedanta’s operations are tied to aluminium, with zinc and silver comprising much of the remainder — commodities that are also benefiting from supportive price environments.

He further highlighted a reduction in promoter-level debt, improved balance-sheet resilience and robust cash generation as strengthening the investment case. On his estimates, the shares trade at around 4.5–5 times EV/EBITDA, which he views as attractive given the company’s earnings trajectory.

Hindalco features lower in his rankings. Domestic expansion, he suggested, is weighted towards the back end of projections, while supply disruptions at its subsidiary, Novelis, have created additional uncertainty.

Looking beyond non-ferrous metals, Nevatia also expressed optimism about India’s domestic steel sector. He described it as a consolidating, demand-driven opportunity, supported by policy interventions such as safeguard duties. As producers implement price increases, he expects margins to broaden, with a preference for non-integrated players positioned to benefit from improving profitability.

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