The Nifty Metal saw a strong run last week, and ended all five trading sessions in the green. The story, however, has shifted this week, and the index has fallen over 3.5% since Monday.
The top three counters dragging the stock have been National Aluminium Co., Vedanta Ltd., and Hindalco Industries Ltd. While some of the weakness could be attributed to Avendus Spark downgrading Hindalco Industries to a 'sell' rating, and maintaining the same stance on National Aluminium on Feb. 25, there are also some macro factors at play.
Fall In Commodity Prices
One of the key triggers for the fall in the three aluminium-focused companies is the fall in aluminium future prices. LME aluminium future prices hit a 2% intraday low on Monday, and continued the weakness with a 1.75% intraday low today.
Kotak Securities noted that the weakness across base metal prices this week comes after US economic data was released, which has created a cautious sentiment regarding growth in America. Prices have also been under pressure due to geo-political concerns, and the risk of worsening US-China trade relations.
Will Current Aluminium Prices Sustain?
Aluminium future prices currently trade around the $2,655 per tonne mark. Many analysts remain positive about commodity prices remaining stable — Emkay Research expects aluminium prices to remain around the $2,600 level in FY26 and even touch $2,700 in FY27.
However, some analysts caution risk to the optimism.
China A Key Factor
The positive run that global aluminium prices saw in 2024 was on the back of China, which is a strong demand centre for the base metal. The country saw aluminium demand increase 5% year-on-year in calendar year 2024, driven by higher finished goods demand and vehicle exports. However, the latest export data shows a reversal.
China's finished goods export are seeing a 10% annual decline. Exports saw a 1% fall in January 2025, and an 18% decline in February so far.
China's aluminium prices are another key factor that need to be tracked. China's domestic aluminium prices on the Shanghai Futures Exchange have been relatively underperforming London Metal Exchange prices. This phenomenon has historically led to an increase in Chinese exports in the past, due to lower demand in the country.
Thus, the risk of China exporting more aluminium in global markets could potentially pull global prices further, having a negative impact on Indian players as well.
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