Aluminium Stocks Slump as US-Iran Deal Eases Global Supply Fears

The recent interim US-Iran deal has abruptly halted the war-driven rally in the base metals sector, sending aluminium stocks tumbling across Indian exchanges. As supply constraints ease, investors are bracing for a period of consolidation and potential further declines in metal prices.

Major Indian Aluminium Players Hit Hard

The market reacted sharply to the news on Tuesday, with the Nifty Metal Index sliding 1.6% even as the benchmark Nifty rose 0.6%. Leading players in the aluminium space saw significant sell-offs: Vedanta Aluminium Metal dropped by 5%, followed by National Aluminium Company (NALCO) at 4.1%, and Hindalco at 3.1%.

This downturn follows a period of intense volatility. While the Nifty Metal Index had jumped nearly 7% from the onset of the war until Monday, the sudden peace prospects have triggered widespread profit-booking. Analysts suggest that the premium these companies enjoyed due to geopolitical tensions is now being rapidly eroded.

Global Supply Unlocked and Price Outlook

The primary driver behind this correction is the expected reopening of shipping routes, specifically the blockage at the Strait of Hormuz. According to Jateen Trivedi, VP Research Analyst at LKP Securities, the deal could unlock nearly 10% of the global primary aluminium supply. This influx of goods, combined with tumbling energy costs that have lowered global production curves, has put immense downward pressure on benchmarks.

The London Metal Exchange (LME) aluminium prices have already slumped over 8% in June so far. After surging nearly 9% in March at the peak of the conflict, prices have tumbled toward the $3,333.75 mark. Experts like Nishchal Jain from Share.Market indicate that while short-term "dead-cat bounces" might occur, the sector is heading toward a crucial price floor of $3,200 to $3,250. Long-term projections from Anand Rathi Institutional Equities suggest LME prices could settle around $3,300 for FY27 and $3,175 for FY28.

Strategic Outlook for Investors

Despite the near-term bearish sentiment, the outlook for corporate earnings remains nuanced. Analysts note that Q1 earnings for aluminium companies could still be robust because the recent price spike helped widen margins.

עבור משקיעים המבקשים להיכנס מחדש למגזר, מומחים מציעים להמתין לתיקון עמוק יותר. Jateen Trivedi ממליץ להמתין לתיקון של 5%–8% במדד המתכות לפני הקצאת הון חדש, ומציין כי NALCO עשויה להפוך לאטרקטיבית לאחר ירידה של 15% מהרמות הנוכחיות.

מעניין לציין כי Hindalco Industries בולטת כאופציה הגנתית. מכיוון שיותר ממחצית מהכנסותיה מגיעות מחברת הבת האמריקאית שלה בתחום ה-downstream, Novelis, שולי הרווח שלה מונעים על ידי מרווחי המרה של עיבוד (processing conversion spreads) ולא על ידי מחירי ה-LME הראשוניים התנודתיים מאוד, מה שמספק כרית מבנית מפני תנודות בשוק.

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