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

The recent interim US-Iran deal has sent shockwaves through the metals sector, abruptly ending a massive rally driven by geopolitical tensions. As supply constraints ease, major Indian aluminium players are facing significant selling pressure, signaling a shift in market sentiment.

Geopolitical Truce Triggers Sector Sell-off

The unexpected progress in US-Iran negotiations has neutralized the supply fears that had previously bolstered aluminium prices. With the potential reopening of the Strait of Hormuz, imports that were previously blocked are expected to flow freely, restoring global supply.

The market reaction was immediate. On Tuesday, Vedanta Aluminium Metal saw a sharp 5% decline, while National Aluminium Company (NALCO) and Hindalco dropped by 4.1% and 3.1%, respectively. This contributed to a 1.6% slide in the Nifty Metal Index, even as the benchmark Nifty rose by 0.6%. Analysts suggest that if a formal peace deal is signed around June 19th, further profit booking could drag the metal index down by an additional 5%.

Impact on Global Prices and Production Costs

The truce is expected to unlock approximately 10% of the global primary aluminium supply. This influx, combined with tumbling energy costs that have lowered global production curves, has exerted heavy downward pressure on prices.

Benchmark prices on the London Metal Exchange (LME) have already seen a significant correction. After a six-month rally that saw prices surge nearly 9% in March during the height of the war, LME aluminium plummeted over 8% in June. Prices recently hit levels around $3,333.75 per metric tonne. Technical indicators, such as the Daily Relative Strength Index (RSI), have moved into a neutral-to-bearish zone, suggesting the sector may consolidate toward a global price floor of $3,200 to $3,250.

Outlook for Indian Aluminium Majors

While the near-term outlook appears bearish, analysts note that the high prices seen during the conflict likely bolstered Q1 earnings for Indian companies due to expanded margins. However, long-term price projections remain conservative, with LME prices expected to hover around $3,300 for FY27 and drop to $3,175 by FY28.

Bagi investor yang mencari titik masuk, para ahli menyarankan untuk menunggu koreksi. Jateen Trivedi dari LKP Securities menyarankan untuk menunggu koreksi indeks sebesar 5-8% sebelum mengalokasikan modal, serta mencatat bahwa NALCO bisa menjadi menarik setelah penurunan sebesar 15%.

Dalam hal pemilihan saham, Hindalco Industries disorot sebagai "pilihan defensif". Hal ini disebabkan oleh anak perusahaannya yang berbasis di AS, Novelis, yang menghasilkan lebih dari setengah pendapatannya melalui pemrosesan hilir. Karena Novelis bergantung pada margin konversi alih-alih harga utama LME yang volatil, perusahaan ini tetap terlindungi secara struktural dari dampak langsung jatuhnya harga logam dasar.

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