Aluminium companies to benefit from supply constraints, strong dollar
Shares of aluminium companies surged Tuesday on expectations that tight supplies may push the commodity price higher.
MUMBAI: Shares of aluminium companies surged Tuesday on expectations that tight supplies may push the commodity price higher.
Shares of NALCO ended 6.24 per cent higher at Rs 482.40, Hindalco Industries advanced 2.83 per cent to Rs 180 and Sudal Industries closed at 5 per cent upper circuit at Rs 22.05.
Of late, there has been a slowdown in aluminium output on account of power shortages in China and South Africa. The massive earthquake which rocked China���s Sichuan province on Monday is likely to disrupt electricity supply in the region and thus impact aluminium production. Over half a million tonne of aluminium is produced in this region. These factors, along with high input costs of bauxite, have led to spike in metal prices.
���China is a major producer as well as consumer of aluminium. Any disruption in production there will lead to high prices in the medium term. However, in the long-term prices are likely to moderate because of capacity additions globally,��� said Chintan J Mehta, sector analyst at Asit C Mehta Investment Intermediates.
A recent supply constraint has already seen aluminium prices firming up on the London Metal Exchange from Rs 2,400 per tonne to Rs 3,100 per tonne. On Tuesday, the commodity was trading at Rs 2,885 per tonne.
The recent dollar appreciation against the Indian rupee will also benefit the domestic companies. Demand from oil companies has seen the rupee fall about 5 per cent in the past few days. Today, dollar was up 0.05 paise at 42.10 against the rupee.
���Indian companies will benefit from the rise in commodity price and recent dollar demand which will lead to better realisations. Their numbers were bad mostly because of rupee appreciation. However, recent trend reversal will help them to improve margins,��� said another analyst from a local brokerage.
However, he doesn���t expect the prices to cool down soon. ���Aluminium prices are likely to remain in the current range for medium-term,��� he said.
Shares of NALCO ended 6.24 per cent higher at Rs 482.40, Hindalco Industries advanced 2.83 per cent to Rs 180 and Sudal Industries closed at 5 per cent upper circuit at Rs 22.05.
Of late, there has been a slowdown in aluminium output on account of power shortages in China and South Africa. The massive earthquake which rocked China���s Sichuan province on Monday is likely to disrupt electricity supply in the region and thus impact aluminium production. Over half a million tonne of aluminium is produced in this region. These factors, along with high input costs of bauxite, have led to spike in metal prices.
���China is a major producer as well as consumer of aluminium. Any disruption in production there will lead to high prices in the medium term. However, in the long-term prices are likely to moderate because of capacity additions globally,��� said Chintan J Mehta, sector analyst at Asit C Mehta Investment Intermediates.
A recent supply constraint has already seen aluminium prices firming up on the London Metal Exchange from Rs 2,400 per tonne to Rs 3,100 per tonne. On Tuesday, the commodity was trading at Rs 2,885 per tonne.
The recent dollar appreciation against the Indian rupee will also benefit the domestic companies. Demand from oil companies has seen the rupee fall about 5 per cent in the past few days. Today, dollar was up 0.05 paise at 42.10 against the rupee.
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���Indian companies will benefit from the rise in commodity price and recent dollar demand which will lead to better realisations. Their numbers were bad mostly because of rupee appreciation. However, recent trend reversal will help them to improve margins,��� said another analyst from a local brokerage.
However, he doesn���t expect the prices to cool down soon. ���Aluminium prices are likely to remain in the current range for medium-term,��� he said.
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