Aluminium and copper to stay elevated, steel risky: CLSA's top metals and cement calls for FY27

The Nifty Metal Index is up 13% year to date, comfortably beating the broader market. But not all metals are created equal right now. Talking to ET Now, Indrajit Agarwal, Executive Director at CLSA India, says the real opportunity lies in base metals — aluminium and copper — while steel faces meaningful downside risks in the near term.

Why base metals beat steel

Agarwal's core thesis is simple: global commodity producers are in a structurally better position than consumers. Since 2010, capital expenditure across the global commodity basket has been minimal. Any supply disruption or demand uptick is therefore amplified.

Within metals, he favours base metals for three reasons — demand is stickier and less tied to China's construction cycle, new-age use cases like EVs and data centres are driving structural growth, and the cost curve is more favourably placed. Steel, by contrast, is trading at a premium to import parity after an 18-month gap, making it vulnerable if global demand softens heading into the monsoon season.

Aluminium: Supply disruption + rising demand = elevated prices

Aluminium prices have risen about 50% over the past year and Agarwal sees this continuing for at least the next three to six months. The Middle East — which hosts 6–7% of global aluminium capacity — is seeing around 15–20% of that capacity disrupted due to supply or offtake issues. This tips the ex-China market into deficit territory for 2025, explaining why spot prices are running well ahead of forward prices.

On the demand side, the copper-to-aluminium price ratio has crossed 3.5 times, which is triggering substitution of copper with aluminium across categories. Add to that rising European power costs — which are delaying restarts of smelters shut in 2022–23 — and the supply picture stays tight well into the medium term.

For Indian producers specifically, Agarwal points to a structural advantage: captive bauxite, captive alumina, and domestic coal give Indian non-ferrous companies a cost edge that makes their earnings more resilient into FY27 and FY28.

Cement: Earnings pressure now, recovery later

Cement is where Agarwal sounds the most cautious in the near term. Petcoke prices are up roughly $45 since the end of February, packaging costs have jumped, and demand could slow if government infrastructure spending decelerates due to elevated oil prices. He expects consensus earnings downgrades for FY27, particularly in Q1 and through the monsoon quarter.

That said, he is not bearish on the sector on a 12–18 month view. Cement stocks are trading at multi-year valuation lows — more than one standard deviation below the 12-year median on EV/EBITDA — and some midcap names are even below replacement cost. The industry has also pushed through 4–5% price increases in recent weeks to partly offset input cost pressures.

The real earnings recovery for cement, in his view, will come in the December and March quarters of this fiscal year — provided prices hold through the monsoon and a good rainfall season supports rural demand in the second half.