The prices of aluminum metal are seeing a boom across the world. On Wednesday, February 9, global aluminum prices crossed $3,200 a tonne, a 13-year high. This led to a rise in the shares of companies producing aluminum in India, especially Hindalco Industries (HINDALCO) and National Aluminum Company (NALCO).
The prices of aluminum in the international market have increased by 14 per cent since the beginning of 2022. Globally, there is a apprehension of a gap in the demand and supply of aluminum, due to which the prices of this metal may remain bullish for the rest of the year 2022.
The closure of several aluminum plants in Europe and China and the reduction of their capacities has raised concerns that the supply of aluminum will not be able to meet its growing demand. One of the main reasons behind the increase in prices has been the crackdown on aluminum plants by China, which is the world’s largest aluminum exporter.
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China has imposed a lockdown due to Corona in ‘Basai’, a major aluminum production city, due to which production has come to a standstill. Apart from this, China has ordered another aluminum plant to reduce its capacity in view of pollution concerns during the Winter Olympics.
According to a report by news agency Reuters, aluminum inventory levels in warehouses of the London Metal Exchange are at their lowest level since 2007. This reduction in the availability of aluminum comes at a time when demand for the metal has increased after the lifting of economic sanctions across the world.
A major pressure on aluminum prices comes from the ongoing dispute between Russia and Ukraine. Russia is also one of the largest producers of aluminum. However, amid growing fears of Russia taking military action in neighboring Ukraine, there is growing concern that the US could impose sanctions on it under NATO countries. If this happens, the supply of aluminum can be affected all over the world.
For companies like Hindalco, the hike in aluminum prices is a boon, especially for its subsidiaries Novelis Corporation and Aleris Corporation. Apart from this, the use of aluminum in making electric vehicles and other green transition technologies is also positive for the long term for this Aditya Birla Group company.
Investors expect Hindalco and NALCO to see significant growth in earnings in the coming quarters due to a steady rise in aluminum prices overseas.
On Wednesday, shares of Hindalco closed 3.08 per cent higher at Rs 543.00 and Nalco shares rose 4.91 per cent to Rs 125.05 on the National Stock Exchange (NSE).
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