Vedanta, Nalco, Hindalco: Aluminum prices up 5% in one month; stocks worth buying?
Target prices: Kotak Institutional Equities values Vedanta at Rs 450, Hindalco at Rs 705, Nalco at Rs 220, and Hindustan Zinc at Rs 350.
- Sep 19, 2025,
- Updated Sep 19, 2025 12:37 PM IST
LME aluminium prices have rallied 5 per cent in the past month on macro tailwinds from a weakening dollar, the looming Fed rate cut, and signs of trade war de-escalation. However, Kotak Institutional Equities finds fundamentals fragile, citing the lack of cost support and tariff-led uncertainties that could trigger demand destruction.
Kotak noted that alumina prices are near a two-year low, while new capacities are likely to keep the market in structural surplus. Aluminium spreads are now approaching February 2022 levels—the start of the Russia-Ukraine war—marking record highs despite demand headwinds.
“We see downside risks to aluminium prices and remain cautious on producers such as Nalco, Vedanta, and Hindalco. We find better risk-reward in ferrous players due to stronger growth visibility, supportive trade policies, and superior return profiles,” Kotak said.
The brokerage values Vedanta at Rs 450, Hindalco at Rs 705, Nalco at Rs 220, and Hindustan Zinc at Rs 350.
Global aluminium demand grew 2.7 per cent YoY in 1HCY25, but Kotak expects momentum to fade in 2HCY25E due to trade uncertainties and potential demand destruction. It forecasts global demand growth to slow to 1.8 per cent in CY2025E and 1.7 per cent in CY2026E, compared with 3.7 per cent in CY2024. Down-trending regional premiums (ex-USA) also point to a fragile demand outlook.
While China’s production growth should slow under its capacity cap, capacity additions in ex-China markets are expected to offset the gap. Kotak estimates the aluminium market will remain in a mild deficit of 140,000 tons in 2025E and 90,000 tons in 2026. It projects LME aluminium at $2,550–2,600 per ton in FY2026–27E, against the current spot of $2,700 per ton.
Kotak said alumina prices have fallen 50 per cent YTD in CY2025 to US$341/ton (FoB Australia), driven by normalized supplies and capacity additions. Near-term supply increases in China, along with a strong pipeline elsewhere, suggest a structural surplus over the medium term.
Kotak estimates alumina prices at 14–15 per cent of LME aluminium over FY2026–28E, below the historical average. Elevated aluminium prices—supported by macro tailwinds and subdued input costs (alumina, thermal coal)—have pushed spot spreads to US$1,640/ton versus the long-term average of US$1,000/ton. This is close to the February 2022 peak of US$1,690/ton, reached during fears of supply disruption from the Russia-Ukraine war.
Kotak estimates that 98 per cent of global smelting capacity remains profitable on a cash cost basis at current aluminium prices.
LME aluminium prices have rallied 5 per cent in the past month on macro tailwinds from a weakening dollar, the looming Fed rate cut, and signs of trade war de-escalation. However, Kotak Institutional Equities finds fundamentals fragile, citing the lack of cost support and tariff-led uncertainties that could trigger demand destruction.
Kotak noted that alumina prices are near a two-year low, while new capacities are likely to keep the market in structural surplus. Aluminium spreads are now approaching February 2022 levels—the start of the Russia-Ukraine war—marking record highs despite demand headwinds.
“We see downside risks to aluminium prices and remain cautious on producers such as Nalco, Vedanta, and Hindalco. We find better risk-reward in ferrous players due to stronger growth visibility, supportive trade policies, and superior return profiles,” Kotak said.
The brokerage values Vedanta at Rs 450, Hindalco at Rs 705, Nalco at Rs 220, and Hindustan Zinc at Rs 350.
Global aluminium demand grew 2.7 per cent YoY in 1HCY25, but Kotak expects momentum to fade in 2HCY25E due to trade uncertainties and potential demand destruction. It forecasts global demand growth to slow to 1.8 per cent in CY2025E and 1.7 per cent in CY2026E, compared with 3.7 per cent in CY2024. Down-trending regional premiums (ex-USA) also point to a fragile demand outlook.
While China’s production growth should slow under its capacity cap, capacity additions in ex-China markets are expected to offset the gap. Kotak estimates the aluminium market will remain in a mild deficit of 140,000 tons in 2025E and 90,000 tons in 2026. It projects LME aluminium at $2,550–2,600 per ton in FY2026–27E, against the current spot of $2,700 per ton.
Kotak said alumina prices have fallen 50 per cent YTD in CY2025 to US$341/ton (FoB Australia), driven by normalized supplies and capacity additions. Near-term supply increases in China, along with a strong pipeline elsewhere, suggest a structural surplus over the medium term.
Kotak estimates alumina prices at 14–15 per cent of LME aluminium over FY2026–28E, below the historical average. Elevated aluminium prices—supported by macro tailwinds and subdued input costs (alumina, thermal coal)—have pushed spot spreads to US$1,640/ton versus the long-term average of US$1,000/ton. This is close to the February 2022 peak of US$1,690/ton, reached during fears of supply disruption from the Russia-Ukraine war.
Kotak estimates that 98 per cent of global smelting capacity remains profitable on a cash cost basis at current aluminium prices.