Indian aluminium shares grow 2-3% on three major global events, including EU’s 16th sanctions package

On Thursday, January 16, the three musketeers of the Indian aluminium industry - Vedanta Limited, National Aluminium Company (NALCO), and Hindalco Industries Limited saw a 2 to 3 per cent gain in their intraday stock prices. The contributing factor was the increased aluminium prices to $2,606 per tonne on the same day, following the hike of 3.3 per cent in the previous week and marking a steady bullish trend over a more extended period of one year.

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Additionally, two other global tailwinds buoyed the domestic stock prices: China's projected record-high aluminium production by the end of 2025 and the European Union's proposed 16th package sanctions on Russian aluminium.

Emkay Research, a renowned India-based financial firm, expects global aluminium prices to remain steady in 2025 and 2026, ranging between $2,500.6 and $2,600 per tonne, cushioning sales realisations of Indian players. As a result, Indian aluminium companies are anticipated to gain stock prices in the long run.

At the end of December 2024, Emkay Research recommended a 'Buy' rating for Vedanta's stocks, following the company's revised demerger plan. Projecting a target price of INR 600 (US$6.93), Emkay suggests Vedanta's stocks to those eyeing medium-term returns.

Emkay speculates that with this latest demerger plan, Vedanta Group will have a 'Sum of the Parts' market capitalisation of INR 2.7 lakh crore against the current market cap of INR 1.9 lakh crore.

Global factors

China's projected record high production by the end of 2025, reaching close to the 45-million tonnes cap the government has set, deems a good opportunity for the Indian manufacturers to capitalise on. As China's aluminium export opportunity will become limited, reaching the 45 million cap, is likely to offer a prosperous occasion to Indian manufacturers.

The proposed 16th packaging sanctions by the European Union targeting Russian aluminium and liquefied natural gas could be another favourable opportunity for Indian aluminium companies to grow their businesses. Besides Middle Eastern companies, Indian aluminium firms are well positioned to capitalise on the void that may occur in the European aluminium market on the Russian aluminium ban.

How price rally may help?

Aluminium is a key revenue driver for National Aluminium Company (NALCO), representing 73 per cent of its sales volume. So, if global aluminium prices hold steady throughout 2025, NALCO's near-term earnings will grow. According to Emkay Research, the company has the potential for a 23.5 per cent upgrade to its FY2026 EBITDA.

Similarly, Hindalco and Vedanta are also poised to benefit from anticipated aluminium price hikes, given the former's aluminium upstream business accounts for 33 per cent of its total EBITDA earned, and the latter's aluminium segment accounts for 26 per cent of the annual EBITDA.