Nalco gets an aluminium price boost, but other worries could limit gains

National Aluminium Co. Ltd’s (Nalco) shares are up more than 8% since the West Asia conflict began as some aluminium producers in the region have been forced to suspend operations, creating a supply shortage.

Consequently, the aluminium spot price has risen to about $3,400 per tonne on the London Metal Exchange (LME), the highest since May 2022 and up about 8% since 27 February. Average prices so far in the March quarter are up about 19% year-on-year.Among the companies impacted is Aluminium Bahrain BSC, which has declared force majeure on its aluminium shipment following shipping disruptions through the Strait of Hormuz.

Force majeure is a legal clause that allows a company to cancel or delay its contracts without penalty when an unforeseeable and uncontrollable event such as a war, natural disaster, or shipping blockade makes it impossible to fulfill their obligations.Qatalum, a joint venture between QatarEnergy and Norsk Hydro ASA, has announced a partial shutdown of its aluminium plant owing to a lack of natural gas supply. West Asia accounts for 8-9% of global aluminium production, concentrated across Gulf Cooperation Council countries, which export 75% of their output.Recent developments have further titled the demand supply dynamics in favour of aluminium producers.

Global aluminium prices were already supported by strong demand pull from sectors such as electric vehicles, solar; and supply curtailment from China, Europe, and Africa. “We (had) estimated the aluminium market to remain in deficit over CY2026-28E before the war in Iran and now see significant upside risk to our deficit estimates,” said Kotak Institutional Equities.