Rising alumina prices, a shot in the arm for Nalco

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Subscribe to enjoy similar stories. Shares of National Aluminium Company Ltd (Nalco) hit a new 52-week high of ₹227.39 on the National Stock Exchange on Tuesday, driven by rising alumina prices amid a supply shortage. The global aluminium market has been experiencing widespread disruption across the entire bauxite-alumina-aluminium supply chain.

Alumina prices have surged 45% over the last six months due to production disruptions and raw material shortages, exacerbated by mining restrictions in China. Notably, Rio Tinto, a key global alumina supplier, has lowered its 2024 production guidance to 7.0-7.3 million tonnes, down from 7.6-7.9 million tonnes, citing force majeure. Aluminium prices have also climbed, gaining nearly 22% from August lows of $2,160 per tonne.

Read this | Can Nalco beat aluminium price fluctuations? These factors are likely to work in the favour of Nalco, giving its earnings outlook a boost. In fact, brokerage firm Kotak Institutional Equities has upgraded Nalco's stock outlook to ‘Add’ from ‘Sell’, projecting its Ebitda to increase by almost 90% in FY25 with the surge in alumina prices. Ebitda is earnings before interest, tax, depreciation and amortization.

Alumina accounted for about 43% of the company’s Ebitda in FY24, but its share is projected to reach 53% in FY25 with higher realization and lower cost of production. “We upgrade alumina price forecast by 11%/10%/7% for FY2025/26/27, factoring in the market tightness and expect only a gradual easing of the ongoing deficit", added the Kotak report dated 1 October. Nalco is an integrated producer of aluminium with captive source of bauxite and coal mines meeting a part of its need.