Metal Shares Plunge as Aluminium Production Ramps Up; Supply Concerns Ease After Strike Restart News

Metal Shares Plunge as Aluminium Production Ramps Up; Supply Concerns Ease After Strike Restart News​

Shares of major aluminium producers saw a sharp downturn on Friday after global metal prices experienced a reversal. Vedanta Aluminium, Hindalco, and National Aluminium Company (NALCO) all tumbled, trading near their daily lows as supply constraints appeared to ease slightly in the market.

The decline was primarily triggered by increased production at Alunorte, a key refining facility in Brazil. This news contrasted sharply with earlier excitement surrounding a potential aluminium shortage created by geopolitical disruptions.

Global Supply Surge Looms as Alunorte Boosts Output​

The reversal comes after intense focus on supply shortfalls caused by international tensions. Norwegian giant Norsk Hydro has ramped up operations at its Brazilian refinery, Alunorte. The move follows regulatory approval from ANP for the facility to become a self-importer of gas.

Alunorte is now increasing production towards full capacity. Earlier, reduced output due to a gas shortage had been estimated between 100,000 and 120,000 tonnes. This ramp up signifies an addition of alumina supply back into the global market.

Market Reversal: Emirates Global Aluminium Restart Eases Shortage Fears​

The immediate pullback in metal prices was also fuelled by positive news from the Middle East. Emirates Global Aluminium PJSC announced plans to restore production at its main smelter by the first quarter of next year. The facility had been shut down previously following an Iranian strike in March.

This development eased worries over a significant aluminium shortage, triggering a sharp sell-off across related stocks. For the three major Indian companies, this supply expansion represents a negative factor as Alunorte produces the essential raw material for primary aluminium.

Company Stock Performance and Market Trends​

NALCO suffered the biggest dip, falling 7% to settle at Rs 375 apiece. Hindalco also saw a decline of 2.3%, trading at Rs 1,022. Vedanta Aluminium shares fell 2%, closing at Rs 442 on the BSE. Meanwhile, the benchmark aluminium price on the London Metal Exchange (LME) settled at $3,285.50 a tonne after retreating by 1.6%.

Analysts Maintain Bullish View on Long-Term Demand​

Despite the near-term correction, several market experts remain bullish on the long-term outlook for base metals. HDFC Securities notes that aluminium is showing signs of entering a powerful structural bull cycle. This trend is attributed to supply disruptions caused by the effective blockade of the Strait of Hormuz since late February.

Morgan Stanley maintains a constructive medium-term view, citing strong sustainability-linked demand and constrained growth in global supply. The brokerage points out that near-term risks are still present, including China’s supply discipline and ongoing Middle East disruptions.

Constraints on Metal Supply Growth​

Supply growth globally remains restrained by several factors. These include capacity caps imposed by China, slower ramp-up rates in Indonesia due to power constraints, and limited expansion capacity elsewhere.

The LME inventories remain near historical lows, indicating tight physical markets and a limited buffer against potential shocks. As supply flexibility is constrained, low inventories increase the risk of sharp price spikes during periods of stronger demand or new disruptions.