With a broader shift in the global metals cycle that could reshape earnings expectations, major Indian aluminium companies are drawing renewed investor attention. JPMorgan has upgraded both Vedanta Limited and Hindalco Industries Limited to “overweight”, citing a favourable mix of higher aluminium prices, inventory disruptions and currency movements. The brokerage has also raised price targets, indicating a potential upside of up to 22 per cent.
However, going beyond near-term upside, the shift is being driven by the sharp decline in the global aluminium supply crunch. Ongoing geopolitical tensions spurred by the Middle East conflict have disrupted key supply chains, with smelter outages of EGA and Alba facilities contributing to a mounting supply deficit.
Consequently, the London Metal Exchange (LME) aluminium prices soared, crossing USD 3,500 per tonne once around the middle of March and then after the Iranian strikes on the Gulf smelters. The current levels, too, are hovering around USD 3,500 per tonne.
According to JPMorgan, current valuations of both Vedanta and Hindalco imply an aluminium price of about USD 2,900 per tonne, remaining well below the prevailing spot price of about USD 3,500 per tonne. The gap suggests that the market may not have fully priced in the ongoing supply shock.