Shares of Vedanta Aluminium, Hindalco, and National Aluminium Company (NALCO) fell as much as 7% to their day's lows on Friday after aluminium prices retreated from a seven-week high. According to reports from The Economic Times, Vedanta Aluminium shares fell 2% to a day's low of ₹442 on the BSE, while Hindalco declined 2.3% to ₹1,022. State-owned NALCO was the worst hit, falling 7% to ₹375 apiece. On the London Metal Exchange, benchmark aluminium fell 1.6% to settle at $3,285.50 a tonne. The broader Indian market also declined, with the Nifty 50 falling 0.26% to 24,332.4 and the BSE Sensex losing 0.33% to 77,820.91 as of 9:37 a.m. IST.
The decline followed Norwegian aluminium major Norsk Hydro's ramping up of production at its Brazilian refinery, Alunorte, following approval from Brazil's oil, natural gas and biofuels regulator ANP to become a self-importer of gas. As reported by The Economic Times, Alunorte has reached a temporary agreement with gas supplier CELBA for terminal access, allowing the refinery to begin ramping up alumina production. The lost production during the period of reduced output is estimated at 100,000 to 120,000 tonnes. The development is negative for the three companies as Alunorte produces alumina, the key raw material used to make primary aluminium, with a ramp-up in production potentially adding more alumina supply to the global market.
The development comes just days after Alunorte had cut alumina production to 50% of its capacity on August 12 due to a gas shortage. According to The Economic Times, the production cut had pushed shares of NALCO, Hindalco and Vedanta Aluminium up by as much as 8% during that trading session. Production is now being increased towards full capacity at the Brazilian facility, though the market has seen a sharp reversal following the supply update.
The market has also been pressured by escalating geopolitical tensions, with the U.S. threatening an indefinite naval blockade of Iran, reviving concerns about supply of key commodities. As reported by Reuters, crude oil prices rose after the U.S. threat, with Brent crude prices near $87 per barrel, up 4% this week due to stalled Middle East peace talks. Adding to market pressure, overseas investors have sold equities for three consecutive sessions through Thursday, with tepid foreign investor flows following a hefty selloff earlier this year. India's markets regulator proposed revamping its framework for accredited investors on Thursday to allow more overseas investors access to higher-risk investment products.
Fifteen of the 16 major sectors fell in early trade, led by metal stocks which declined 1.3% on losses in aluminium and copper makers as base metal prices dropped. Heavyweight financials, favoured by foreign investors, were down 0.2%, taking their weekly decline to 0.7%. Among individual stocks, Tata Motors Passenger Vehicles shed 5% to be the biggest loser on the Nifty 50 after the carmaker's quarterly profit slumped about 80% due to higher costs and forex losses. However, LG Electronics India jumped 7% after strong quarterly results and an affirmation of the full-year revenue target.
