Shares of aluminium producers came under significant selling pressure as LME aluminium prices crashed more than 4% to $3,379.50 per tonne, with the benchmark three-month contract earlier plunging 5% to $3,357 a metric ton - its lowest level since March 27. Hindalco Industries, NALCO, and recently-listed Vedanta Aluminium shares crashed up to 6% as the Iran-US peace deal framework improved prospects for deliveries from Gulf producers. As of 11:50 am, these stocks are currently leading losses on the Nifty Metal, which is down around 2% despite the broader market uptrend. The decline came after US President Donald Trump announced on Sunday that the much-awaited agreement has been finalised, with Trump writing on his Truth Social platform that "The Deal with the Islamic Republic of Iran is now complete." As of Thursday, spot aluminium prices on the London Metal Exchange (LME) had fallen about 12% from their early-June peak of more than $3,850 per tonne, though prices remain above pre-war levels and could stay firm due to structural deficits.
The US and Iranian officials reached an agreement to end their war and reopen the Strait of Hormuz, with the memorandum of understanding scheduled to be officially signed on Friday in Switzerland. Iran's Deputy Foreign Minister Kazem Gharibabadi confirmed in televised comments that "a permanent and immediate end to the war has been declared on all fronts, including Lebanon." The reopening of this crucial waterway, where shipping has been largely suspended since the end of February, would significantly improve prospects for aluminium exports from the Gulf region. Aluminium producers from the Middle East typically account for nearly 9% of global supply, using the narrow 33-kilometre waterway connecting the Persian Gulf with the Gulf of Oman to ship their metal to global markets and import raw materials. The improved supply prospects have weighed heavily on aluminium prices, which had previously surged to near all-time highs amid trade disruptions after Iran blocked the Strait of Hormuz. However, the aluminium market recorded a deficit of 0.15 mt in 2025, compared with a surplus in 2024, indicating tightening supply conditions despite the peace deal.
Despite the recent decline, analysts at Axis Securities maintain an optimistic long-term outlook for aluminium prices. The brokerage expects aluminium prices to remain between $3,000 and $3,800 per tonne in the short term, driven by the Hormuz supply drought and acute physical backwardation. Over the long-term period of 2028-2030, aluminium's structural equilibrium floor is seen at $2,800-$3,000 per tonne, which the brokerage describes as the "Incentive Price" required to amortise high Indonesian capex and offset the rising marginal cost of compliant (green) electrons. Axis Securities maintains its BUY ratings on Hindalco and NALCO despite the recent share declines, with aluminium price assumptions remaining unchanged at $3,295/t for FY26, $3,175/t for FY27, and $3,025/t for FY28. Even with the recent correction, shares of Hindalco and NALCO have corrected 13-15% from their recent peaks over the past month, but remain up 12-18% so far this year, reflecting investor optimism about the sector's prospects.
The easing of geopolitical tensions has removed some of the war-related risk premium from aluminium prices, but several supply-side factors continue to support the metal. Production caps in China and Guinea's proposal to curb bauxite exports—the key raw material used in aluminium production—in a bid to encourage domestic refining are among the supporting factors. Guinea accounts for more than one-third of global bauxite output, making these supply constraints significant. The domestic aluminium market also remains healthy, posting a 12% compound annual growth rate between FY24 and FY26. NALCO is set to receive an additional earnings boost from its 1 million-tonne-per-annum alumina refinery, which is expected to begin commercial production by November, with trial runs already commenced. The Pottangi bauxite mine in Odisha, which will supply ore to the refinery, is being developed at a lower cost than NALCO's existing Panchpatmali mine, potentially lowering overall production costs.
Firm aluminium prices and strong demand point to a favourable earnings outlook for domestic producers including Hindalco Industries, National Aluminium Co. (Nalco), and Vedanta Aluminium Metal, which listed separately on Monday following its demerger from Vedanta Ltd. The companies are also expected to benefit from the sharp depreciation of the rupee, which could improve export realizations, partly offsetting higher raw material and fuel costs. Hindalco's subsidiary Novelis could also benefit from a widening beverage scrap spread in the US—the difference between aluminium prices and scrap prices—supported by US aluminium tariffs and rising scrap availability, as Novelis produces more than 60% of its aluminium using recycled scrap. The stocks currently trade at enterprise value-to-FY27 Ebitda multiples of 6.9 times and 6.4 times, respectively, according to Bloomberg estimates. From here, aluminium price trends and policy decisions by governments across major producing nations are likely to determine the next leg of movement in these stocks.
While domestic steel demand remains healthy and government measures such as safeguard duties provide support, UBS maintains a cautious stance on the sector. The brokerage expects limited upside to steel prices and believes valuations already discount much of the expected earnings recovery. As reported by UBS, it initiated coverage on Tata Steel with a target price of ₹220, JSW Steel at ₹1,400, and Jindal Steel at ₹1,300 with Neutral ratings. Within mining, UBS sees contrasting opportunities with Coal India initiated with a Buy rating and target price of ₹550, viewing the company as a structural beneficiary of India's growing energy demand with an attractive dividend yield of 7-8%. In contrast, UBS initiated NMDC with a Sell rating and target price of ₹80, citing execution risks, rising capital expenditure and a relatively muted outlook for iron ore prices.
