Shares of Vedanta Aluminium Metal and Hindalco Industries, India's leading aluminium producers, are projected to rise by approximately 20% from their current levels, according to analyst estimates. This anticipated growth is driven by factors such as cost improvements, volume growth, and a global aluminium deficit.
Vedanta is expected to benefit from continued cost improvements, volume growth, and increased cash flows that will help ease its debt burden. Meanwhile, Hindalco is poised to gain from stabilising earnings at its US subsidiary, Novelis, following recent disruptions caused by factory fires. Analysts also highlight Hindalco's ongoing expansion efforts, particularly in upstream operations, which are expected to come online in 2028-29.
Both companies are set to gain from a global aluminium deficit, which is anticipated to keep average metal prices higher than the previous fiscal year. Aluminium prices, which peaked at about $3,790 per tonne on the London Metal Exchange earlier this month, have been declining for four consecutive weeks, dropping approximately 17% from their peak.
“Hindalco remains a buy-on-dip for us, because it is doing a lot of expansion, especially in upstream and a lot of it will come on board in 2028-29.”
Aditya Welekar, analyst at Axis Securities
The surge in aluminium prices followed the onset of the Iran war on February 28, which significantly impacted production in West Asian facilities, a region responsible for about 8% of global output. This supply shock has shifted market expectations from a 0.3 million tons deficit to a 1.5 million tons deficit for 2026, supporting prices and reducing visible inventory.
Despite recent declines, analysts remain optimistic about both Vedanta and Hindalco. CLSA India has initiated coverage on Vedanta Aluminium with an 'outperform' rating, citing a 'higher-for-longer' aluminium cycle and strong operational tailwinds. Kotak Institutional Equities projects a 6% volume CAGR for Vedanta over FY26-29, with integration across bauxite and coal mines expected to lower costs by about $150 per tonne.
“...the market has moved from an earlier expectation of 0.3 million tons deficit to 1.5 million tons deficit for calendar year 2026, which should support prices and drive visible inventory drawdowns.”
Satish Pai, managing director at Hindalco Industries
Background
The aluminium market has been experiencing significant volatility due to geopolitical tensions and supply chain disruptions. The recent Iran war has exacerbated these issues, leading to a substantial supply shock in the industry. As a result, the global aluminium deficit is expected to widen, influencing market dynamics and pricing.
Looking ahead, investors should monitor the ongoing global aluminium supply dynamics and the companies' strategic expansions. These factors will be crucial in determining the future performance of Vedanta and Hindalco in the aluminium market.
