Sanctions imposed by the U.S. on Russia’s United Company Rusal Plc, the largest producer of the base metal outside China, is likely to help Indian aluminium producers like Anil Agarwal’s Vedanta Limited and Kumar Mangalam Birla-led Hindalco Industries as prices of the commodity soar.
Aluminium prices on the London Metal Exchange (LME) have climbed to more than $200 per tonne since the sanctions were imposed.
Steady rise
“Both Vedanta and Hindalco will benefit from U.S. sanctions on Russian firm Rusal,” said Tarang Bhanushali, a metals analyst at IIFL. “The aluminium prices that were suppressed since last one year have started going up steadily. Both Vedanta and Hindalco will benefit from the price increase,” he said. .
Vedanta and Hindalco together produce 8.8% of the global aluminium output compared with Rusal’s 17%.
“It’s a big positive for both Hindalco and Vedanta,” said Paras Bothra, head of equity research at Ashika Stock Broking. “Vedanta is likely to benefit more than Hindalco, as Hindalco is operating near peak capacity. If Vedanta brings its idle capacity to full production, it will benefit more,” Mr. Bothra said.
Vedanta plans to increase capacity of its Lanjigarh alumina refinery in Odisha from one million tonnes to six million tonnes.
Brokerage firm Edelweiss said Hindalco may benefit from the U.S. sanctions on Rusal due to the integrated nature of its domestic operations. According to Edelweiss, Vedanta too may benefit as it would be able to pass on the higher cost of alumina in a better manner.
Vedanta and Hindalco are two of the largest producers of aluminium in India.
Shares climb
Shares of Hindalco climbed 4% on the BSE to close at ₹230.35, while Vedanta shares rose 1.05% to close at ₹284.30 in a firm Mumbai market on Tuesday.
Volumes surge
Both, Hindalco and Vedanta saw significant jumps in volume and were among the top traded shares on Tuesday.
On the BSE, 22.77 lakh shares of Hindalco were traded, which is a significant jump from its two-week average of 8.13 lakh shares. Vedanta also saw a similar spurt with 25.63 lakh shares being traded on the BSE, as against the two-week average of 7.23 lakh shares.
In terms of total turnover, Vedanta was at the second spot with trades worth ₹73 crore, while Hindalco stood sixth with shares worth ₹52 crore being traded.
