Aluminium prices have been moving up broadly on three factors. One is that energy cost has been spiking up, the second factor is a bit of a deficit because of lower production coming out of China and the third factor is that there has been some nervousness because of the escalating tension on the Russia-Ukraine front.
National Aluminium Company Ltd (NALCO
) is the pure-play aluminium stock and has recovered considerably from the low point of the day. There are three reasons – one is in terms of Russia’s contribution to the total global output. Russia contributes roughly around 3.5-4 million tonne of aluminium production, that accounts for about 6 percent of the total global output and 13.5 percent ex-China. So if things go wrong and there are sanctions imposed under Russia then aluminium prices may spike up further from here. Secondly, the aluminium deficit globally is pegged at around 1 million tonne. So if there are sanctions from Russia, it will further give an uptick in terms of aluminium prices and finally on valuations, NALCO is not very expensive, it has been cheap and it has been cheap because it is a PSU, it trades at around 4.5 times FY23 EV/EBITDA.
Watch the accompanying video of CNBC-TV18’s Nigel D’Souza for more details.
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