Metal stocks showed a notable uptrend in Wednesday's trading session, spearheaded by Hindalco, which surged over 3%. The BSE Metal index emerged as the top gainer, propelled by Hindalco's 3.13% surge. Other key metal stocks also experienced gains, with SAIL, JSW Steel, and Tata Steel marking increases of over 1%.
According to a report by JM Financial Institutional Securities, the global aluminium market might transition from a modest deficit in 2021-22 to a potential balance within the 2023-2025 period. The dynamics between China and world markets, excluding China, are anticipated to diverge during this timeframe.
Projections suggest that China's aluminium market surplus could narrow due to an expected surge in demand and constraints on production capacity. Government-mandated capacity limits set at 45 million tons per year since 2017 might impede further growth in China's aluminium production.
The anticipated surplus in 2024 might notably decrease from the 0.7 million tons recorded in 2023 if infrastructure spending and the expansion of environmentally friendly sectors like electric vehicles (EVs) and solar power gain momentum, per the report.
Conversely, the supply outside China could outpace growth within China due to the commissioning of new capacities in countries such as Canada, Indonesia, and India. Factors such as green sector expansion, power supplies in China, European smelter reactivations, and project approvals are identified as pivotal in balancing the global aluminium market.
Overall, the report suggests that China's demand will be a critical factor in balancing the markets. It anticipates that lower inventory levels coupled with positive macroeconomic indicators like the dollar index and potential rate cuts will likely lend support to aluminium prices, estimated to range between USD 2,200-2,400 per ton. The report factors in an LME price assumption of USD 2,300 per ton in light of these trends.
(With Agency Inputs)
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