These five aluminium stocks are set to benefit from Russian giant’s production cuts

Russian aluminium giant Rusal recently shook the global market with its plan to slash output by more than 6%, citing skyrocketing alumina prices and weakening domestic demand. The decision comes amid a surge in alumina prices, which have more than doubled to about $700 a tonne owing to supply disruptions in Guinea, Brazil and Australia.

With alumina prices doubling this year and aluminium prices up 11%, the production cut is set to tighten supply chains and have ripple effects across the industry.

This could be a golden opportunity for Indian aluminium stocks. As global players scramble to fill the gap, Indian companies stand ready to capitalise on soaring demand and higher prices.

Here are the top five Indian aluminium stocks primed to shine amid Rusal's cutbacks.

#1 Hindalco

Part of the Aditya Birla Group, Hindalco and its subsidiaries are primarily engaged in producing aluminium and copper. It ranks among the top five global producers of aluminium.

It also manufactures chemicals such as calcined alumina and aluminium hydrates used in the water-treatment industry.

The company has a wide product portfolio that caters to the needs of industries such as fast-moving consumer goods, aerospace, automotive, construction, and industrial and household appliances.

Through its subsidiary Novelis, which is also the world's largest recycler of aluminium, Hindalco manufactures automotive and beverage can sheets in North America, South America and Europe.

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With a global reach and integrated operations, Hindalco is well-positioned to benefit as impending supply-chain disruptions and tightening aluminium supplies drive up prices.

The company has had a robust growth trajectory over the past five years, with net sales expanding at a compound annual growth rate (CAGR) of 10.6% and net profit growing at 13.1%.

The company is focused on downstream expansions in India, with an emphasis on increasing contributions from value-added products. This strategy aims to enhance profitability and protect the company from fluctuations in aluminium prices.

It also expects to sustain its momentum in the copper business, driven by increasing volumes, robust demand and improved treatment charge/refining charge margins.

#2 Vedanta

Vedanta Limited is one of the world’s leading natural resources companies, with a significant footprint in the aluminium sector. It is India’s largest aluminium producer, accounting for nearly 60% of the country’s output. It has an extensive range of aluminium products including billets, ingots, wire rods, primary foundry alloys, rolled products and slabs.

Vedanta’s aluminium is critical to a range of industries including space exploration, aerospace, building and construction, defence, transportation, electricity distribution and packaging.

The company is also focused on driving adoption in sunrise sectors such as electric vehicles, renewable energy and high-tech manufacturing. Vedanta is exploring and developing emerging applications for aluminium.

It also operates in Namibia, South Africa, the UAE, Australia and Ireland, which enhances not just its market reach but also its supply-chain resilience.

It is poised to gain significantly from Rusal's decision to reduce aluminium production. This development is expected to tighten the global aluminium supply, creating opportunities for Vedanta to capture a larger market share and command better prices for its products.

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As an integrated player with in-house alumina production capabilities, Vedanta is better insulated from raw material price volatility than non-integrated global competitors.

Hindalco has experienced robust growth over the past five years, with net sales expanding at a CAGR of 9.3%.

Key upcoming projects include full backward integration in aluminium to ensure 100% self-sufficiency in bauxite, alumina and coal, and targeting 30 million tonnes of iron ore production annually in Liberia.

Expansion plans also include replicating Zinc India's success globally, with a commitment to delivering one million tons of zinc from its international operations and ramping up copper production through its recently regained control over Konkola Copper Mines.

#3 NALCO

Incorporated in 1981, National Aluminium Company is a Schedule A Navratna central public sector enterprise. It’s the country’s largest integrated bauxite-alumina-aluminium-power complex, managing operations that include bauxite mining, alumina refining, aluminium smelting and casting. NALCO produces a diverse range of products including aluminium hydrate, calcined alumina, aluminium ingots and aluminium wire rods.

In FY24, the company set a record for the highest-ever production and sales of aluminium and bauxite, highlighting its operational efficiency and market leadership. In recent years, elevated aluminium prices have bolstered NALCO’s revenue and net profit, enabling healthy growth, and it’s set to be a prime beneficiary of Rusal’s production cuts.

Hindalco’s revenue has grown at a CAGR of 2.7% over the past five years, while net profit has increased at a 2.8% CAGR.

Through its learning role in joint venture KABIL, NALCO is embarking on a pioneering lithium exploration and mining project in Argentina – a significant move towards ensuring India’s critical-mineral security.

#4 Tanfac Industries

The company was incorporated in 1974 by Tamil Nadu Industrial Development Corporation as a joint-sector company (managed by both the public and private sectors). It produces aluminium fluoride, anhydrous hydrofluoric acid and more, and is the largest producer of aluminium fluoride acid in India. It is also among the leading producers of hydrofluoric acid and its derivatives. These products are used for things like aluminium smelting and petroleum refining.

With the tightening of global aluminium supply due to Rusal's production cuts, the demand for critical inputs such as aluminium fluoride is expected to rise. This positions Tanfac Industries to benefit significantly from the evolving market dynamics.

On the financial front, the company has experienced strong growth over the past five years, with net sales expanding at a CAGR of 11.3% and net profit at 7.9%.

The company now plans to increase its hydrofluoric acid (HF) plant capacity.

#5 Man Industries

The company manufactures aluminium extruded sections and has an installed capacity of 4,000 tonnes per annum. Its products are mainly used in building construction, furniture, automobile bodies and irrigation.

The company was founded in 1988 to manufacture aluminium extrusions. Over the years, it has become a leading manufacturer and exporter of large-diameter carbon steel line pipes used in oil, gas and water transmission.

It continues to produce aluminium extrusion products, maintaining its foothold in the aluminium sector, and could capitalise on the supply gap caused by Rusal.

Rising alumina costs are likely to increase aluminium product prices, giving Man Industries an opportunity to improve its margins and expand its market presence, especially in exports.

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Man Industries has had a strong growth trajectory over the past five years, with net sales expanding at a CAGR of 7.2% and net profit at 12.3%.

It is building a new plant in Dammam, Saudi Arabia, to meet the growing demand for line pipes.The plant will include a coating facility and line pipe manufacturing.

Man Industries is also expanding in Jammu, where its new facility is expected to be operational in FY26.

Conclusion

The global aluminium market is poised for a significant shift following Rusal's announcement of production cuts. This development comes as India’s aluminium sector is gearing up for strong growth, fuelled by rising demand from infrastructure projects, electric vehicles, and renewable energy initiatives. With ongoing investments to expand production and modernise facilities, the sector is poised for sustained growth.

This combination of strong domestic demand and favourable international dynamics is expected to bolster the position of Indian aluminium companies, allowing them to capture greater market share and enhance profitability.

Nevertheless, it is always prudent to conduct thorough research before making any investment decisions. Ensure the investment aligns with your financial objectives and matches your risk tolerance.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com