InCred wrote in its note that it remains negative on the aluminium-linked names, as its bull case thesis for the metal is on “shaky legs”. It added that the current valuations of NALCO, Vedanta Aluminium and Hindalco appear “stretched” as well.
Why Is InCred Bearish On Aluminium?
Firstly, the brokerage said that investors are focusing on the primary market shortage for Aluminium as the capacities were impacted due to the Iran war, and China, a key producer, is also nearing its capacity cap of 45 Million Tonnes Per Annum (MTPA).
On the flip side, InCred wrote in its note that the scrap and secondary supply of aluminium is the key too track. In 2024, China’s secondary aluminium consumption stood at 12.7 MT, a number that increased to 13.35 MT in 2025.
This showed that the primary deficit of aluminium is being replenished by secondary supply.
The Middle East Disruption
As highlighted earlier, the West Asia region is facing disruptions due to the Iran war, as over 2.2 MTPA of primary capacity was affected.
However, InCred believes that this also appears to be a temporary phenomenon compared to a structural supply shock, as the supply from both Qatar Aluminium and Alba, could normalize relatively quickly.
The only one that remains a longer outage risk is Emirates Global Aluminium’s Al Taweelah unit, as per InCred, who went on to add that Aluminium prices are vulnerable to a $800 per tonne fall, as war-risk premium unwinds, the note added further.
InCred had warned about these risks in last week’s note as well. It had said that the fear of further supply cuts is fading and the war-risk premium on the LME Aluminium should unwind going forward.
On the flip side, Emkay said that structural risks remain for Aluminium as China’s production curbs and Guinea bauxite export restrictions are some key drivers behind their positive stance on Aluminium. It expects Aluminium prices to range between $3,200 to $3,300 per tonne through financial year 2027, which will support the earnings of these companies.
Metal stocks have been underperforming through the month of June, as the US Dollar Index continues to strengthen. A stronger dollar is negative for metals as it makes the cost of acquisition for customers dearer.
