Supply tightness to keep aluminium prices firm through 1HFY27: Report

The report noted aluminium prices surged 43 per cent YoY in 1QFY27, averaging ~USD 3,535/tonne, which further reflects an increase of 11 per cent on QoQ. Additionally, LME aluminium prices also surged to around USD 3,500/t before correcting from their peak levels.

As per the report, "The recent rally in aluminium prices has been driven primarily by the geopolitical crisis in West Asia."

The report attributed the recent supply tightness to the shutdown of major aluminium smelting capacity in the Middle East, which accounts for nearly 9 per cent of global primary aluminium production.

It added that the closure of the Strait of Hormuz has disrupted aluminium exports and curtailed imports of key raw materials, affecting supply chains across industries such as automotive, aerospace, packaging, and construction. "We estimate the total supply disruption from the Middle East at ~3.4 MT," it said.

On the alumina front, the report said average LME/Platts alumina prices have remained largely stable in recent months, but have edged up from the March low of around US$300 per tonne to about US$305-308 per tonne currently.

"In our view, alumina prices are close to bottoming out and can gradually trend higher from current levels, aided by tighter bauxite/alumina fundamentals and aluminium's structurally strong demand outlook," it added.

Highlighting that restarting idled smelters typically requires 6-12 months, the report said supply is unlikely to normalise immediately.

"Going forward, we expect aluminium prices to remain in the range of US$ 3,000-3,300/tonne during 1HFY27 (our base case assumption is US$ 3,150/tonne for FY27), supported by the ongoing supply tightness," it said.

360 ONE Capital, however, expects the current supply deficit to gradually ease, with the market likely to stabilise by 2HFY27 as disrupted facilities resume operations and new capacities are progressively commissioned. (ANI)