National Aluminium Co. Ltd’s (Nalco) shares are up more than 8% since the West Asia conflict began as some aluminium producers in the region have been forced to suspend operations, creating a supply shortage. Consequently, the aluminium spot price has risen to about $3,400 per tonne on the London Metal Exchange (LME), the highest since May 2022 and up about 8% since 27 February. Average prices so far in the March quarter are up about 19% year-on-year.
Among the companies impacted is Aluminium Bahrain BSC, which has declared force majeure on its aluminium shipment following shipping disruptions through the Strait of Hormuz. Force majeure is a legal clause that allows a company to cancel or delay its contracts without penalty when an unforeseeable and uncontrollable event such as a war, natural disaster, or shipping blockade makes it impossible to fulfill their obligations.
Qatalum, a joint venture between QatarEnergy and Norsk Hydro ASA, has announced a partial shutdown of its aluminium plant owing to a lack of natural gas supply. West Asia accounts for 8-9% of global aluminium production, concentrated across Gulf Cooperation Council countries, which export 75% of their output.
Recent developments have further titled the demand supply dynamics in favour of aluminium producers. Global aluminium prices were already supported by strong demand pull from sectors such as electric vehicles, solar; and supply curtailment from China, Europe, and Africa. “We (had) estimated the aluminium market to remain in deficit over CY2026-28E before the war in Iran and now see significant upside risk to our deficit estimates,” said Kotak Institutional Equities. The broking firm’s base-case estimate for LME aluminium is $2,900 per tonne for FY27-28, and a prolonged war poses upside risk for the base-case estimate and spot prices.
Alumina under pressure
Strong aluminium prices have aided Nalco’s 16% year-on-year Ebitda growth for the nine months to December (9MFY26). Here, the aluminium segment Ebit (earnings before interest and taxes) grew sharply by 40%, offsetting the 14% drop in the alumina Ebit as its prices have been under pressure. Alumina contributed more than 40% of Nalco’s total Ebit in FY25, which fell to 31% in 9MFY26.
Alumina, an intermediate product in aluminium manufacturing, faces a surplus scenario, which could rise further after West Asia’s suspension of imports. This means more downward pressure on alumina prices, which have fallen to around 9% of spot LME aluminium price, versus the long-term average of 16%.
Nalco’s aluminium sales volumes are expected to grow by just 2% year-on-year in FY26. It expects to achieve alumina sales of 1.3 million tonnes for FY26, which is more than 12% growth, partially making up for low realization. Its one million tonne per annum (mtpa) alumina expansion project, along with the associated bauxite mine, is likely to be commissioned by June. Muted alumina prices may limit near-term gains from the project.
There is some respite on the costs front. Nalco’s coal mines reached full capacity in Q3FY26 and will help reduce production costs. Staff costs are also falling. Employee costs declined by about 9% in 9MFY26 after dropping 12% in FY25.
Amid strong demand and firm prices, Nalco’s shares have more than doubled over the past year. The stock trades at an enterprise value of 7 to 7.5 times FY27 estimated Ebitda, according to various brokerages. Further upside may be difficult. “Despite strong fundamentals, zero debt, favorable LME prices and a robust demand outlook for aluminium in India, the near-term upside is capped by limited production headroom, trade tension, on-time execution challenges, and regulatory risks,” Motilal Oswal Financial Services said in its Q3FY26 results review report.