MUMBAI: Aluminium stocks are rallying while cement names are sliding as geopolitical tensions flare, underscoring a widening gap between globally linked metals and domestically driven materials.
Analysts say this divergence, driven by energy costs and supply disruptions, tends to widen during periods of geopolitical stress—as seen in current market moves—and could reverse if tensions ease, making it a useful, if imperfect, signal for sector rotation.
Data across recent flashpoints shows the pattern clearly. During the Russia-Ukraine war in 2022, cement spreads compressed to their lowest levels since 2016 at ₹2,651 per tonne, even as aluminium spreads surged to $1,294 per tonne towards the end of the year on supply fears, according to data from Ambit Capital Research. More recently, amid US-Iran tensions, aluminium spreads spiked to $2,547 per tonne while cement spreads softened to ₹2,981 per tonne.
Spreads, or the margin per tonne between selling prices and key input costs, tend to move in opposite directions for the two sectors during such periods.
Cement stocks have come under pressure since the US-Iran conflict broke out on 28 February, with Ambuja Cements and Shree Cement down over 11% and 7%, while Dalmia Bharat and Ramco Cements have slipped 4% and nearly 17%, respectively. In contrast, aluminium stocks have gained on the geopolitical tailwind over the same period, with NALCO up around 13% and Hindalco jumping 12% buoyed by higher global prices on supply concerns.
Diverging cycles
Uttam Kumar Srimal, senior research analyst, Axis Securities, explained that aluminium is globally traded and highly sensitive to energy costs (power, fuel) and geopolitical supply disruptions, which lift prices and spreads. Cement, by contrast, is a domestic, demand-driven commodity where fuel cost inflation compresses margins if price hikes lag. So, Srimal said, rising fuel or geopolitical stress tends to benefit aluminium but adversely affect cement, creating an inverse trend.
As a result, when global demand weakens or supply increases, aluminium prices soften and capital tends to rotate into cement, which benefits from India’s infrastructure push and relatively stable demand. Conversely, when the global cycle turns favourable and aluminium prices pick up, metal stocks tend to outperform while cement margins come under pressure from rising input costs.
Satyadeep Jain, lead analyst - Cement, Metals, Mining & Utilities at Ambit Capital, said aluminium is one of the most energy-intensive metals, so regions with cheaper energy set up smelters. Geopolitical disruptions in these regions have two effects: they knock out some aluminium supply and push up energy costs, raising prices. Indian aluminium producers, with captive mines and long-term fuel supply agreements (FSAs), see less cost inflation than global peers, leading to steep margin gains during such periods.
For cement, he explained, cost is a major input, but it is not a global sector like aluminium. In the near term, domestic sectors such as cement, paints and autos are unable to pass on cost inflation immediately and also face demand slowdown concerns during inflation, resulting in margin compression. “When geopolitical tensions ease, suddenly fuel costs will ease which will lead to margin increase for cement and price/margin decline for aluminium.”
These sectors don’t always move in opposite directions, Jain said, adding that they tend to do so during geopolitical situations but there are also periods when they move in the same direction.
Some market participants, however, noted that if earnings in both sectors move in tandem, they can perform well simultaneously. But they also said that investors shouldn’t always rely on this correlation while making sector allocation decisions.
Jain of Ambit Capital said, “This is something to trade during times of extreme geopolitics such as current one”.
Even Srimal of Axis Securities believes this indicator is best used as a macro overlay alongside company-specific fundamentals, and not as a standalone strategy. “The relationship can break due to local pricing power in cement or supply-side shocks in aluminium, so it’s a useful directional indicator, not a rule.”