What Alcoa’s Higher Shipment Forecast Means For Nalco, Hindalco, Vedanta

Alcoa Corp. raised its forecast for aluminium shipments this year on anticipation of higher demand, an indication that Indian producers also stand to gain from higher consumption of the metal used to make everything from washing machines to beer cans.

The biggest U.S. aluminum producer expects to ship 2.9-3 million tonnes in 2021 against an earlier forecast of 2.8 MT, according to its statement.

LME Aluminium prices rose 14% sequentially and 55% over the year earlier in the three months ended June. That came as demand for the metal increased on accelerated pace of vaccination in developed economies.

  • Alcoa posted its highest quarterly profit since inception in 2016. Its adjusted net income stood at $281 million in the quarter ended June, up 87.3% sequentially.

  • Its earnings before interest, taxes, depreciation, and amortisation stood at $618 million compared with $599.8 million average of analyst estimates compiled by Bloomberg.

  • Notable special items include gains from non-core asset sales of $96 million, primarily the sale of former Eastalco site, offset by $39 million in pension lump sum settlement charges and $32 million in debt redemption expenses.

Higher LME prices drove stronger set of numbers by Alcoa. Indian companies such as National Aluminium Co., Hindalco Industries Ltd. and Vedanta Ltd. will all benefit similarly, according to Rakesh Arora, managing partner at Go India Advisors. Nalco being the pure play has highest leverage to aluminium prices, he said, adding the company doubles it earnings on every $400-a-tonne increase in aluminium price.

Edelweiss Securities expects aluminium division’s Ebitda in non-ferrous companies to show a good improvement mainly due to higher LME price. Over the last three months, aluminum stocks have rallied in the range of 9-47%, with Nalco gaining the most and Hindalco the least.

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