Why are aluminium prices rallying so hard and what does that hold for aluminium companies like Hindalco, Vedanta and NALCO?

Aluminium prices have had a dream run on the London Metals Exchange or LME and the commodity has recently scaled a 13 year high of $3,000 per tonne. The recent spurt in price has been triggered by the major coup that just happened in Guinea. Now, Guinea is a major supplier of bauxite to global market and bauxite is one of the key inputs in the production of aluminium. This shortage has led to a spike in input costs and a rise in prices too.

Of course, there is also a more compelling demand story. It is estimated that demand for aluminium could grow multi-fold due to the big shift to electrical vehicles. EVs need light components and aluminium fits perfectly well into that definition. However, the downside risk is that aluminium smelters are also facing rising costs and the last one year, aluminium prices are already up nearly 70%. This is positive for Hindalco, Nalco and Vedanta.