Nalco share price crashed 7% in trade today. What’s behind the rout?

Shares of National Aluminium Company (Nalco) cracked over 8 per cent in intra-day trade on Thursday, December 12, with the scrip settling the day over 7 per cent lower at ₹251.80. The stock has now ended in the red for the third day in a row. Analysts attributed the fall to multiple factors, with the major being a decline in alumina prices.

“Nalco's stock witnessed a 7% decline, primarily due to cooling alumina prices, which have softened in recent weeks. Adding to the pressure, Australian miner South32 has withdrawn its production guidance, signalling potential challenges in the sector,” said Santosh Meena, Head of Research at Swastika Investmart.

Alumina Prices Cool Off

Alumina prices – which have doubled this year – cooled off to $724 apiece from above $800 on the London Metal Exchange (LME). Since Nalco sells the product in the open market, a drop in prices has impacted the stock of the public sector company.

Demand Concerns

Another factor that contributed to the decline in Nalco shares is the withdrawal of guidance byAustralian miner South32 for its aluminium smelter in Mozambique because of widespread and deadly protests in the country.

The miner had forecast 360,000 tons of aluminium output from the smelter, which is near the capital, Maputo, in the financial year through June 202, according to a Bloomberg report. A reduction in production would result in a fall in demand for alumina, which is a raw material for the production of aluminium.

Furthermore, a Bloomberg report suggested that aluminium smelters in China are cutting output following a surge in the price of raw material, which is expected to further weigh on alumina demand, and in turn, could drive the prices further lower. 

Stock Price Trend

Despite the fall over the three days, Nalco share price has surged a whopping 135 per cent in the last one year, delivering multibagger returns to investors.

Disclaimer: The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.