Why are metal stocks rallying?

Following the trend seen in the global resource stocks, metal stocks in Indian market surges on Thursday. Leading Indian aluminum producers, Hindalco, Nalco and Vedanta followed the big overnight rally in metal prices.

Due to US government's sanctions against Russia's biggest aluminum manufacturer Rusal, global markets expect a supply deficit in aluminum and alumina in 2018. The US sanctions are in response of Russia's support to the Syrian regime. This price surge is fueled by global FCMG companies, alloy manufacturers, traders trying hard to secure their aluminum supplies. Based on these conditions, Goldman Sachs has forecasted that aluminum prices will reach US$3,000 per metric ton.

Last week, Nalco fetched a price of US$601 per ton for alumina on a free-on-board basis. This is the highest in last 12 years. Aluminum prices on London Metal Exchange quoted US$3,000 last in 2008.

Nalco was the biggest gainer with the stock trading at Rs. 86.80 per share, up by 8.23 per cent, Hindalco was at Rs. 258.00 per share, up by 6.35 per cent, Vedanta was at Rs. 307.95 per share, up by 5.41 per cent at 11:44 hours on Thursday. Supported by this surge in these stocks, BSE Metal was at 14,758.73, up by 3.97 per cent, while Nifty Metal was at 3,902.55, up by 4.05 per cent.