Centrum Broking sees aluminium prices rising to 18 per cent

Centrum Broking said it expects aluminium prices to recover sharply to $2000 per tonne by first half of 2016 from $1700 per tonne price currently, citing expected supply cuts due to large unviable capacity at present prices and steady demand.

The brokerage said 30-40 per cent of aluminium capacity was presently unviable and supply cuts would accelerate globally with China's smelter margins being at multi-year lows right now.

"We believe that current depressed levels in aluminium are driven by a mix of speculation and unfavourable currency movements rather than demand-supply and ignore the support of current global cost curve which makes one-third of global capacity unviable and is triggering sharp supply cuts," said analyst Abhisar Jain at Centrum Broking.

Indian aluminium producers like Hindalco Industries and Vedanta are suffering reduced profits and sometimes even losses because of falling aluminium prices and increased competition from cheap Chinese imports.

The brokerage said Hindalco will benefit from its low cost of production and capital expenditure plan coming to an end, while Vedanta's diversified asset base will help the company tide through tough times.

Hindalco and Vedanta shares have lost half their value in last six months on BSE.

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