Centrum Broking expects aluminium prices to recover

Centrum Broking expects aluminium prices to recover next year as over supply in the world market tapers off with China and global aluminium majors cutting back on production in the last few months.

The brokerage said the recovery in prices will be based on actual fundamentals rather than speculation this time. It expects global demand to outstrip supply by 0.3 million tonne in 2016.

"We expect deficit in aluminium to return in 2016 and pave way for smart recovery in prices as fundamentals, rather than speculation or financial activity, increase in salience for determining prices. Hindalco Industries is our preferred play on an aluminium price recovery," the report said.

Centrum maintained its buy on Hindalco, Vedanta and Hindustan Zinc. It said sharp under-performance of non-ferrous stocks has led valuations compressing to lowest since the economic crisis of 2009 despite much better overall positioning of companies, with capex cycle behind and well-invested assets ready to deliver cash flow.

Hindalco stock has lost half its value in the past one year. It closed at INR 79.25 apiece, down 1 percent on BSE on Thursday, december 3rd.

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