National Aluminium Co. Ltd (Nalco) has benefited from soaring alumina prices in FY25, driving a 201% year-on-year surge in consolidated Ebitda for the December quarter (Q3FY25). The state-owned company achieved an average alumina realization of $641 per tonne. Plus, it also helped that alumina exports rose 11% and the use of captive coal increased. Note that Nalco’s Ebitda was up 290% in Q2 and saw an average 47% growth in the previous four quarters.
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However, with spot prices now around $530 per tonne, the price advantage may be short-lived. Nalco’s management indicated in its Q3 earnings call that Q4 realizations would remain above $600 per tonne due to prior contract bookings. But the global alumina market is expected to swing back into surplus in 2025, pressured by China’s housing oversupply and economic slowdown. The US tariff on aluminium could further disrupt global trade flows, adding to the uncertainty.
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While Nalco’s price advantage may not last long, the commissioning of its alumina refinery by December can boost volumes significantly. The 1 million tonne per annum (mtpa) refinery, being built at an investment of ₹5,700 crore, has achieved 70% physical progress and would increase the company’s total capacity by almost 50%. The refinery would also lower production cost due to lower material usage with higher efficiency.
The associated bauxite mine is also expected to start production around the same time, ensuring raw material security. Meanwhile, Nalco also started production from its coal block this year and should achieve full capacity in FY26. This should further lower the fuel cost, down about 7% per tonne of production in Q3FY25.
Looking ahead, the company’s next expansion phase includes a 0.5 mtpa smelter plant and a 1,200-megawatt captive power plant, requiring an estimated ₹30,000 crore investment and a three-to-four year timeline for commissioning.
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Nalco’s shares are down 26% from their 52-weeks high of ₹262.99 on 25 November, and look undemanding at an enterprise value of about 6x FY26 Ebitda, as per Bloomberg consensus.
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“Despite strong fundamentals, zero debt, and a robust demand outlook for aluminum in India, the near-term upside is capped by potential price corrections in alumina, limited production headroom, on-time execution challenges, and regulatory risks,” said a Motilal Oswal Financial Services report dated 11 February.
