Metals & Mining : Hindalco Industries Ltd.

provides an excellent example of how commodity cycles influence stock-market valuations. Metal companies are affected by global aluminium and copper prices, demand from China and other major economies, energy costs, currency movements, interest rates and industrial production. Unlike many consumer businesses, a metal producer has limited control over the international price of its main commodity. Therefore, investors should examine both production costs and the stage of the commodity cycle. Hindalco has also been expanding into value-added products, which can reduce dependence on basic commodity prices. The major learning point is that cyclical companies should be analysed across an entire economic cycle rather than judging them solely on one year's profit.