Metal stocks beaten out of shape
On a day when the benchmark Sensex shaved off almost 678 points or 3.52%, metal stocks went into a tailspin on investor worries over the prevailing scenario in the highly cyclical sector.
By TNN |
MUMBAI: On a day when the benchmark Sensex shaved off almost 678 points or 3.52%, metal stocks went into a tailspin on investor worries over the prevailing scenario in the highly cyclical sector. The BSE Metal index was the worst performer of the day, shedding 1,057 points or 6.11% to end the day at 16,254. Most of the metal majors including Tata Steel, SAIL, Hindalco, NALCO and Jindal Steel all lost ground in the range of 5-9% each.
According to market participants, there is concern that most metal prices are trading near their record lows in the international market. They further add that domestic companies are facing supply side pressure on account of marginal duties, which makes the sector highly competitive.
“If you look at the LME prices, zinc is at its 52-week low while copper is also near lows,” says Hitesh Agrawal, VP (research), Angel Broking. “There are fears of demand slowdown in the international market too, with indications of a slowdown in the US economy. In the domestic market, while demand is high, there are supply side pressures as import duties are in the range of 2.5% to 7%. On a more important note, analysts are expecting further weakness in the prices in the future,” he added. Interestingly, all copper futures on LME are trading at a discount.
Meanwhile, on Wednesday, Tata Steel lost 4.37% to end the day at Rs 822. SAIL was down by nearly 7% to close at Rs 245.45. Similarly, Ispat Industries, which was on an upswing in the recent past, lost nearly 10% to settle the day at Rs 42. Jindal Steel lost more than Rs 900 or 8.29% to close at Rs 10,043.80. Incidentally, the BSE Metal index comprises of 17 stocks and all were down in the red on Wednesday.
On a different note, analysts add that there are fears that the good demand for steel will be affected by a raw material supply crunch as a handful of countries account for bulk of global raw materials. However, since the demand for steel is robust, companies in this sector have managed to pass on the increase in raw material cost to their customers, thereby maintaining a good profit margin.
However, the same cannot be said about non-ferrous metals. Marketmen said lower LME advices helped by reduced offtake by stockist and consuming industries mainly pulled down tin and aluminium prices. While aluminium prices have fallen twice in the last quarter, they have started rising as is evident from the recent price hike announcement of NALCO. According to analysts, this will help the domestic aluminum producers who have been hit both by appreciating rupee and falling aluminum prices in recent months.
According to market participants, there is concern that most metal prices are trading near their record lows in the international market. They further add that domestic companies are facing supply side pressure on account of marginal duties, which makes the sector highly competitive.
“If you look at the LME prices, zinc is at its 52-week low while copper is also near lows,” says Hitesh Agrawal, VP (research), Angel Broking. “There are fears of demand slowdown in the international market too, with indications of a slowdown in the US economy. In the domestic market, while demand is high, there are supply side pressures as import duties are in the range of 2.5% to 7%. On a more important note, analysts are expecting further weakness in the prices in the future,” he added. Interestingly, all copper futures on LME are trading at a discount.
Meanwhile, on Wednesday, Tata Steel lost 4.37% to end the day at Rs 822. SAIL was down by nearly 7% to close at Rs 245.45. Similarly, Ispat Industries, which was on an upswing in the recent past, lost nearly 10% to settle the day at Rs 42. Jindal Steel lost more than Rs 900 or 8.29% to close at Rs 10,043.80. Incidentally, the BSE Metal index comprises of 17 stocks and all were down in the red on Wednesday.
On a different note, analysts add that there are fears that the good demand for steel will be affected by a raw material supply crunch as a handful of countries account for bulk of global raw materials. However, since the demand for steel is robust, companies in this sector have managed to pass on the increase in raw material cost to their customers, thereby maintaining a good profit margin.
However, the same cannot be said about non-ferrous metals. Marketmen said lower LME advices helped by reduced offtake by stockist and consuming industries mainly pulled down tin and aluminium prices. While aluminium prices have fallen twice in the last quarter, they have started rising as is evident from the recent price hike announcement of NALCO. According to analysts, this will help the domestic aluminum producers who have been hit both by appreciating rupee and falling aluminum prices in recent months.
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