No longer easy to predict the metals scene: Angel Broking

While we were talking to various analysts they also pointed out the fact that while global commodity prices are coming down in the near term they do not see a reason why companies should actually go ahead and increase product prices? Is that a view that you also share considering keeping in mind the global market scenario?

P Phani Sekhar: To begin with global commodity prices and this includes metals I do not think the Indian prices and global prices are strictly correlated at this point in time because the product price increases in India has not been as steep as it has been with global commodity prices. At the same time over the last especially three years what has happened is with the kind of raw material linkages that most of the commodity players in India especially and globally it has been happening for the last decade, I think it is becoming very difficult to predict as to where the commodity prices can take support because in good old days you could actually look at a demand supply and then look at what ROE and return on capital does selling particular metal is viable for the least efficient player and that would be the support for the metal prices. But today if you for example look at India people have got coking coal linkages, iron ore linkages. So there is so much of a raw material advantage and the return on equities in buoyant times at around 40%-45% or even more that becomes really difficult to predict what will be the levels to which the metal prices can drop and at the same time that the converse is also true.