Tag: steel

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Editorial

What Will be the Impact of Export Duty on Steel?

The Indian steel industry received a “major shock” last month! The Central government introduced a 15% export duty on steel intermediaries and products, effective May 22. For the uninitiated, export duty is a tax payable on goods leaving a country. Moreover, the government also slashed import duty on certain raw materials used in the steel-making process.

In this article, we discuss the impact of this move on steel companies and other stakeholders.

Why is the Govt Levying Export Duty?

  • An export duty of 15% (from nil earlier) has been levied on steel products and intermediaries to improve the availability of steel in the domestic market. It will protect domestic manufacturers of steel. The duty has been imposed on flat-rolled products, bars & rods, and various flat-rolled products of stainless steel. 
  • Meanwhile, the government has waived customs duty on the import of some raw materials used by the steel industry, such as coking coal and ferronickel. This move will lower costs for the domestic steel industry and reduce prices, thus helping curb inflation.

The Impact

After the Central govt issued the notification on May 23, we saw major steel stocks fall heavily! The shares of Tata Steel, Steel Authority of India (SAIL), and JSW Steel hit 52-week lows. The NIFTY Metal Index crashed 16% in May alone, the sharpest decline since March 2020. Steel stocks were already under pressure due to low demand and weak international prices. Moreover, rising inflation, geopolitical tensions (Russia-Ukraine war), and high crude oil prices have impacted the Indian economy.

  • The 15% export duty is likely to reduce margins on steel exports. Foreign clients will turn to manufacturers in their country to maintain costs. 

Export margins were attractive/profitable for Indian steel companies last year due to lower exports from China (due to their de-carbonisation drive) and higher energy prices in Europe. Thus, the recent step to levy export duty on certain steel products will enable sales volumes to shift to domestic markets.

  • The imposition of export duty has accelerated a fall in benchmark steel prices. Higher production/supply volumes and low demand in our country have caused prices to drop. Domestic hot-rolled coil and cold-rolled steel have declined by Rs 5,500 and Rs 6,300 a tonne, respectively, over the past two weeks.

This development comes at a time when the Indian steel industry is approaching a seasonally weak quarter (due to Monsoon). Domestic demand is usually subdued in Q2. Long story short, prominent steel manufacturers will face a tough time handling revenue margins in the coming months. It could also put pressure on the returns from capital expenditure (capex). While most steel stocks are near their 52-week lows, do keep a close eye on them for good investing opportunities!

What are your views on the government’s actions to support the steel/metal industry? Let us know in the comments sections of the marketfeed app.

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Editorial

Q2 Result Analysis: Tata Steel Net Profit Soars 660% YoY

TATA STEEL q2 results

Tata Steel, the steel giant, saw incredible growth this quarter in terms of profits, Q2FY22. In the second quarter, the steelmaker saw its revenue grow by ~62% YoY and ~13% QoQ. The revenue growth eventually resulted in a whopping ~660% growth over a year. In the current quarter, Q2FY22, the company scored a net profit of Rs 11,918.1 crore against Rs 1,565.4 crores last year, the same quarter. The company’s profits grew by ~33% over the previous quarter.

Source: Company Website

What Drove The Quarterly Results?

In the previous marketfeed articles, we have discussed the steel market in COVID-19 times. We have addressed the industry’s stress globally, China’s involvement, and how the sector recovered post-pandemic. To know more, you can read: 

Global Steel Prices Volatility, China-Australia Trade War and Indian Metal Market: Analysis

Reasons Behind the Rise in Steel Prices in India

Steel Prices Surge in India; is China Hoarding Global Steel?

To sum it up, steel plants were operating below capacity, China, the largest steel supplier, had disrupted global supply citing environmental concerns. Post-pandemic, the supply picked up, at least in India, yet, the prices remained high globally. Indian steelmakers took advantage and gained higher margins on exports. 

The current quarter saw high vaccination rates, normalised trade, and healthy steel prices in the international steel market. Like other steel companies, Tata Steel managed to gain higher realisations in the domestic market. In the global market, Tata Steel managed to play on better price realisations and increased volumes. However, lesser ‘deliveries’ in Europe impacted the profit numbers

For Tata Steel, production increased by 2% on QoQ and 4% on a YoY basis despite planned maintenance shutdowns. Steel sales volume increased by 4% QoQ base with best-ever quarterly sales of Rolled Products.

Currently, Tata Steel is working on offsetting its debt. The company’s debt stood at Rs 88,501 crore in the quarter ended March 2021. The debt was reduced by 11.2% to Rs 78,163 crore in the current quarter. The company plans to reduce gross debt by nearly Rs 14,000 crores in FY22 while prioritising off-shore debt repayment.

The company saw its operating expenses increase by 41% YoY and 17% QoQ. The expenses increased primarily due to an increase in the purchase of  Iron ore and coal consumption cost across its key entities and also higher purchase of Finished & Semi-finished goods.

In other news, the shortage of semiconductors in the automobile has hit the demand. The problem is likely to persist in the short term. Once the problem is mitigated, one can expect a healthy steel sales volume in the automobile sector.  

The company’s investor presentation states its future goals. The company plans to offset a huge amount of debt and aim for strong earnings and improved cash flow performance. It intends to focus on capital allocation, cashflow, and working capital management. Moreover, the company plans to spend Rs 10,000- Rs 12,000 crore as capital expenditure. 

Recovering markets have paved the way for greater demand for steel and lowered material costs. India steel demand is expected to improve, supported by govt’s push for infrastructure spending and consumer demand with the onset of the festive season. One can expect demand improvement across segments and high coking coal prices. Coking coal is a very critical raw material in manufacturing steel. 

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Editorial

Why are Zinc and Aluminium Stocks Rallying? Will Base Metal Stocks Move More?

India’s base metal market is booming. Steel, Aluminium, Zinc, Copper, and other such metals are known as base metals. They are used extensively in industries. The base metal market was facing headwinds as COVID-19 restrictions were being lifted throughout the world. Competition from China, capacity rebuilding, reserve stock shortage, and unfavourable international market prices were a few of the many problems facing the sector. As China seems to battle environmental concerns, cutting down on production capacity and trimming exports, the world seems to benefit from it. In this article, we talk about the recent surge in base metal prices. 

Why Are Base Metal Stocks Rallying?

Indian base metal shares have been rallying for quite some time, facing timely corrections arising from profit bookings. The steel industry is the most polluting one in China. As the country battles environmental concerns, it is now increasing export duties along with cutting down much of the steel production. This has created a supply crunch globally and has made way for other major steel-producing countries to ramp up production. Higher steel prices and increasing production translates into better realization and profit margins for Indian companies. Steel companies that have higher exports are benefitting from it. Shares like Tata Steel, SAIL, JSW Steel, and other steel companies rallied anywhere between 8%-10% in nearly two weeks. 

Coming to Aluminium, China is facing a shortage of the raw material, magnesium. China is also the largest exporter of aluminium. Parallel to the steel sector, China has a huge part to play in the Aluminium stock rally as well. The National Aluminium Company (NALCO), Vedanta, and Hindalco Industries rallied anywhere between 15%-25% in two weeks’ time in mid-October. During the same period, Hindustan Zinc rallied ~23% and Hindustan Copper moved up by ~19% 

The following is the share price appreciation of some of the important base metal stocks between October 6, 2021, and October 18, 2021.  

Company Name% Change In Share Price
Tata Steel+10.3%
JSW Steel+8.4%
SAIL+12.1%
National Aluminium Company+27.0%
VEDANTA+28.8%
HINDALCO+14.1%
Hindustan Zinc+23.1%
Hindustan Copper+19.2%

What Should Investors Watch Out For?

While India’s domestic demand and market price for base metals remained relatively stable, a shortage of supply in the international market is pushing certain metal producers to export. This is the case for almost all base metals. The price moment for Steel stocks, Aluminium stocks, Copper stocks, and that of other base metals is running nearly parallel. 

The demand for metals remained robust, yet the metal manufacturers are faced with rising input and logistics costs. Nevertheless, the manufacturers have been successful in transferring the extra costs to customers. 


The metal stocks rally broke down after profit-booking and China’s vow to curb coal prices. This increased selling pressure significantly since the uncertainty around coal and base metal supply was reduced. Rising coal prices were earlier adding to manufacturing costs for base metal manufacturers. 

As is the case with many sectors, China seems to be pulling the strings for most. One should be cautious around any policy changes that China makes. These include import or export duties, production levels, and other trade limits that the country poses. Nevertheless, the domestic demand for metals seems healthy, yet the volatile global market situation could turn out to be beneficial for Indian stocks,  

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Editorial

Global Steel Prices Volatility, China-Australia Trade War and Indian Metal Market: Analysis

India’s metal stocks and the NIFTY METAL index have been rallying. Steel prices are soaring and iron ore prices have started to slump. Iron ore is the key raw material used to manufacture steel, yet both are following opposite trends. In December 2020, we at marketfeed discussed the soaring steel prices and how it was impacting the Indian economy. While there have been some shortfalls that are globally driving down steel prices, one crucial factor is at play, China. This piece gives an overview of the steel market and how it could impact Indian metal stocks. 

China’s Economic Turbulence Impacts Global Steel Prices

The last few weeks have been tough for the Chinese economy. It first faced the Evergrande Crisis and is now facing a severe power crunch. Even though we are amidst a global energy crisis, it seems to have impacted China more than other countries. Nevertheless, there is a weird trend that exists right now in the metal market. Iron ore, a key ingredient for making steel, has its prices falling while steel prices are soaring. 

The story starts with China’s trade war with Australia. China produces ~51% of the world’s steel. To make this steel, it imports 60% of the iron ore from Australia, which controls ~38% of iron ore production. The trade war started in May 2020, when China restricted barley imports from Australia, accusing it of breaching WTO rules by subsidizing barley production in China below the domestic production cost. 

Australia further angered China by asking for an independent inquiry into the origin of the coronavirus. Essentially, Australia was accusing China of deliberately creating the COVID-19 pandemic. China retaliated by disrupting the imports of seafood, wood, beef, wine, and coal from Australia. Eventually, Australia restricted the supply of iron ore to China. This meant that China wouldn’t be able to produce as much steel as before. This sent steel prices on a rollercoaster globally. 

To correct the supply-demand mismatch of metals in China, it has decided to release metal reserves of copper, aluminium and zinc. It shall release 170,000 tonnes of this metal into the market and more depending on how the market reacts.

The iron ore that Australia would sell to China would go to other steel manufacturing economies like India, Brazil, the US, etc. Steel, aluminium, copper, and iron ore prices have slumped in India due to fears of weak demand from China amidst an economic crisis. Nevertheless, steel demand in India is healthy, since it has managed to revamp domestic production. India is boosting its economy with multiple infrastructure projects, which ultimately require a significant amount of steel. 

In Q1 FY22, India turned net exporter of finished and semi-finished steel to China for the first time in years. This could mean soaring profits for domestic steel companies in India and for their shareholders. China is currently focussing on reducing carbon emissions and is therefore importing semi-finished and finished steel from India. This would mean better profit margins for Indian steel players. 

India’s Metal Markets

International steel prices are much higher than domestic prices in India. This could mean a bumper export season for domestic steel and iron companies, eventually making good profits. For the past few days, the winds in the metal markets blew in favour of Indian companies. This caused a rally in the Indian metal stocks, followed by a major correction. Between September 1, 2021, and September 16, 2021, the NIFTY Metal Index rallied by 4% or 247 points before going down amidst uncertainties surrounding the US Interest rate hike and the Evergrande crisis.

Tala Steel, SAIL, NMDC, JSW Steel, APL Apollo Tubes are some big players that can benefit from the current situation in the global markets. These companies are players in the core steel industry. They have a replenished inventory of steel products and a large consumer base, both domestic and international

The government has advised SAIL and NMDC to sell off its ‘residual iron ore fines’ from all its mines. This will not only generate supply in the market but also add to revenue (even though a small amount) of the two companies. India’s domestic steel demand is likely to remain healthy as the government has announced many infrastructure projects and some incentive schemes for them. 

Currently, Indian steel companies have two marketplaces to benefit from. First, there is the global market where there is a shortage of steel supply. Second is the Indian market which is seeing fast growth in the number of infrastructure projects.

In a December 2020 issue, we discussed how India’s steel production shortage caused domestic prices to cross the international prices. India could neither export steel because of the price gap nor import it because of the import duties imposed in the country. The situation is now much better as India has plenty of steel and iron ore reserves that can be exported and meet domestic demand at the same time. Price fluctuations in the international market are not likely to impact the domestic metal market. An investor should watch out for core steel companies with high export numbers and no production bottlenecks. 

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Editorial

Why HEG and Graphite India Stocks Zoomed 65% in 3 Months

Graphite India and HEG, are the largest manufacturers of ‘Graphite Electrodes’ in India and major competitors in the global market. These two stocks are highly correlated and almost always rise and fall together in the markets. 

Graphite electrodes are used majorly in producing steel. They are used in electric arc furnaces, where they form the main heating element of the furnace. Electricity is passed through these graphite electrodes till they reach high temperatures, where the steel is then smelted. These electrodes are also used to recycle steel from scrap waste.

There was a time when both HEG and Graphite India used to trade at almost 2x-6x their present-day value. Over a period, these companies lost their value due to global factors and slumped demand. During the COVID-19 pandemic, the demand for steel slumped and so did the demand for graphite electrodes. However, both HEG and Graphite India have gained ~65% over the last three months. What are the factors that made them lose value? Will history repeat itself in the graphite sector? Let us find out.

2018, A Bad Year For Graphite

  • China was the largest consumer, producer, and exporter of graphite electrodes in the world. Essentially, it controls the industry. In 2018, the Chinese government gave orders to shut down factories that were highly polluting. Thereafter, the steel industry took a hit. 
  • China shut down a LOT OF factories that used electric-arc furnaces that used these electrodes. This caused a slump in demand for graphite electrodes and therefore production. There was panic in the global markets and a lot of panic buying happened. Steel mills filled their inventory with graphite electrodes. The prices of these electrodes rose ~5x in a year’s time. 
  • The steel mills across the globe had filled their inventories so much, that there was no need to buy more for almost 2 years. This suddenly caused a SLUMP in demand for graphite electrodes. 
  • In late-2018, India lifted anti-dumping duties on imported electrodes from China. The domestic market, therefore, took a hit. It was at this time when HEG and Graphite India took a hit and came down crashing.

Rising Prices? Graphite for Electric Vehicles?

  • From the above points, we know that the graphite electrode inventories were full for quite some time, the demand for steel wasn’t as much. Moreover, with the COVID-19 vaccine in sight, the prices of steel were skyrocketing and demand for steel was increasing. Steel mills have now managed to use up their excess inventories of graphite electrodes and their demand for more. Steel production has crossed pre-COVID levels. 
  • Graphite India in its Q3FY21 results declared an increase in revenue by ~20% at Rs 641 crores and a net profit of Rs 23 crores over a loss of Rs 41 crores in the last quarter of Q2FY21. HEG on the other hand declared revenue of Rs 344.9 crore where its loss narrowed down to Rs 80 lakh from Rs 15.4 crore. A well-rounded result along with increasing demand for steel and therefore graphite electrodes explains the rally in the graphite stocks.
  • Electric Vehicles need rechargeable batteries. These batteries need electrodes. There have been news pieces circulating around, that Graphite India or HEG might supply these in the future. However, this might not be the case in the near future. According to Manish Gulati, Executive Director at HEG India, “EV doesn’t find any use for graphite electrodes as such. Entire sales are going for the steel industry. There is a very small market of titanium smelting, magnesium, silicon, these types of companies and there also we sell some of the portion, but that is minute maybe 1-2% of sales”. So while it does not currently supply a considerable portion, this could be a major part of their business going forward, especially if capacity is expanded or steel production falls.

The graphite electrode industry faced a patchy phase, the past few years. Volatile steel prices and a glut of excess electrodes impacted the balance sheet of graphite electrode companies. A few months ago, steel prices(Hot Rolled Coil(HRC) variant) reached their record high of Rs 58,000/tonne. This had made certain infrastructure projects financially unviable. The steel prices now are getting back to normal. The demand for steel has been sustained and there is sufficient demand for graphite electrodes. The trouble in the global graphite electrode industry was a long-term one, the post-COVID period has shown signs of recovery for the industry as a whole. One can expect some really good sales figures at HEG and Graphite India provided the Indian steel industry does not face any turbulence. Surely counting on these stocks for the Electric Vehicle revolution as well.

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Editorial

5 Reason Why Commodity Prices Are Increasing and Impact on Stock Market

Last year, the prices of commodities such as crude oil, silver, copper, etc saw a significant fall due to the Covid-19 pandemic. All major economic activities were disrupted as countries went into complete lockdowns. Now, the situation has more or less turned for the better, and commodity prices are witnessing a strong recovery. Copper prices have rallied by over 60% since the beginning of the year and have hit their 10-year high. The price of Brent crude oil, which fell to $20 per barrel in April 2020, has shown a sharp rise to ~$65 (as of Feb 23). The prices of Silver and Platinum have also shown monumental gains over the past year. 

Let us understand some of the reasons behind this surge in commodity prices.

Factors Behind the Rally in Commodity Prices

  • During a period when countries were under strict lockdowns, China began to open up its factories. They had a headstart in manufacturing activities. In fact, the Chinese factory output in November 2020 hit a 20-month high. Thus, there was a huge rise in demand for commodities from the country, which led to a rise in its prices. There were also reports stating that China has been hoarding steel and is controlling its prices.
  • As lockdown restrictions were lifted globally, the demand for industrial commodities started rising. The different sectors of the economy began to ramp up production activities. At the same time, supply chain disruptions or logistical issues continued. Commodity traders blamed the global container shortage as a major reason for high transportation costs. This ultimately led to a surge in the prices of essential commodities such as steel, copper, tin, and aluminium.
  • Recently, oil-producing nations have limited their supply to energy-dependent countries such as India. This has caused crude oil prices to increase exponentially.
  • The passing of the $1.9 trillion US stimulus package can also be attributed to the sharp rise in commodity prices. Financial analysts state that the package would lead to further demand for commodities as people will spend more (or more money will be in circulation).
  • Investing in the commodities market is a great way to diversify your portfolio. Over the past few months, hedge funds have invested billions of dollars into this market. This is primarily due to the optimism surrounding vaccine rollouts and economic recovery. It has been recommended as one of the best asset classes to hedge against inflation, leading to a sharp increase in returns.
  • As most countries are on the path towards building renewable energy infrastructure, the demand for metals is at an all-time high. This is driven by an increase in the production of batteries, solar panels, and electric vehicles (EVs).

What is the Impact of Rising Commodity Prices?

The commodities market is receiving a lot of attention from investors around the world. They are collectively pulling money from the stock markets and infusing billions into commodities (due to its high returns). Investment groups and hedge funds are also investing heavily in bonds due to higher yields. However, this may be a short-term phenomenon until financial institutions reshuffle their portfolios.

As India came out of its Covid-related lockdowns, we witnessed pent-up demand for commodities- which led to a further rally in its prices. This has caused fears of inflation in our domestic market. The high price of steel has heavily impacted the automobile and infrastructure sector. We saw companies such as Maruti Suzuki, Tata Motors, Mahindra & Mahindra, and Hero MotoCorp introducing price hikes for their vehicles in January. The continuous surge in prices of raw materials would also affect the real estate sector in the long term. Developers would face an increase in overall project costs, and homebuyers would have to pay more for acquiring assets. The general rise in demand with a fall in supply is helping no one.

One of the most serious issues that Indians face today is the continuous increase in fuel prices. The price of petrol has even crossed the psychological barrier of Rs 100 per litre in several cities. The rise in global crude oil prices and high taxes (or excise duties) are concerning. This ultimately leads to a surge in prices of essential items such as food. With no solution in sight, the middle-class and poor sections of society continue to suffer. Let us look forward to seeing how the situation unfolds in the weeks to come.

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Editorial

Steel Prices Surge in India; is China Hoarding Global Steel?

India’s steel prices are skyrocketing. They have increased by more than 55% over the last 6 months. Some major projects have been impacted by the hike in steel prices due to additional costs.

Transport Minister Nitin Gadkari has written to the Prime Minister’s Office(PMO) to check on the rising steel prices which are making projects ‘unviable’. India’s steel reserves were full during the lockdown, sufficient to meet India’s demand once everything opened up, yet the prices continue to surge. Is there a steel cartel? is this a failure on the part of the government? Or is this a trade war unleashed by other countries? Read on to know more.

Why Are Steel Prices Surging?

India Emptied Its Iron and Steel Reserves

Rewind to the beginning of the COVID-19 lockdown, the world had come to standstill, demand had slumped, Indian steel stores were full and at rock bottom prices. Steelmakers had to somehow make a living and therefore decided to export all their steel. They exported most of their iron-ore and steel to two countries, China and Vietnam. The Iron and Steel exported to China amounted to Rs 13,000 crores between April-August alone. All of this, amidst border tensions between India and China. 

Blast furnaces that are used to make steel can’t be turned off unless you are getting rid of them for good. It will cost a lot to restart the blast furnace. So to manage costs China continued churning steel even when there was no demand. Once industries opened up, the Indian government announced new projects to boost growth and employment, steel demand went up but supplies weren’t enough, causing a rise in steel prices. 

India Isn’t Able To Import Steel

To protect domestic steelmakers, India had imposed heavy anti-dumping duties on ‘cheap steel’ coming from China, Vietnam, South Korea, the European Union, Taiwan, and other countries till January 2021. In order to reduce the prices of steel, traders could have imported steel from these countries to bring down prices, this isn’t viable as of now. 

What can be the Impact of Rising Steel Prices?

The automobile sector as a whole will be impacted because of the surging steel prices. In fact, Maruti Suzuki and some other automobile manufacturers are going to increase their prices from January 2021. Real estate prices and urban infrastructure projects will be impacted long term since the cost of steel, as well as cement, continue to rise. Some real estate companies are alleging cartelization of cement and steel by producers. Export of steel may take a hit. 

When Will Steel Prices Normalise?

Bringing down the price of Steel involves basic economics. India needs to ramp up supply in the market. It can either increase the production of domestic steel or allow the import of steel from other countries. The latter will surely impact the domestic steel players. India has imposed anti-dumping duties on imported steel till January 31, 2021. Before this date importing steel will be expensive. Considering price and quantity, the only two countries India can import cheap and affordable steel from are Japan and China.

Is China Hoarding Global Steel?

China was once known for dumping steel products all across the world. However, things have changed recently. During June, it was for the first time in 11 years that China turned a net importer of steel. Even when steel plants were operating at 90% capacity in July, China continued importing steel. One of the reasons stated by economists is that China had deployed a huge fiscal and monetary stimulus package to increase demand and promote development. Many infrastructure projects have been summoned at the same time which is giving steel demand a push in China.

Global steel prices refuse to tank, China being the largest producer of steel, has an edge in supplying steel to the world. China produces close to ~51% of the world’s steel. In a world, which is still recovering from COVID-19 at the same time trying to boost production, China is the factor for deciding whether the steel prices will go up or down. China has been in the news earlier where it has allegedly hoarded Copper and even Nickel. Could this be a move by China to dominate the metal sector?

What can be the Impact of Rising Steel Prices?

The automobile sector as a whole will be impacted because of the surging steel prices. In fact, Maruti Suzuki and some other automobile manufacturers are going to increase their prices from January 2021. Real estate prices and urban infrastructure projects will be impacted long term since the cost of steel, as well as cement, continue to rise. Some real estate companies are alleging cartelisation of cement and steel by producers.

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Editorial

The Tale of Metal and Mines in India.

What does the Metal and Mining sector look like in India?
  • According to TradingEconomics, GDP from mining stood at USD 1052 Billion as of April 2020 which is about 10-11% of the GDP(PPP)
  • India produces 95 minerals – 4 fuel-related minerals, 10 metallic minerals, 23 non-metallic minerals, 3 atomic minerals and 55 minor minerals (including building and other minerals).
  • India ranks fourth in terms of iron ore production globally also India became the world’s second-largest crude steel producer in 2019 with production at 111.2 MT(Million Tonnes). India is the third-largest producer of coal standing at 55.4MT.
  • India’s iron and steel export in FY20 (till January 2020) stood at US$ 7.96 billion. India is the 14th largest exporter of steel, this leaves a huge potential for India to produce and meet global demand and pump up exports
  • India Exported $3357.61 Million worth of Aluminium in FY20. India Exported Zinc worth 360.24 USD Million in 2019
Steel and Economic Growth.

How does steel signify economic growth? Construction, Automobile and Spares, Transport and Logistics, Energy and Appliances are some of the industries that heavily rely on iron,steel and aluminium. A healthy crude steel consumption is a sign of growth in a developing economy.

Already developed economies, with low GDP growth rates do not indulge in mining activities for “domestic” consumption. Developing economies like India, China, Vietnam have high levels of domestic consumption as compared to other developed economies.

A COVID restrictions ease and economic activites begin normalizing, you can expect Heavy Industries and Capital Goods sector to reopen as well. Moreover, India is also expecting to meet global steel demands post-COVID period, with currently the importer of steel from India being China.

Metals and Mines on Dalal Street
  • NIFTY METAL is the benchmark for Metal and Mining Stocks on National Stock Exchange.

Following are the Top stocks by Market Capitalization in NIFTY METAL .

CompanyMarket Cap.
Hindustan Zinc Ltd.106871.4
Coal India Ltd. 79961.4
JSW Steel Ltd. 57648
Tata Steel Ltd. 46261.7
Hindalco Industries Ltd.39427.2
NIFTY METAL stocks by Market Cap

Following are the top gainers in NIFTY METAL in terms of annual(%) returns:

CompanyAnnual%
Jindal Steel & Power Ltd.95.01%
Mishra Dhatu Nigam Ltd.77.70%
APL Apollo Tubes Ltd.64.09%
Hindustan Zinc Ltd.21.44%
Ratnamani Metals & Tubes Ltd.20.29%
Top Gainers in NIFTY METAL by Annual%

Following are the top losers in NIFTY METAL in terms of annual(%) returns:

CompanyAnnual%
Coal India Ltd.-37.05%
National Aluminium Company-18.93%
NMDC Ltd.-12.30%
Welspun Corp Ltd.-11.77%
Steel Authority of India -3.46%
Top Losers in NIFTY METAL by Annual%
Metal Stocks Performance in COVID.
  • The COVID pandemic managed to jolt almost all stocks in the NIFTY METAL benchmark except for TWO. Steel Authority of India(SAIL) with Net Profit (+)383% YoY and Jindal Steel and Power(JSPL) with Net Profit (+) 406.16% YoY What is it that made these two companies exceptional?
  • SAIL and JSPL both adopted an export-oriented approach. SAIL’s exports increased by a staggering 349% in July(YoY) from 0.8 ton to 3.1 ton and JSPL’s exports increased by 203% in July(YoY). Naveen Jindal of JSPL announced aiming for 80% export of output for time being.
  • Last year Indian Iron and Steel Industry faced a de-growth of 6-7% however after the COVID restrictions eased Indian companies focused on increasing exports because of reduced domestic demand in the country.
  • According to EEPC India, Indian steel export increase two-fold in June. JSPL export sales contributed to 39% of the total standalone Sales in July 2020 to 2,50,000 tonnes.
  • Hindalco (Aluminium) is exporting over 80% of its output amid contracting domestic demand. Read More Here.
  • NMDC India’s prime iron ore producer reported increased production by 13% and increased sales by 7% in July post lifting of lockdown restrictions.
  • Nifty Metals index this year has gained nearly 6% so far in August
Future Prospects of Metal Stocks?
  • Despite 100% FDI through the automatic route introduced in 2019, Steel industry didn’t see much of it due to absence of domestic expertise, lack of MSMEs and inefficient productivity.
  • According to a Crisil report, steel companies with 22 MT capacity were referred to the National Company Law Tribunal (NCLT) in the RBI’s first round of resolution of stressed assets. The MSMEs in Steel Sectors are finding it difficult to get the Credit from Banks and thus impacting their production. 
  • After a long slump, Metal prices, as well as demand, have started to pick up. Import demand exists in developing economies such as China and ASEAN countries(South East Asian Nations) where construction and infrastructure sectors have resumed show and the demand for capital goods has arisen.
  • China and Vietnam were top destinations of Indian steel exports accounting for nearly 63.5% of total steel exports during June 2020 as compared to only 6.2% in June 2019. Essentially, current global prices are China-driven.
Source: Ministry of Steel Monthly Report
  • Steel demand in the developing economies excluding China is expected to fall by 11.6% in 2020 but will see a substantial recovery of 9.2% in 2021 according to the World Steel Association. This leaves prospects for India to pump exports into already existing markets of ASEAN.
  • Base metal prices had slumped after the COVID lockdown, the price has started moving up as market normalises and global production gains momentum which is seen as a positive, however precious metals like Gold which crossed its highest-ever Rs. 57,000 mark this week adds to volatility surrounding markets which may continue till the vaccine isn’t obtained.
  • MSME, Small Cap and Secondary metal enterprises are unlikely to report any significant production anytime in the future as they are grappling with additional challenges of low working capital and depleting cash reserves under lock-down. The focus should be directed on larger and established metal or mining stocks until volatility doesn’t die down.
  • The gap between international domestic price was 7-8 per cent (source: Business Standard). This leaves Indian steel prices a potential to recover the gap. Domestic hot-rolled coil (HRC), a variety of steel sold, moved up by Rs 2,000 a tonne from end-July.

With projects pending all over the country, rising exports to developing economies and the declaration of Atmanirbhar Bharat, India plans to become a producer hub for the world. This goal will be fueled by all major industries in India, one such being the Iron and Steel Industry. You can expect a fair share of growth once the economy restarts to its full scale. As India continuously aims to increase its Net Export, the future for the Metal and Mining industry seems bright and shiny.

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Market News

Jindal Steel and Power (JSP) Q1FY21 Results.

Jindal Steel and Power

Jindal Steel and Power Ltd has reported a consolidated net profit of Rs 268 crore in the first quarter of the financial year 2021, as against a net loss of Rs 87 crore during the same quarter previous year, due to increased volumes and lower raw material prices

The company grew at 5.02% QoQ in terms of revenue but has its Net Profit trimmed by -12.45%, which is not huge considering the global slowdown due to COVID  

Q1 FY21(Rs. Cr)Q4 FY20(Rs. Cr)Q1 FY20(Rs. Cr)QoQ%YoY%
Revenue9,279 8,835.2 9,945.585.02%-6.7%
Net Profit268.00 305.6-87.4-12.45%-12.1%

The company managed to reduce its operating cost and managed to obtain Raw materials for cheap. The operating expense has also been decreasing over the past 1 year.

Decreasing Operating Expenses

 On the day of the result, the market moved sideways due to split opinion and sentiment regarding the stock. Which was later followed by a 3.2% decline at the close which could have been because of reduced profit as compared to last quarter. There is a certain optimism in the market looking at the fundamentals, reducing operating expense and profit.

You can check out the Official Q1FY21 result by clicking here.