Nifty metal index has been under pressure for some time with major stocks in the index correcting between 2–5 percent in the last week. This is after they rallied 10–23 percent in the month of July.
The Nifty Metal index has gained nearly 18.78 percent in the last month, compared to the benchmark Nifty50, which has returned 8.60 percent in the same period.
In the last month, eight stocks in the index gave double-digit returns. Hindustan Copper was the biggest gainer, up 23%, followed by Tata Steel, up 21%. Additionally, the index made the largest contribution to the Nifty50 in July, which helped the benchmark to outperform its global peers.
However, the index began to fall on August 18th on the back of a fall in commodity prices and rising interest rates across developed economies; a slowdown in the Chinese economy; and the downgrades from Credit Suisse. During Monday's intraday, steel majors Tata Steel, JSW Steel, and Jindal Steel all dropped between 3-5%. During the same time period, SAIL, Hindalco, and NALCO all lost 1–3% of their value.
At the beginning of the Russian-Ukraine crisis, industrial metals skyrocketed. For instance, prices of domestic hot-rolled coil (HRC) surged to ₹76,000 per tonne in April 2022 from ₹39,200 per tonne in March 2020.
However, HRC prices are currently in the range of ₹58,000–59,250 per tonne, which is among the lowest so far in 2022 and a more than 28% drop from the peak they commanded earlier this year, according to Financial Express.
As on August 17, HRC prices in the Mumbai wholesale market stood at ₹57,300 a tonne. Steel Mills are restoring to price cuts almost on a weekly basis, the report said.
In addition to that, aluminium prices on the London Metal Exchange were down by 32% in July, copper down by 26% and Zinc by 22%.
On the other hand, steel exports have been falling steadily since the government imposed a 15% export duty in May this year. For the April to June quarter, exports declined 39 percent, year-on-year. In June, exports declined 60 percent, y-o-y, The Hindu Business line reported quoting steel ministry data.
Since May, offers have remained under pressure while volumes have taken a hit. The key markets of West Asia, Europe, and Vietnam have seen fewer bookings for Indian-origin HRC, the report said.
On the domestic front, too, demand has dropped as buyers are wary of holding inventory in anticipation of further price corrections. Consumption of steel has also come down as the seasonally slow period of the monsoon arrives. As a result, inventory piled up. Steel mills decide on an advance annual maintenance shutdown.
Major steelmakers have urged the government to reduce or eliminate export duties on steel products.
Further, one such benefit for steel companies is the decline in the cost of raw materials. Imported premium hard coking coal (Australia) has fallen on a weekly basis by about $327/tonne, from $554 in May to $227 in June.
Global brokerage firm Credit Suisse, in its latest report, has said that it remains cautious on the Indian steel sector. The brokerage firm has maintained its underperform rating on JSW Steel, while it has a neutral stance on Tata Steel.
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