Metal shares extend rally; Nifty Metal index surges 18% in 2 months

Metal stocks were on roll on the National Stock Exchange (NSE) on Tuesday with National Aluminium Company, Hindalco, Welspun Corp, Adani Enterprises, and Tata Steel rallying up to 6 per cent. The Nifty Metal index, meanwhile, surged 4.6 per cent to 4,654.5 levels in the intra-day deals and was the top performing index on the NSE. In contrast, the benchmark Nifty was up 0.7 per cent at 11:40 AM. In the past two months, the index has rallied 19 per cent at the bourses as against a 0.03 per cent decline in the Nifty50 index.

Individually, Hindalco rose 6.2 per cent, Nalco (6 per cent), Adani Enterprises (3.4 per cent), and Welspun Corp (3 per cent). That apart, APL Apollo, Vedanta, Tata Steel, NMDC, and Ratnamani Metals and Tubes were up between 1.4 per cent and 3.4 per cent. SAIL, JSPL, Jindal Steel, Moil, and Hindustan Zinc added up to 1 per cent.

Investors have warmed up to the sector after a pick up in global demand. For the fortnight ended April 18, China's steel exports rose 16 per cent YoY to 7.5 million mteric tonne in Mar-21, from 6.48 mnt in March 2020. They were also up 53 per cent MoM. "The rise in exports is backed by ~13 per cent YoY growth in global steel production (155mnt) over Jan-Feb 2021, as well as a rise in export prices from $690/t to $840/t in a month. Production further rose 19 per cent YoY to 94.02mnt in Mar-21, compared with 78.98mnt in Mar-20, highlighting even stronger growth vs

Jan-Feb 2021," noted analysts at Nomura.

Given this, the brokerage observed that Indian HRC and cold rolled coils (CRC) prices have been hiked for the second time for April 2021 deliveries and currently stands at Rs 63,000-64,000/t for HRC and Rs 74,000-75,000/t for CRC. "However, the prices are still below imported steel price. We see scope for further hikes with export offers rising to $927/t (up $37/t w-w), and expect Jun-21 deliveries to be further higher at $940-950/t," it said.

Meanwhile, the World Steel Association (WSA) has projected India steel demand for CY21 at 106.1mnt (or up 19.8 per cent YoY), up from 88.5mnt in CY20. The level in CY21 is similar to CY20, and WSA projects further 5.9 per cent growth for CY22 to 112.3mnt.

Prices of other base metals such as copper and aluminum are also at decade high levels given huge demand-supply mismatch. According to a Bloomberg report, copper prices climbed to the highest in almost a decade on Monday as the global recovery from the pandemic extended a rally in metals markets. Aluminum is surging and iron ore jumped to a fresh high as commodities advance toward the highs of the last supercycle. READ ABOUT IT HERE