Nifty Metal index tanks 6%; Jindal Steel, Tata Steel, Hindalco down over 7%

A prolonged Covid-19 outbreak would reduce demand for the metals while disruptions in the supply chains would impact the availability of the metals in the physical markets," ICRA said.

Shares of metal companies were under pressure with Nifty Metal index falling 6 per cent on the National Stock Exchange (NSE) on Tuesday on concerns of weak demand due to the Covid-19 outbreak.

Jindal Steel & Power (JSPL), Hindalco Industries, Tata Steel and MOIL were down more than 7 per cent, while Steel Authority of India (SAIL), Vedanta, JSW Steel, Hindustan Copper and National Aluminium Company (NALCO) were trading lower in the range of 5 per cent to 6 per cent on the NSE.

At 11:25 am, Nifty Metal index, the top loser among sectoral indices, was down 5.7 per cent at 1,657 points, as compared to a 2.7 per cent decline in the Nifty 50 index. The metal index had hit a 52-week low of 1,481 on March 23, 2020 in the intra-day trade, as the virus started spreading to the rest of the world.

“The global outbreak of Covid-19 has severely impacted the non-ferrous metal industry as prices of the three metals - aluminium, copper and zinc have corrected by over 16 per cent, 23 per cent and 20 per cent, respectively since the beginning of the calendar year 2020. Moreover, while a prolonged outbreak would reduce demand for the metals, disruptions in the supply chains would impact availability of the metals in the physical markets,” ICRA said in a press release.

The correction in non-ferrous metal prices and the expected large-scale slowdown in demand would impact the credit metrics of the primary metal manufacturers. The impact was higher for non-integrated aluminium manufacturers procuring alumina from the spot market during Q4 FY2020. Although the increase in Treatment Charge (TC) and Refining Charge (RC) would have provided a temporary relief to the custom copper smelters, conversion rates may come under pressure, going forward, it added.

Among individual stocks, Jindal Steel & Power slipped 13 per cent to Rs 78.85 in intra-day trade on the NSE. Last week, the credit rating agencies, Care Ratings and ICRA had revised the outlook from stable to under credit watch with negative implications.

Apart from uncertainty about the refinancing/ reschedulement, the rating action also factors in the near-term impact of the Covid-19 outbreak on global and domestic steel demand as well as realisations which is expected to impact JSPL’s business performance in the domestic steel sector.

However, JSPL in a regulatory filing clarified that with the continued support being provided by existing lenders pursuant to the Reserve Bank of India (RBI) directions, the company remain confident on its liquidity position and optimistic on our ongoing discussions with lenders of its subsidiaries.